IIFL Finance Limited (IIFL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the IIFL Finance Limited Q1 FY27 Earnings Conference Call. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference call over to the management for the opening remarks. Thank you, and over to you.

Good evening, everyone. I welcome you all in the IFL Finance Investor Conference presentation call. My name is Vikas Jain, CFO, IFL Finance. We have today Mr. Nirmal Jain, MD CEO, IFL Finance, Mr. Girish, who is the CEO of IFL Home Finance, and Mr. Venkateshan, who is the CEO of IFL Samasta Micro Finance. Now, I will hand over to Mr. Nirmal Jain for macro and strategic overview for the quarter.

Thank you, Vikas. Good evening, everyone, and thank you for joining us today. So, on the macro backdrop, the West Asia situation has reignited over the last two weeks after the June ceasefire framework, keeping crude and saving volatile. RBI has a repo rate at 5.25% in June with a neutral stance, but it trimmed FI27's growth outlook to 6.6% and nudging inflation up to 5.1% on account of geopolitical and external pressures. However, domestic demand, particularly in retail and MSM, has remained structurally resilient regardless. Coming to our main core business, gold prices, despite corrections, have been elevated through this period of uncertainty, and while that has supported our growth and which has been tenant-led growth as well, but we are equally mindful that our sharp correction is a real tail risk in this environment, and we are therefore consciously focused on maintaining loan-to-value So, the quarter return on equity is close to 20%, 19.5%, return on asset is 3.1%, and on a book that is nearly 90% secured. Our AUM has crossed 1.15 lakh crores, is up 38% on a year-on-year basis. Our gold loan has remained our primary engine, but as I said, we are managing growth deliberately. Our home finance and microfinance businesses typically have a first quarter comparatively slower, but both these businesses are structurally on track and we expect the trajectory to strengthen through the rest of the year. Our co-rending continues to scale a bit slower than our plans in the first quarter, but now with 15 active bank partners, we expect it to gather momentum. Also, our AI-led operating model is moving from pilot to measurable impact across collection, fraud detection, front line of productivity and so on. Also, the board has approved a leveling resolution for fresh equity, which is subject to shareholders' approval in day after tomorrow's AGM, which will give us flexibility to raise capital during the year as and when needed. So, in summary, this was a quarter where our profitability and operations are back to their natural levels, and from here on, we expect organic growth to continue, and also AI and operating leverage to support the profitability acceleration in the near future. With this, I'll hand over to Vikas for the detailed numbers. Thank you.

Thank you, sir. To start with the financial numbers for the quarter, for the quarter, IFL financed profit after tax before non-controlling interest was 713 crore and up by 14% on quarter-on-quarter basis. We recorded pre-provision operating profit of Rs.252, up by 50% YOY basis and 7% on a quarter-on-quarter basis. For the quarter, consolidated loan AUM grew by 38% YOY and was up 7% on a quarter-on-quarter basis at 1,15523, driven by gold loans close to around 58,406 crore. Further, dissecting the AUM, our core product loan AUM comprising home loan, gold loans, MSME loans, and microfinance up by 43% YOY and was up 8% quarter-on-quarter basis to 11,770 N.C. This segment now comprises 96.7% of our overall AUM mix. On the asset quality side, our gross NPS stood at 1.6% and net NPS stood at 0.8%, both which are stable and slightly up by 9 basis points from the quarter on quarter basis. The company maintains a cautious stance on unsecured MSM and MFI segment focused on recovery and collections. Happy to inform that provision coverage ratios on NTA stands at 94%. The assigned loan book stands at 26,118 crore, up by 73% on YY basis, and up by 10% on quarter-on-quarter basis. Besides this, there are co-lending assets of Rs. 14,647 crore, which is up by 27% and 2% on quarter-on-quarter basis. Quarterly average cost of borrowing has decreased by three basis points on a quarter-on-quarter to 9.13 and 33 basis points on a YOY basis. A brief update on liquidity. During the quarter, we have raised 17,183 crore through term loans, bonds, commercial paper, and 5,283 crore was raised through direct assignment on loans. Our cash and cash equivalent and committed credit lines from the banks and institutions is 7,148 crores are adequate to meet not only the near-term liabilities but also to fund our growth momentum. We have a positive ALM whereby inflows covers or exceeds our expected outlaw across all buckets and net gearing is at 4.0x. Our ROE for the quarter stood at 19.5% and while ROE stood at 3.1%. Basic earnings per share for the quarter is 15.9 per share. As of June 26, our capital adequacy ratio for NBFC is 17.1, HFC 14.7, and for Summerspa is 24.9%, which is well above minimum threshold of around 15% reflective of our successful off-book model, which we have implemented. Also in the quarter, Moody's rating has assigned us BA3 issuer rating and PBA3 GMTN program rating to the IFL Finance Outlooks table. We have raised USD 500 million through social bond issuance proceeds, which are directed to income generating loans for women, low income, and rural semi-urban borrowers. Crystal ESG rating has assigned an ESG rating of Crystal ESG66 and Core ESG rating of Crystal Core ESG69 to the company. With this, I come to an end and now we are open for Q&A. Thank you very much.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use hand fits while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register, please press star and 1. Your first question comes from the line of Pawan Kumar with Edelweiss Public Halls. Please go ahead.

