IIFL Finance Ltd. share price target

IIFL Finance (IIFL)’s 2QFY26 NII grew 7% YoY and ~11% QoQ to ~INR14.4b (in line). Other income stood at ~INR4.9b (PQ: INR3.8b). This was primarily due to higher assignment income of ~INR3.5b (PQ: INR2.3b).

IIFL Finance (IIFL)’s 1QFY26 NII was down 10% YoY and ~1% QoQ to ~INR12.9b (~10% miss), potentially due to higher interest income reversals.

IIFL Finance (IIFL)’s 3QFY25 PAT declined ~85% YoY to INR817m. NII declined 22% YoY and ~8% QoQ to ~INR12.4b (~7% miss). Other income stood at ~INR1.1b (PY: INR1.1b). This was lower than our estimates because of lower assignment income and lower gain on fair value changes.

The RBI has lifted the ban on IIFL’s gold loan business, effective immediately. The RBI embargo on the company’s gold loan operations was in force for more than six months.

IIFL Finance (IIFL)’s healthy Q2FY24 financial performance is a reflection of the successful execution of its retail-focused strategy – AUM grew by 7% QoQ/32% YoY driven by core products (gold, mortgage, MFI and digital loans); growth in non-core products (CRE and capital market financing) remained subdued.

We initiate coverage on IIFL Finance (IIFL) with a BUY rating and a target price of INR 760. We believe IIFL Finance is a direct play on ‘increasing financial formalisation’ with its presence in high-growth segments. Its diversified product portfolio, along with strong >4,000 physical branches, focus on scaling high-margin products like gold loans, MFI, digital loans etc., end-to-end digital process, tight control on asset quality and capital optimisation via co-lending could help it sustain >20% growth and 20% RoE in the near term.

IIFL Finance (IIFL) has transitioned into a diversified retail-focused NBFC, scaling up its consolidated AUM to Rs553bn as of Sep’22 with retail constituting 94% of it post registering 18% CAGR over FY19-FY22.