Concall AI

IIFL Finance Limited — Q3 FY26 earnings call

Call held 22 Jan 2026

Management summary

IIFL Finance delivered a strong Q3 FY26, marked by robust AUM growth, significant asset quality improvements, and healthy profitability. The company successfully reset its portfolio by exiting higher-risk segments, leading to a more resilient balance sheet. Management addressed concerns regarding a procedural income tax special audit, clarifying it has no financial or operational impact, and provided optimistic guidance for future growth and asset quality.

Highlights

Consolidated AUM grew 9.1% QoQ and 38% YoY to INR 98,336 crores, nearing INR 100,000 crore.
Asset quality significantly improved with GNPA reducing from 2.14% to 1.6% and NNPA falling below 1%.
Profitability remained strong with PAT up 20% QoQ to INR 501 crore and annualized Q3 ROA of 2.5% and ROE of 14.3%.
Gold loan AUM showed exceptional growth, up 26% QoQ and 189% YoY to INR 43,432 crores, crossing pre-embargo levels.
S&P reaffirmed international credit rating and revised outlook to positive, reflecting strong business fundamentals.

Concerns

A procedural income tax special audit under Section 142(2A) caused market anxiety, though management clarified no financial or operational impact is ascertained.
One-time OPEX increase of INR 22.5 crore due to new labor code for gratuity and leave measurement.

Key financials

2 periods

Headline

Consolidated AUM
₹98,336 Cr
YoY +38% QoQ +9.1%
PAT (before NCI)
₹501 Cr
QoQ +20%
PPOP
₹1,075 Cr
YoY +101% QoQ +4%
Gross NPA
1.6%
QoQ -25.2%
Net NPA
0.8%
Provision Coverage Ratio
92%
Consolidated Capital Adequacy
27.7%
Liquidity
₹9,400 Cr
Net Gearing
3.6×
Average Cost of Borrowing
9.3%
QoQ -0.1%
Basic EPS
₹10.9
Book Value (Dec 31)
₹306.85

Q3 FY26

Annualized ROA
2.5%
Annualized ROE
14.3%

What they filed

Q1 FY27: revenue up 32.7%, net profit up 160.2% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	2,556	2,443	2,591	2,953	3,305 +29%	3,427 +40%	3,692 +42%	3,919 +33%
Expenses	1,105	1,307	1,065	1,267	1,323	1,280	1,194	1,211
Other income	-582	6	3	6	4	5	7	3
Interest	963	996	1,169	1,289	1,382	1,437	1,610	1,719
Depreciation	46	46	51	47	47	53	64	63
Profit before tax	-140	101	309	356	557 +498%	663 +556%	833 +170%	929 +161%
Tax rate	-33%	19%	19%	23%	25%	24%	25%	23%
Net profit	-93	82	251	274	418 +549%	501 +511%	623 +148%	713 +160%
EPS	-3.72	0.96	4.89	5.49	8.86	10.92	13.80	15.87

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Core Products (Home Loan, Gold Loan, MSME, Microfinance)
₹93,767 Cr AUM
Gold Loan
₹43,432 Cr AUM0.36% Gross NPA59.4 tonnes Tonnage (current)59.6 tonnes Tonnage (peak)
Housing Finance
0.9% GNPA47.7% Capital Adequacy
Samasta Microfinance
30% Capital Adequacy99.5% Collection Efficiency (Nov/Dec)99.6% Primary Zero Bucket Collection
NBFC (Standalone)
18.9% Capital Adequacy
Assigned Loan Book
₹21,373 Cr Value
Co-lending Assets
₹13,176 Cr Value

Capital allocation

high confidence

Dividend ₹4/share (interim)

We also declared an interim dividend of INR 4 per share, which was approved by the Board of Directors and will be paid in due course.
Liquidity Liquidity disclosed Liquidity stands at over INR 9,400 crores, adequate enough to not just meet our near-term liabilities, but also adequate to support and fund our growth momentum.

Liquidity stands at over INR 9,400 crores, and net gearing of just 3.6x.

Guidance & targets

Credit Cost

Full Year Credit Cost Credit Cost · FY26 · High confidence 2.8%-3%

And the last quarter, if you remember, we had given guidance for full year at 2.8% to 3%.

— Nirmal Jain
Credit Cost Credit Cost · Next year · High confidence less than 2%

Next year we will try to bring it to less than 2%.

— Nirmal Jain
Credit Cost (decline) Credit Cost · Next financial year · High confidence 50-60 basis points decline

So, another 50-60 basis points decline in the next financial year from the current.

— Nirmal Jain
Credit Cost (annualized) Credit Cost · Next year · High confidence below 200 bps

So, if this quarter annualizes around 250, we should go below 200.

— Nirmal Jain

Gold Loan

QoQ Growth Gold Loan · Ongoing · High confidence 25%-26%

25%, 26% growth on Q-o-Q basis? Yes. That should be a very comfortable target.