So, thank you for the opportunity, and congratulations on a really good set of numbers. Two questions. At the current rate of growth, when will you be required to go for equity raise, considering CED1 is already at 12.24 in the standalone entity? Because the gold loans, I understand the risk rates are 125%, and I know you have alluded to reduction in the gold loan growth rate,

But, I mean, even then, we are very close to the regulatory minimum.

So that's one question. Second question, in the IFL home finance entity, can you give us the disbursement separately for home finance and the LAP? And do you think that, you know, from the Q1 is the bottom for the disbursements and the UGM growth going forward, the housing finance growth and the LAP growth will pick up? What is the kind of expectation there for the FI27? Yeah, thank you, sir.

Thanks, Pawan. So, good morning, industry growth has slowed down in this quarter, but we are still growing maybe faster than industry. That's what I would, I won't have the data, but that's what I think so. And then about capital, I think we need to fix the capital adequacy issue in the parent company. And so, you know, this is something, that's why we are taking shareholder's approval on, you know, in this meeting, which is after tomorrow. Now, we have multiple options, you know, basically we can raise QIP or we can sell, do a secondary sell of subsidiary companies. We are also looking at a strategic, you know, invest divestment partly or this thing of microfinance. So, we can raise equity through subsidiary companies. Also, co-lending is gathering momentum now. So, that will also ease the pressure this quarter. And we can raise subordinate debt and perpetual debt also, which we had raised quarter before. That will also help us. So we are very conscious of the capital adequacy, which in the parent company is kind of at the edge. And we are like, you know, we want to fix it. So all these options are open and we have to keep all the options open so that, you know, at appropriate time. So once we have said that approval is valid for a full year. So at appropriate time, we can, you know, make sure that the capital adequacy for this business is properly maintained. And about hope and answer, Girish will give you the disbursement data. I think there's a strong pick-up in the disbursement, but let Girish give you the data.

Sir, before Girish gives just one clarification, because, you know, share sale, I mean, stake sale in the subsidiaries takes time, right? The due diligence, everything will take some time, and even if you raise tier 2 debt, again, 82 debt, that will be tier 2, right? It won't be counted towards tier 1, and the way...

So, perpetual is counted towards tier 1, subject to certain, you know, numbers. So, the perpetual is counted as tier 1, up to 50% of the equity. And I think, you know, maybe there's some such restriction on the total quantum, but it is counted as tier 1, and subordinate is counted as tier 2. And we have been working on this. Okay, I'm not saying it will happen tomorrow, but it can happen very quickly. Thank you. We don't want to raise, but we want to raise at some reasonable valuations, you know.

Got it, sir. Thank you.

And on home growth, we had a very good quarter one. So, if you look at last few quarters, I think we registered the disbursement growth. So, sequentially, we have grown disbursements by 39%. And this is, you know, high compared to last few quarters. Please, please, please, please. We will be happy to ask questions. And please, please, please, please, please.

So, the 39% growth is between home loan and LAP together, right, in IFL Home Finance?

