IIFL Finance Q2 results: Firm incurs consolidated net loss of Rs 93.07 cr

Makes Rs 586.5 crore provision for AIF investments

IIFL Finance Ltd reported a consolidated net loss of Rs 93.07 crore in the quarter ended September 2024 (Q2 FY25), as the non-banking finance company (NBFC) made a 100 per cent provision of Rs 586.5 crore for security receipts (SRs) during the quarter. These SRs were issued to the NBFC for the sale of investments in alternative investment funds (AIFs) to an asset reconstruction company (ARC).

 

IIFL Finance had posted a consolidated net profit of Rs 525.52 crore in the July-September 2023 quarter (Q2 FY24).

 

Its income from operations for the reporting quarter was flat at Rs 2,318 crore, compared to Rs 2,357 crore in Q2 FY24, according to the company’s filing with the BSE.

 

Nirmal Jain, managing director of IIFL Finance, said in a statement, “This past quarter has been one of our most challenging, primarily due to the regulatory embargo on our gold loan business.” The company has taken corrective actions that have satisfied regulatory authorities, and the embargo has now been lifted, he added.

 

“Although this quarter has seen the lowest financial performance, the worst is behind us. The company is committed to not only restoring these standards but also strengthening them moving forward,” Jain said.

 

Overall loan assets under management (AUM) shrank by 8 per cent year-on-year (Y-o-Y) to Rs 66,964 crore. Home loans grew by 21 per cent, and loan against property AUM grew by 18 per cent. Microfinance remained stagnant on a Y-o-Y basis, while digital loans grew by 53 per cent Y-o-Y. Gold loans de-grew by 54 per cent Y-o-Y.

 

The company’s impairment on financial instruments rose sharply to Rs 406 crore in Q2 FY25, from Rs 242 crore in Q2 FY24. Its gross non-performing assets (NPAs) increased to 2.4 per cent in Q2 FY25, up from 1.8 per cent a year ago. Net NPAs also rose to 1.06 per cent in September 2024, compared to 1.1 per cent in September 2023.

 

The company’s capital adequacy ratio stood at 26.3 per cent as of September 30, 2024, compared to the minimum regulatory requirement of 15 per cent, supported by capital raised during the quarter.

 

The company also noted that it held certain AIF investments (debentures) due to mature in June 2024. Subsequently, these debentures were assigned to an ARC, and the book value of the resulting security receipts (SRs) was Rs 586.50 crore as of September 30, 2024.

 

According to RBI regulations (dated December 19, 2023), investors are required to make a 100 per cent provision for AIF investments if they are not liquidated within 30 days of the circular being applicable. The management has decided to make a provision equivalent to 100 per cent of the book value of these SRs, IIFL Finance said.