— Nirmal Jain

Housing Business

Book Growth Housing Business · Next year · High confidence 15%-16%

So, on the book, we plan to grow by about 15%-16%.

— Girish Kousgi
Disbursement Growth Housing Business · Next year · High confidence 24%-25%

And on disbursement, it will be 24%-25%.

— Girish Kousgi

Overall AUM

AUM Growth Overall AUM · Next year · High confidence 20%-25%

On the whole, you should see about 20%-25% AUM growth next year.

— Nirmal Jain

ROE

ROE ROE · 2-3 years · Medium confidence 18%-20%

So, our ROE was in the range of 18% to 20% in normal times. So, we would endeavor to reach towards that. So, that is our internal target in the next two to three years.

— Nirmal Jain

Leverage

Leverage Leverage · Ongoing · High confidence around 4-4.5x

Our leverage, we will keep it around 4-4.5, and capital adequacy, we would like it to be closer to 20.

— Nirmal Jain

Capital Adequacy

Capital Adequacy Capital Adequacy · Ongoing · High confidence closer to 20%

Our leverage, we will keep it around 4-4.5, and capital adequacy, we would like it to be closer to 20.

— Nirmal Jain

What to watch in Q4 FY26

Income Tax Special Audit Conclusion

Next quarter (within 60 days from Jan 22, 2026)

Current Ongoing, auditor appointed

Target Audit concluded, report submitted

Why it matters

Resolution of a market-sensitive issue that caused anxiety and stock price correction.

This tax audit, it is not a tax audit, it is a special audit based on their findings during the search, which will cover the block period of six years. This is supposed to get over in 60 days' time.

Risks & concerns

Income Tax Special Audit
high

A procedural audit under Section 142(2A) following a search, covering 6 assessment years, caused market anxiety but management clarified no financial or operational impact is ascertained and it is expected to conclude in 60 days.

Management acknowledged
New RBI Co-lending Guidelines (CLM 1)
medium

New RBI guidelines for co-lending (CLM 1) have temporarily put co-lending on hold, with integration currently underway. This impacts capital-efficient growth in gold loans.

Management acknowledged

Q&A highlights

8 direct

Income Tax Special Audit Scope and Timeline Direct

So, this, if you are aware, you must be aware that last February, we had an income tax search under Section 132. So, after the search, there's always a block assessment of six assessment years. This tax audit, it is not a tax audit, it is a special audit based on their findings during the search, which will cover the block period of six years. This is supposed to get over in 60 days' time.

Addressed market anxiety regarding the special audit, clarifying its procedural nature, scope, and expected timeline, and stating no financial impact is ascertained.

Asked by Nischint

Housing Business NPA Restatement and Future Growth Direct

This quarter cleanup is done. So, from next quarter, we should see acceleration in the housing or the growth in the housing portfolio as well, with a very clear strategy on focusing on certain segments that we are comfortable with and from a long-term point of view.

Clarified the impact of NHB's directive on NPA reporting and signaled a clear strategy for renewed growth in the housing segment after portfolio cleanup, with GNPA falling from 2.2% to 0.9%.

Asked by Abhijit Tibrewal

Gold Loan Tonnage and Future Growth Drivers Direct

But we are still a little short of what our tonnage was at the time of embargo. March end was around59.6, now we are at 59.4. ... Markets are very strong because loan-to-value has gone up. The addressable market's capacity to borrow has gone up significantly because of gold prices, one. Two, there has been a clampdown on the unsecured MSME and personal loan, and many of these customers are also basically moving towards gold.

Provided specific tonnage figures relative to peak and detailed the macroeconomic and regulatory tailwinds supporting continued strong growth in the gold loan portfolio.

Asked by Digant Haria

Capital Issuance Plans and Leverage Targets Direct

No. At this stage, we haven't announced any capital raising plan. We are monitoring the situation very carefully. But whenever appropriate, we will raise capital. ... Our leverage, we will keep it around 4-4.5, and capital adequacy, we would like it to be closer to 20.

Addressed concerns about potential equity dilution, outlining the company's comfortable capital position in subsidiaries and its strategic approach to capital raising and leverage management.

Asked by Nischint

Credit Cost Trajectory and Future Outlook Direct

So, Credit cost has come down and we continue to keep it low. So, it is around 2.5%. For the full year, we had said that we will end at anywhere from 2.8% to 3%. Next year we will try to bring it to less than 2%. So, we are on track for that.

Provided clear guidance on the expected reduction in credit costs for the next financial year, indicating improving asset quality and a positive impact on future profitability.

Asked by Gao Zhixuan

MFI Asset Quality and Collection Efficiency Direct

See, in the month of November and December, the strongest comebacks, I can say, was in these two states. Though the portfolio of Tamil Nadu overall for the industry also has dipped a little, but the collection efficiencies have considerably increased. And in both the states, considering that Karnataka came out of the ordinance, what was their last MFI act of last year, it is much better than the thing. So, we are back in both these states at around 99.5% plus.