Yes, this is overall sequential growth in the LAP, but 39%. Yeah, both put together.

Home loan is about 80% of the portfolio, and LAP is about 18% or 18-19% kind of thing.

So, can we say that, like, this quarter, like, going forward, the growth will be much faster? You know, like home, particularly home loans, which has grown only 3% quarter on quarter.

So, this is sequential. So, if you look at the overall year, we are looking at growth of about 17% to 18% on book and year year. Disgusting growth will be over 30%.

Got it, sir. Is that the kind of growth estimate for the full year also, 17% to 18% for the... Yes, for the full year. This is for the full year.

For the full year, the book growth... No, no, I mean, for FI27, I mean, for the full year.

Okay, sure, sir. Thank you so much. I'll come back in the queue.

Thank you. The next question comes from the line of Chirak Sengal with First Water Fund. Please go ahead.

Yeah, thanks for the opportunity and Congress and good set of numbers. So, my first question is on the target that you have given in slide 20. So, in FY27, the credit cost is expected to be 1.5 to 1.7, which is sharply dropping in the next two years. So, which segment do you see will be contributing to the higher credit cost in the current year? Because microfinance, as I can see in Q1, you know, a lot of, I mean, it's turned in favor of the industry. And even the gold loans and all are not witnessing any higher provisioning. So, just trying to understand the higher credit costs for this year and what will lead to a steep decline in the next two years.

So, this year in our housing finance, because there is a small portfolio of micro-lab, you know, that is there. So, if you really look at our housing finance, GNPA, they are much higher than the peers, and that is what will be fixed in the next two years.

So, what is the outstanding micro-lab group as of Q1 end?

So, the outstanding of micro-lab is about 440 crores. 440 crores? 440 crores.

So, this is a problem book.

Okay.

It's not significant, but it is just a residual so it will have, you know, clean up in this year.

Got it. Second question is on the, you know, the, just continuing the previous participants point on the fund raise. So, you are, you know, looking at taking in microfinance subsidiary. So, like, what is the multiple that you would be looking at bare minimum if you want to, you know, exit tamasca? And would it be like a partial stake sale or you are coming to exit microfinance completely?

No, we can do partial stake sale also. Now the business has recovered this year. But it's very difficult to give any guidance on this because these are all, you know, It depends on the negotiation deals and this. So the environment has improved now. And therefore, it may be a time to raise the capital there. Also, you know, in our parent company, the subsidiaries are valued at cost. So that basically is a disadvantage when we compute the capital adequacy for the parent. So even if we demerge, then also the capital adequacy gets released. So, we are looking at various options, but as I said in the previous question that we are very conscious of this and we want to make sure that this is addressed properly.

Yeah, because diluting at the current valuation would be your last option that you would be looking at, right?

Yeah, so I think we can still, you know, with the marginal, we can still continue for a quarter or two more with the cold ending picking up, and, you know, perpetual subordinates, our capital adequacy will be better as we go along. And, you know, so we are not, as I said, that what we are saying is right, but we need to look at the multiple options and, you know, take one.

Understood. One more question on this project piece. So, you have given some data points on slide number 19. So, you know, the ranges are very wide. So, loss prevention, you are saying 10 to 40 percent, opposing cost 8 to 20 percent. So, any specific reason why such a wide range? And also, on the OPEC to AUM, if you can give a guidance, how you should look at it going forward?

So, okay, first you are, why, this AI is a new animal. And, you know, I think we are also a human organization. We are going to do it slowly. And this is something which will be achieved over a period of time. So, if you say, you know, the cost reduction over three years, then I am very optimistic that it might be on the higher side. But in the first year, you know, it will be on the lower side. And as I said, this is completely, you know, everybody is sort of talking about it, doing it. In my opinion, more or less, everybody will get the AI right. I mean, just like mobile and any other technology, a few months here and there, everybody will adopt it. But, you know, I think, you know, we are also looking at it as a completely new thing, and that is why the range is wide. This is not a tested technology. This is not something that you have precedence or a model. As you can say, this is what I'll achieve.

Okay. And on the OPEX to AUM, like, what is the...

