Priya Patel
TLDR:
- IIFL Finance has a diversified product suite including home loans, loans against property, gold loans, microfinance loans, and unsecured business and personal loans.
- The company is focused on aggressive expansion of physical distribution and digital capabilities to sustain strong AUM growth.
In a recent report by Motilal Oswal, it is highlighted that IIFL Finance Ltd. is well-positioned for a ~25% assets under management (AUM) compound annual growth rate and a return on equity of ~20-21%. The company’s presence in various loan segments like home loans, gold loans, microfinance loans, etc., is expected to drive this growth.
Key points from the report include:
- The company’s net interest margin is expected to improve to ~8.0% in FY24E from 6.2% in FY19, supported by an improvement in the product mix and lower cost of borrowings.
- With a focus on branch expansion for various businesses, IIFL is expected to slow down branch expansion and improve branch productivity to achieve a better opex-to-AUM ratio of ~3.5% by FY26.
- The company’s asset quality in gold loans and home loans, which contribute to 65% of the AUM mix, is robust, helping mitigate risks in other loan segments like MFI and digital loans.
- The asset-light model combined with a diversified product suite is projected to drive a strong AUM CAGR of ~25% over FY23-FY26E.
- Based on these factors, Motilal Oswal reiterates a ‘Buy’ rating for IIFL Finance with a target price of Rs 800.
Overall, the report emphasizes the company’s strong growth potential, favorable risk-reward ratio, and the importance of its diversified product suite in driving future performance.