Confirmed strong recovery and high collection efficiencies in key microfinance states, signaling improved health and stability in this segment.

Asked by Shreya Shivani

Housing Segment Strategy and Yields Direct

Our focus, I think, going forward is going to be in terms of segments broadly on emerging and affordable. Affordable largely will be the priority for us, which can give us yield and emerging to asset mix, which can help us in terms of growth, which will be in line or maybe slightly better than the industry growth rate. ... So, this would aid in the overall portfolio yield going up. But this will take some time, maybe another two to three quarters because we have started this already.

Detailed the refined strategy for the housing finance business, focusing on specific customer segments (affordable, emerging) to drive higher incremental yields and improve overall portfolio yield over the next few quarters.

Asked by Abhishek M

Net Gain on Derecognition of Financial Instruments Direct

So, this is something which is dependent on what assets we are able to sell to banks by way of direct assignment. And the way it happens is that you basically have certain yield on the assets, certain cost of funds or certain price at which you have sold to the bank. The difference basically you can take NPV and reduce it by operating cost or service cost and the probable early repayment. That is how it is.

Provided clarity on the nature and accounting treatment of gains from direct assignment, explaining how it contributes to income and manages capital/risk.

Asked by Ansh Khimavt

3 min read 7 chapters

Detailed narrative

Strong Q3 FY26 Performance Driven by Gold Loans

IIFL Finance reported a robust Q3 FY26, with consolidated AUM growing 9.1% QoQ and 38% YoY to INR 98,336 crores, nearing the INR 100,000 crore mark. This growth was primarily fueled by gold loans, which saw a 26% QoQ and 189% YoY increase in AUM to INR 43,432 crores, surpassing pre-embargo levels. The company's consolidated PAT before non-controlling interest rose 20% QoQ to INR 501 crore, while pre-provision operating profit surged 101% YoY to INR 1,075 crores.

Significant Improvement in Asset Quality

The company demonstrated a material improvement in asset quality, with consolidated Gross NPA reducing from 2.14% to 1.6% QoQ and Net NPA falling below 1%. This improvement was attributed to a strategic portfolio reset, including the exit from higher-risk segments like digital unsecured MSME loans and Micro LAP under HFC, and the sale of INR 875 crore of non-strategic assets to an Asset Reconstruction Company (ARC). The provision coverage ratio stands strong at 92% following ECL implementation.

Income Tax Special Audit Clarified

Management proactively addressed market concerns regarding a special audit under Section 142(2A) of the Income-tax Act. Nirmal Jain clarified that this is a procedural step following a search, covering six assessment years, and is not a finding, allegation, or adjudication. The audit, expected to conclude within 60 days, has no ascertained financial impact and does not affect the company's operations, capital position, or growth plans. A clarificatory note will also be filed with exchanges.

Refined Housing Finance Strategy and Cleanup

The housing finance business underwent a portfolio cleanup, with INR 875 crore of non-strategic assets (BLC, Micro LAP) sold to an ARC, leading to a reduction in Home Finance GNPA from 2.2% to 0.9%. Going forward, the strategy will focus on 'emerging' and 'affordable' segments in Tier 2, 3, and 4 cities, targeting higher incremental yields of 11.5-13%. The company expects housing book growth of 15-16% and disbursement growth of 24-25% from next quarter, with the new strategy taking 2-3 quarters to reflect in overall portfolio yields.

Optimistic Outlook on Credit Costs and Overall Growth

IIFL Finance guided for a full-year FY26 credit cost of 2.8-3%, with a target to bring it below 2% for FY27, representing a 50-60 basis points decline from the current quarter's annualized 2.5%. Management anticipates overall AUM growth of 20-25% for the next year and aims to achieve an ROE of 18-20% in the next 2-3 years, reflecting confidence in its refined business model and improving macroeconomic conditions.

Microfinance Portfolio Resurgence

The microfinance segment, IIFL Samasta, showed strong recovery, particularly in Karnataka and Tamil Nadu, with collection efficiencies exceeding 99.5% in November and December, a trend continuing into January. Management noted significant improvements in asset quality, credit culture, and reduced customer leverage, with the primary zero bucket collection efficiency at an all-time peak of 99.56%. The cost of fund for microfinance also saw a 10 bps decline.

Capital Adequacy and Funding Strategy

The company maintains a comfortable consolidated capital adequacy ratio of 27.7% and net gearing of 3.6x, with liquidity standing at over INR 9,400 crores. While no immediate capital issuance plans were announced, management indicated a target leverage of 4-4.5x and capital adequacy closer to 20%. Growth will be supported by bank partnerships, including co-lending and direct assignments, with integration for new RBI CLM 1 guidelines underway, which is crucial for capital-efficient growth.

This is an AI-generated summary of a publicly available earnings call transcript.

View original transcript