Yeah, OPEX to AUM, I think we are down to 3.4. So, I mean, from here, there can be a marginal decline because we are also setting up new branches. Last year, we did not set up any new branch. So, I mean, I think 3.4, 3.3, or, you know, this is the range that you should look at. And with AI, which is again a black box, You know, we'll see over the next two, three years that probably we can contain it further.

So, this 3.3, 3.4, are you considering any benefits from this, what you have mentioned about project base? See what is happening.

So, AI benefit, if you really look at our fixed costs in this quarter and last quarter, despite growth in the business, it has grown by 2% or something like this. So, obviously, you see that the AI benefit has already started to kick in. But, you know, it's very difficult to estimate. But what I can tell you is that the operating cost over next two to three years, you'll see a downward trajectory, which is combined impact of AI. And also as our scale goes up. So we are, you know, our branched-led model with 4,500 to 5,000 branches, we are a very heavy fixed cost model because the branches' costs are fixed, the employees are fixed salaries. So if the scale goes up, then the operating leverage benefits us a lot. I'm also trying to factor in the expansion that we're going to do, because as I said, this year we want to set up 500 new branches. So, you know, that will, to some extent, mitigate the benefit of operating leverage.

Understood. Yeah, that would be it for mine. Thanks, and best of luck.

Thank you. The next question comes from the line of Gaurav Khandi and Waal with J.P. Morgan. Please go ahead.

Hi. Good evening. Thanks for taking my questions. I've got a couple of those. First, on asset quality, can I understand what's driving the higher gross NPAs both in home and gold loan segments quarter on quarter? Is there anything systemic that we need to worry about?

So, I think gold, one should not worry about because these are customers that generally don't default and their journeys have emotional value. So, you have to be a little careful and give them some more time. In housing also, as I said, we are mending it structurally. So, as we go along, you will see that coming down significantly. But compared to, say, last year, we are significantly down. And now that we are pivoting towards a secured portfolio, then you see our credit costs and losses will become minimal.

Got it. And if I can just follow up, so in case of your housing loans, on an average, whenever we see a default and an actual loss, what's the LGD on a blended basis for the housing book?

So, if we take on the entire book, LGD will be anywhere between 33 to 34%. And our coverage also is accordingly, you know, done.

Got it. Okay. And my second question on your long-term strategy, and I'm sorry if you've already answered this. But your guidance of effectively increasing ROA by 50-odd basis points, a lot of that appears to be coming from credit costs. But outside of credit costs, are there any areas, you think, which can also help in terms of getting to the higher ROA in operating leverage or margins or otherwise? And also, I just want to understand what's the outlook for margins of the next two, three quarters? Have your costs of funding worries come down, especially after the spike in years and initial part of the quarter? So those are my two questions. Thanks.

So ROI, you know, I think 40, 50 basis point post tax will be like 60, 70 basis point pre-tax, which is coming, you know, more 40-50 basis from credit cost, 20-30 basis point from, you know, maybe rest of the things which can be operating cost as well as, you know, the NIM improvement. Now, in terms of credit, the cost of borrowing, cost of funds, I think, you know, the general industries of the view that with SCNR, liquidity will ease in the system, and we should be able to borrow at an overrate. In the last couple of quarters, we have paid slightly higher rates, and also our dollar bond has been at a higher cost. Margin are stable. In the gold loan, despite competition, we focus on a very small segment, which is, you know, the customers which are, the ticket price is small. So, there, I personally don't think any pressure on margin, because the rate at which we lend, given our scale, we afford. But otherwise, for a small ticket loan, you know, that's a very fair rate. So, we expect margin to be stable. So, margins will remain in this range, and benefit will come from operating costs and also credit costs. Other income costs, and with AI, we are just trying to, you know, we should achieve some benefits there also.

Got it. And in fact, in this quarter, the gold loan yields are up slightly. Have you increased pricing for any particular gold product, or what is driving this almost 40, 50 basis point increase?

So, this is a portfolio yield. And when we started after embargo, so initially the yield was over, but as we have been talking about in earlier analyst call also, so we have picked up, and so as quarter after quarter, you see the, you know, the advantage coming in. So, and as I said, because we are focusing on small ticket loan, we are able to maintain RIA. The portfolio, typically, you see, the loans are for 6 to 24 months, actually. So, as the new loans are at a higher rate, you see, you'll improve it.

