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IIFL Holdings conducted a conference call on 01 August 2018 to discuss the financial results of the company for quarter ended June 2018. Nirmal Jain, Chairman, IIFL Holdings addressed the call:
Highlights:
- The company has posted strong 38% growth in group net profit to Rs 348 crore for Q1FY19. Net profit after minority interest has grown by 37% to Rs 269 crore. ROE was 20.3% and ROA was 2.4% in Q1FY2019. All the three segments of the company have recorded steady growth.
NBFC business
- The loan AUM has jumped 44% yoy and 8% qoq to Rs 33653 crore end June 2018, driven by small ticket home loans rising 57% yoy, small ticket SME loans rising 139% yoy and microfinance loans rising 291%.
- The company has also recorded good growth in gold, CV and construction finance loans. On the other hand, growth in LAP and capital market loans was moderate as planned.
- The fastest going segment in home loans is the affordable home segment or Swaraj loans with average ticket size of Rs 16 lakh, which accounted for 21% of home loan disbursements in Q1FY2019 and 13% of closing home loan AUM.
- Profit after tax computed as per Ind-AS grew by 68% yoy to Rs 196 crore.
- Tier 1 car stands at 15.9% and total car at 19%.
- IIFL home finance is a significant player in the Pradhan Mantri Awas Yojana Credit Linked Subsidy Scheme and till date it has provided benefits to over 14000 customers and disbursed subsidies of more than Rs 317 crore.
- The company has continued to focus on digitization of loan process with 40% of loans being on boarded and sanctioned on tablet application available with sales team.
- Within construction and real estate finance, the mix continues to change towards construction finance for small ticket housing projects. As on 30 June 2018, the company had over 6600 approved housing projects up nearly 1.5 times from the 4500 approved projects a year back.
- All construction finance loans and 50% of home loans were made through these approved projects. The company expects that this approach will reduce operating and paid cost going forward for housing finance company.
- The company believes that the overall portfolio risk is on the decline, as portfolio mix continues to become more granular, with greater share of small ticket home loans, SME loans and Micro-finance loans.
- Retail loans including consumer loans and small business finance constitute nearly 85% of loan book. About 47% of home loan, 57% of LAP, 86% of commercial vehicle, 50% of SME loans and nearly all of MFI loans are PSL compliant. In aggregate nearly 43% of loans are PSL compliant, which are regularly sold to banks at attractive rates, providing positive impact on profitability and CAR.
- The share of securitized book currently stands at 16% of AuM.
- The average cost of borrowings rose by 20 bps qoq to 8.58%, which is still down 5 bps yoy. NIM was at 7.2%, expansion of 66 bps yoy, helped by recognition of interest on Stage 3 assets and upfront gain on direct assignment portfolio.
- In a rising interest rate scenario, the company is in a position to commensurately re-price loans. About 46% of loans are on a floating rate basis and an additional 25% of loans have a maturity of less than one year.
- Medium and high yielding assets currently constitute 52% of AUM versus 46% at the end of March 2017. These include microfinance loans, MSME loans, gold, CV and construction finance. The other half of AUM consists of relatively low yielding assets including home loans, LAP and capital market loans.
- About 91% of AUM comprises loans that are secured and only 9% of loans are unsecured.
- Cost to income ratio was at 42.6% and opex to average loan book ratio was at 3.5%.
- Total number of NBFC branches has grown 39% yoy to 1547 compared to 1114 a year back.
- Consolidated GNPAs and NNPAs, recognized as per RBI's prudential norms and provisioned as per Expected Credit Loss (ECL) method prescribed in IndAS, stood at 2.0% and 0.9% of loans respectively.
- Of the total 6.67 lakh loans disbursed in Q1 (gold 394k, digital 90k, Samasta 163k, HFC 7k), 99% were on-boarded digitally, with Aadhaar based e-KYC undertaken for 96% of all bookings.
- Home loan will grow faster in terms of the relative share and also obviously the SME; these two segments are growing faster. Commercial vehicle is a cyclical market, there is an uptrend in commercial vehicles this year, which may last couple of quarters. Capital market and LAP has been relatively reducing its share, and the same trend will continue.
- The company expects to keep growing at 30 to 35%.
Wealth management
- IIFL Wealth PAT, computed as per IndAS, grew by 26% to Rs 110 crore. Assets under advice, management and distribution have grown 7% qoq and 25% yoy to reach Rs 1.41 trillion.
- IIFL Wealth raised equity capital of Rs 746 crore in June 2018 through a prior placement to six institutional investors. Out of this amount, the company has allotted shares worth Rs 652 crore and the same forms part of net worth end June 2018. Allotment of the balance 94 crore worth of shares is pending allotment.
- The company has now presence in 23 locations and 9 geographies.
- The company raised net new money of Rs 5228 crore in Q1FY19 versus average quarterly run-rate of Rs 6263 crore last year. AIF assets have grown 60% yoy to Rs 13,422 crore.
- IIFL Wealth Finance, which offers loan against securities and margin funding to high net-worth clientele, grew its loan book 31% yoy but down 16% qoq to Rs 5631 crore. Calibrated approach to portfolio management and selected exits in certain exposures in present volatile market conditions has resulted in qoq decline in the loan portfolio. Average lending rate for this book is around 10%.
Capital Markets
- IIFL Capital Market activities, which largely comprise retail broking, institutional broking and investment banking businesses, grew its net profits by 11% yoy.
- Average daily cash turnover was up 9% yoy to Rs 1215 crore versus 14% yoy growth in exchange cash turnover.
- Average daily total turnover, including F&O, was up 51% yoy to Rs 16677 crore.
- NSE market share in the cash segment was around 3.7% and in total around 1.9%.
- The company is continuously enhancing offerings on digital and mobile platforms for retail customers in broking business.
- The company has completed 6 transactions in Investment Banking and has a substantial pipeline of deals in various stages of execution.
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