Net interest income (NII) came in at ₹1,163.8 crore, rising 13% year-on-year and 6% sequentially. Pre-provision operating profit (PPOP) surged 80% YoY to ₹1,172.7 crore, while net profit jumped 148% YoY to ₹623.2 crore, with a 24% QoQ increase.
The company’s return on assets (ROA) stood at 3.0% versus 2.5% in the previous quarter, and return on equity (ROE) at 17.9% versus 14.4%.
Asset quality strengthened, with gross NPA declining to 1.46% from 1.60% QoQ and net NPA easing to 0.73% from 0.75%. The provision coverage ratio stood strong at 93%.
The company maintained a healthy capital position, with a CRAR of 25.3% and net gearing at 3.8x. Cost of borrowing improved to 8.97%, lower than the FY25 average.
Gold loans continued to drive growth, with AUM at ₹52,581 crore, up 150% YoY and 21% QoQ. Home finance remained steady at ₹32,125 crore, while MSME loans grew 11% YoY to ₹10,349 crore.
Microfinance AUM declined 7% YoY but saw a 9% sequential uptick to ₹9,143 crore.
How brokerages reacted to IIFL Fin Q4
HSBC has maintained a ‘Buy’ rating on IIFL Finance and raised its price target to ₹550, citing a robust Q4 performance, healthy AUM growth, improving asset quality, and a strong RoE.
The brokerage said the company is entering a favourable earnings upcycle, supported by MFI cyclicality and a recovery in housing finance growth.
HSBC has also raised its FY27-FY28 earnings estimates by 9.0% and 1.5%, respectively, driven by expectations of lower credit costs.
Nomura, which has a ‘Hold’ rating on the stock, has cut its price target to ₹500. It expects AUM growth to moderate as gold loan growth normalises, but sees further easing in credit costs supporting a 26% profit CAGR and improvement in RoE over FY26-FY28.
The brokerage added that valuations at 1.1x FY27 estimated book value appear reasonable, although uncertainty around the outcome of the special tax audit remains a near-term overhang.
FY27 guidance and outlook
Management remains optimistic on growth, particularly in secured segments. Gold loan AUM is expected to grow 20-25%, assuming stable gold prices, while the housing finance book is guided to expand 18-20%.
Disbursements in housing finance are projected to grow 25-27%.
The microfinance segment is expected to grow around 20%, albeit with a cautious approach. Consolidated credit costs are likely to improve sharply to 1.5%-1.7% in FY27.
The company expects ROA to sustain above 3% over time, supported by lower credit costs. It is also targeting an increase in the off-book or co-lending mix from 35-36% currently to 40-45%, which should enhance capital efficiency.
Following the easing of RBI norms, IIFL Finance plans to expand its branch network in gold loans. The focus remains on secured lending, cross-selling opportunities, and tapping underserved Bharat and MSME segments.
Management also expects incremental gains from AI-led cost efficiencies and productivity improvements.
Management commentary
The company indicated that a tax assessment order is expected soon, but does not anticipate any material adverse impact. Any potential tax demand will be legally contested.
A rating upgrade remains a medium-term goal, driven by stronger profitability, scale, and asset quality, which could also help reduce borrowing costs further.
IIFL Finance shares settled 2.50% higher on Wednesday at ₹449. The stock is down 28% so far this year.
