RBI special audit over, IIFL Finance releases Q4 earnings with profit at Rs 430.63 crore, down 5.9% on-year

IIFL Finance reported its fiscal fourth quarter profit at Rs 430.63 crore, down 5.9 per cent on-year.

IIFL Finance reported its fiscal fourth quarter profit at Rs 430.63 crore, down 5.9 per cent in comparison to Rs 457.56 crore for the fourth quarter of FY23. It posted revenue from operations at Rs 2853.57 crore, up 30.5 per cent on-year as against Rs 2187.36 crore during the same period last year.

Earlier, the non-banking financial company had announced that the Reserve Bank of India has concluded its special audit of the company, which was initiated in response to significant concerns identified in the company’s gold loan portfolio. The audit had begun on April 23, 2024 after IIFL Finance’s financial position was inspected on March 31, 2023 that led to the imposition of supervisory restrictions on March 4, 2024. The initial inspection by the RBI had revealed several irregularities in IIFL’s gold loan operations, including cash disbursals and collections exceeding statutory limits, non-compliance with the standard auction process, deviations in assaying and certifying gold purity and weight, breaches in the Loan-to-Value (LTV) ratio, and a lack of transparency in customer charges.

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In a regulatory filing, IIFL Finance said that its loan growth in core products was robust, with gold loans and home loans AUM up by 13 per cent and 26 per cent YoY respectively. Microfinance grew by 34 per cent while digital loans and loan against property grew by 71 per cent and 29 per cent on-year respectively. Overall core loan portfolio posted a growth of 22 per cent on-year.

Nirmal Jain, Founder, IIFL Finance Ltd, said, “The regulatory action imposing an embargo on fresh gold loans has significantly impacted our business in the last quarter and continues to do so in the current quarter. We have used this opportunity to enhance our compliance, controls, and operations. We believe that we have fully complied with all regulatory requirements and addressed any deficiencies. The special audit has been completed, and we now await the RBI’s review and expect positive action soon.”

Kapish Jain, President & Group Chief Financial Officer, IIFL Finance Ltd, said, “Consistency in performance has been our mantra and once again we demonstrated healthy financial performance reporting ROA of 3.4% and ROE of 18.4% for fiscal 2023-24. With the conclusion of the on ground special audit done at the behest of the RBI and in depth implementation of all the observations highlighted by RBI in inspection report, we firmly believe that we are far better placed today in working & building ourselves for the next phase of controlled and quality growth once the embargo on the gold lending business gets lifted.”

IIFL Finance’s annualized ROE and ROA for Q4FY24 stood at 14.6 per cent and 2.9 per cent respectively. Pre-provision operating profit stood at Rs 990 crore for the quarter up 30 per cent YoY.  Average borrowing costs for the quarter increased 20 bps YoY and 6 bps QoQ to 9.13 per cent. “98 per cent of our loans are retail in nature and 67 per cent of our retail loans (excluding gold loans which are not classified as PSL loans but are still zero risk weights for the banks on a net exposure basis) are PSL compliant. The assigned loan book is currently at Rs 16,488 crore. Besides, there are securitized assets of Rs 274 crore,” the company stated. While the GNPA stood at 2.3 per cent, NNPA stood at 1.2 per cent.

The total presence of branches stood at 4,801 as at the end of Q4FY24 compared to 4,681 branches last quarter.

IIFL Finance has issued 4,23,94,270 fully paid-up equity shares of the company of face value of Rs 2 each (Equity Shares) by way of a rights issue for an amount aggregating to Rs 1271.83 crore. IIFL Finance, pursuant to board approval on March 20, 2024, has also allotted 50,000 NonConvertible Debentures namely Secured Redeemable Non-Convertible Debentures– Series D25 of face value of Rs 1 lakh each, for cash at par, aggregating to Rs 500 crore on Private Placement Basis.