IIFL Finance (erstwhile IIFL Holdings) ~ Retail focused diversified NBFC

Stock Opportunities
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Q3FY22 notes:

Takeaways from presentation:

  1. IIFL Finance appoints former SBI Chairman Mr. Arun Kumar Purwar as Chairman

  2. Added 6000 employees and opened 554 branches in 9MFY22

  3. 9MFY22 PAT at Rs.867cr where Annual PAT of FY21 was at Rs761
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  4. Provision coverage ratio at 133%.

  5. Co-lending

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Concall notes:

  1. Bank credit growth in the economy at 9% YoY vs 5-6%
  2. Every quarter there is something which affects the numbers like this quarter was RBI notification.
  3. DIY loan: either from MyMoney app or WhatsApp.
    1. MSEME DIY loan grew 4 times
    2. 2 lakh average active users on the app for the month of December.
  4. 94% are retail in nature and 67% are PSL compliant. (Except gold loan) PSL complaints loan can help them sell these loan and raise long term money.
  5. Cost of borrowing declined by 27 basis points year on year to 8.7%
  6. GNPA: 2.8% NPA 1.5% (included impact of RBI notification of 12 Nov 2021)
    1. Impact of RBI Circular: 30 basis points.
  7. Disbursement in quarter is flattish because of pent up demand in Q1.
    1. YoY December was ATH in home loan last 1-1.5 years
  8. Growth guidance for next 12 months: around 25%
  9. Average interest has got slight pressure: on portfolio there is 60 basis points decline.
    1. Incremental yield might have fallen by 1%
    2. Falling of yield is because of competitive pressure from banks
      1. But management says that this happens in this industry and they have witness this earlier.
    3. In gold loan you start with low interest rate and if the customer doesn’t pay on time then interest goes up over period of time.
    4. Some players have already withdrawn the low interest rate but the new stabilization of interest rate will be lower than previous standard.
  10. Home loans:
    1. 60-65% are salaried customers seeking home loans and first time home buyers. (Blue collared customers)
    2. Yields at 9-9.5%
    3. LTV at 75 to 78%
    4. Co-lending
      1. 850cr disbursement for co-lending with banks so far with home loans. (only 20% will be on company’s balance sheet)
        1. Half of the total disbursement of loan should be from co-lending model is their internal target
      2. Interest rate remains same in this model.
        1. Eg: Charging 10% interest to customer on Rs.100 that is Rs.10
          1. For that Rs.100 principal amount Rs.80 was provided by bank and if the deal with bank is set at 8% interest then Rs.6.4 (that is 8% of that 80% principal amount) will be paid to bank.
          2. Remaining Rs.1.6(that is extra 2% interest of that 80% principal amount) + Rs.2(10% of the Rs.20 principal amount which IIFL gave from its own books) will be retained by IIFL. Total Rs.3.6 earned out Rs.100 loan.
          3. Rs.1.6 will be shown as Assignment income and Rs.2 as interest income.
          4. But operating cost is on the IIFL books.
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