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Systematix Report
IIFL Finance Ltd. reported a modest set of numbers. Though there was a beat in estimates on net interest income/Operating profit front, Profit after tax missed our estimates due to one-off provisions on Alternative Investment Fund investments. NII/OP came in higher at Rs 13.3 billion / Rs 8.6 billion (versus estimate of Rs 11.9 billion / Rs 6.9 billion) aided by lesser than expected contraction in assets under management and higher other income.
Credit cost increased by 25 basis points QoQ to 2.4% mainly due to Micro Finance Institutions segment. Moreover, one-time provisions of Rs 5.9 billion on AIF investments resulted in a net loss of Rs 931 million (versus our PAT estimate of Rs 2.7 billion). Net interest margin on AUM (calc) increased by 10bps QoQ to 7.8%.
AUM registered a de-growth of 4% QoQ, due to 27% QoQ contraction in gold AUM and 6% QoQ contraction in MFI AUM, which together constitute 33% of overall portfolio.
Asset quality slipped marginally, with gross/ net stage 3 increasing by 15 bps/ 2 bps to 2.4%/ 1.1% and credit cost (On AAUM) at 2.4% (versus 2.2% in Q1).
Management hopeful of bringing the gold loan book at pre ban level by March 2025, though remain cautious on MFI segment. For FY25, we expect consolidated AUM to de-grow by ~3% YoY followed by 12% growth in FY26. Maintain Buy rating on IIFL Finance with price target of Rs 560 (unchanged).
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