Rationale

To arrive at the ratings, ICRA has considered the combined business of IIFL Finance Limited and its subsidiaries (IIFL Home Finance Limited and IIFL Samasta Microfinance Limited), referred to as IIFL/the Group/the company, given their common senior management team and strong financial and operational synergies. The ratings favourably factor in the Group's diversified lending portfolio with assets under management (AUM) of Rs. 52,761 crore as on June 30, 2022 (retail portfolio constituting 95%) and its widespread presence across 25 states with 3,296 branches. The ratings also consider the Group's adequate capitalisation. With the off-balance sheet portfolio largely driving the growth, the company's capitalisation has remained stable with a consolidated net worth of Rs. 6,470 crore and on-book gearing of 5.7x as on March 31, 2022. IIFL Home Finance has entered into a definite agreement with Abu Dhabi Investment Authority (ADIA) for raising Rs. 2,200 crore of primary capital for a 20% stake, which is likely to support the company's growth plans. Further, given the increasing share of the off-balance sheet portfolio, the capitalisation is expected to remain adequate. The ratings are constrained by the impact of the Covid-19 pandemic on the Group's profitability and asset quality. The asset quality has moderated on account of pandemic-related issues and slippages in the real estate book. With high slippages and write-offs, the credit costs remained high in FY2022 and FY2021, thereby impacting the profitability. IIFL's ability to manage the asset quality and control the credit costs would remain critical for maintaining the profitability. During the liquidity crisis post September 2018, the company had primarily been relying on the assignment/securitisation of its portfolio. However, Rationale To arrive at the ratings, ICRA has considered the combined business of IIFL Finance Limited and its subsidiaries (IIFL Home Finance Limited and IIFL Samasta Microfinance Limited), referred to as IIFL/the Group/the company, given their common senior management team and strong financial and operational synergies. The ratings favourably factor in the Group's diversified lending portfolio with assets under management (AUM) of Rs. 52,761 crore as on June 30, 2022 (retail portfolio constituting 95%) and its widespread presence across 25 states with 3,296 branches. The ratings also consider the Group's adequate capitalisation. With the off-balance sheet portfolio largely driving the growth, the company's capitalisation has remained stable with a consolidated net worth of Rs. 6,470 crore and on-book gearing of 5.7x as on March 31, 2022. IIFL Home Finance has entered into a definite agreement with Abu Dhabi Investment Authority (ADIA) for raising Rs. 2,200 crore of primary capital for a 20% stake, which is likely to support the company's growth plans. Further, given the increasing share of the off-balance sheet portfolio, the capitalisation is expected to remain adequate. The ratings are constrained by the impact of the Covid-19 pandemic on the Group's profitability and asset quality. The asset quality has moderated on account of pandemic-related issues and slippages in the real estate book. With high slippages and write-offs, the credit costs remained high in FY2022 and FY2021, thereby impacting the profitability. IIFL's ability to manage the asset quality and control the credit costs would remain critical for maintaining the profitability. During the liquidity crisis post September 2018, the company had primarily been relying on the assignment/securitisation of its portfolio. However, since then, it has raised long-term bank loans, retail non-convertible debentures (NCDs), foreign currency bonds and National Housing Bank (NHB) and National Bank for Agriculture and Rural Development (NABARD) refinance in the last two years, which has helped improve the funding profile. A further improvement in the Group's ability to raise funds from diverse sources at competitive rates will also remain a key monitorable. ICRA has reaffirmed and withdrawn the rating outstanding on the NCD programme and subordinated debt programme of Rs. 341.04 crore and Rs. 35.00 crore, respectively, as these instruments have been redeemed in full and there are no dues outstanding against the same. The rating has been withdrawn in accordance with ICRA's policy on the withdrawal and suspension of credit ratings