Shares of IIFL Finance tank 13% after I-T dept orders special audit

Q3 net up 157% to Rs 501 crore; gold loans surge 189% YoY

Shares of IIFL Finance fell 13.15 per cent on Tuesday after the non-banking finance company informed exchanges that the Income Tax Department had directed it to conduct a special audit.

 

“The company has received a communication dated January 21, 2026, from the Income Tax Department directing the company to get its accounts audited for a specified block period under Section 142(2A) of the Income Tax Act, 1961, and appointing a special auditor for the said purpose,” IIFL said in an exchange filing.

 

The company downplayed the order, terming it procedural.

 

IIFL also received two orders from the Goods and Services Tax Department of Bihar and one from the Goods and Services Tax Department of Gujarat.

 

 

In the post-earnings analyst call, Nirmal Jain, managing director, IIFL Finance, said: “The direction under Section 142(2A) is a procedural step in our ongoing income tax assessment for a multi-year block period. After that, there is also the block assessment for six years together. So this is not a finding, this is not an allegation and not an adjudication. Such procedural audits are not uncommon for large, diversified financial companies with large transaction volumes, multi-year data and complex operating structures.”

 

He said this provision allows income tax authorities to appoint an independent auditor to assist them with verification and reconciliation of data.

 

“The audit report is an input to the assessment process; it is not a conclusion. There is no tax demand, no penalty, no determination against the company. Pursuant to this direction, and at this stage, there is no financial impact that can be ascertained,” Jain said.

 

He further said the ongoing process is expected to be completed in 60 days. Explaining the reason, he said: “Last February, we had an income tax search under Section 132. After the search, there was a block assessment of six years. This tax audit is a special audit based on findings during the search, which will cover the block period of six months. This is supposed to get over in 60 days.”

 

The NBFC on Thursday reported a 157 per cent surge in its net profit to Rs 501.4 crore. Revenue from operations grew 40.3 per cent year on year to Rs 3,427.5 crore, while net interest income (NII) also saw a significant increase of 61.1 per cent year on year to Rs 1,990.2 crore.

 

For the December quarter, IIFL Finance reported a 189 per cent year-on-year surge in assets under management (AUM) of gold loans to Rs 43,432 crore, which were also higher by 26 per cent on a sequential basis.

 

AUM under MSME loans grew 17 per cent year on year and 4 per cent sequentially to Rs 10,081 crore, owing to recalibration towards low-risk secured lending and a pullback from unsecured lending. Meanwhile, microfinance AUM stood at Rs 8,360 crore, down 19 per cent year on year and flat quarter on quarter, impacted by macroeconomic pressures in unsecured lending.

 

Kapish Jain, group chief financial officer, IIFL Finance, said: “Our Q3 performance reflects the benefits of portfolio rebalancing and tighter execution. Growth was led by gold loans, asset quality continued to improve across businesses, and capital and liquidity remained strong. With cost of funds trending down and provisioning well above regulatory requirements, we are seeing steady improvement in returns while maintaining balance sheet strength.”

 

The company incurred a one-time cost of Rs 22.5 crore for remeasurement of gratuity and leave liabilities as part of the new labour code. Asset quality improved in the December quarter, with gross non-performing assets improving by 54 basis points sequentially to 1.6 per cent, while net NPAs improved by 27 basis points to 0.8 per cent. On a yearly basis, GNPA was down 82 basis points and the net NPA ratio fell 26 basis points.

 

The company reported a return on assets (ROA) of 2.1 per cent and a return on equity (ROE) of 11.3 per cent. Capital adequacy remained strong, with a consolidated capital to risk-weighted assets ratio (CRAR) of 27.7 per cent. Liquidity stood healthy at Rs 9,433 crore, while profit after tax for the nine-month period reached Rs 1,193 crore. The company’s cost of borrowing fell to 9.28 per cent from 9.38 per cent quarter on quarter.