Okay, Gaurav, thank you. Those are all my questions. Appreciate this.

Thank you. The next question comes from the line of Abhijit Tebrewal with Motila Noswaal. Please, go ahead.

Yeah. Good evening, everyone, and thank you for taking my questions. Congratulations on a good quarter. You must have a question on gold loans. Just trying to understand, with so many other larger, bigger NBFCs now pouring into gold loans in the last one or two quarters, have you heard anything from the ground in terms of they being aggressive or higher competitive intensity? This is still just a narrative right now. Basically, what I'm trying to understand is, while in housing finance, Grisha said earlier that we have managed to take yield highs, about 60-70 basis points on the incremental loans that we are doing. Is that something similar we are able to do on gold loan system?

So, okay, there are two different products in housing. What is happening is that there's a mix. And earlier, we had this micro lab, which had a higher yield of almost 80 to 24%. So that portfolio is declining. So if you see that although Gary's talked about boarding yield going up, the portfolio yield has come down in housing finance because that high yield portfolio is running off. In gold, I mean, there's one product. And here, while the competition is there, I mean, I'm not denying that there's competition. And competition can be aggressive in two ways. One is they can drop the yield, and two is they can increase the LTV. And we are seeing, you know, some of the new players getting aggressive in both ways. But there's a huge market, and we have a customer franchise. So we really aren't chasing, you know, cutthroat competition or our growth Because we have our customers, our branches, and we are maintaining, you know, that relationship as well as our business. And also, you know, there's a learning curve. So many corporations have a set of new branches. You need to get the system, security, people, training, you know, everything right. And that's a process. It's a massive market. So it's a very large market. Still, part of the market is an unorganized sector. Banks have a very large market. Many, two, three large public sector. Banks have more than three lakh rupees of portfolio. So, I think, you know, the market is there, and also, now that unsecured lending has become difficult, more and more customers are varying towards lending, or borrowing lending is gold.

So, then the second question I had was about a lot of these management changes that we've seen in the last one year. I think we had a change in our CFO. I think today we have said that our business head, Unsecured Lending, is moving to another role within the company. Grisha himself has come on board for us.

So, let me explain. Unsecured Lending is discontinued. So, obviously, that role has to be redepleted somewhere. CFO is still there in handling strategy, but, you know, there are personal and health issues, so that is a different question. But other than that, you know, many of, if you really look at our tier 2 management or even tier 1, many of them have been there for 15, 20, and 30 years. So, if you look at our gold loan head, he has been here in the company for almost, maybe, 30 years, so, almost 25, 30 years, so, there are many old people and, you know, there is the strength of the company. But some changes will happen in the company as well.

Got it. And, sir, are we looking to introduce any new products in the standalone entity now, while gold will remain the core product? Any new products that you are looking to introduce? I think the lab is

another product which will be there in our listed company. A very small product loan against shares continue. But other than that, we don't have any plans to introduce any new product.

Got it. And lastly, sir, one clarification. When we said that we have discontinued unsecured lending, we'll stop doing unsecured business loans as well.

Yeah, that is what, yeah, absolutely right. Unsecured business loan, personally, both we have discontinued.

Got it. And lastly, Garisa, I'm just trying to understand why you laid out that you're looking at about a 30% disbursement growth, 17-18% loan growth this year. And the fact that what Mirma has explained that disbursement yields are higher, but we came in that micro-lap used to be a higher yielding product and that is running off and we're not doing that product anymore. How are you thinking about improving the ROA trajectory over the next couple of years?

Yeah, actually, we talked about, I spoke about, you know, what is going to be the plan for this year in terms of book growth, premium growth, and because I think the trend will continue for next few years, because we see a lot of potential in spite of Kodron being We have done pretty well on all the three fronts. Yeah, to a certain extent, probably last year was soft. But even if I compare with Codafo, Sequel Street, we would have a good list on this person in the book area. So if I continue with this, maybe in the next three years time, so we are looking at RAF about mid-T, so I think that's the plan, we are focused on that. Now we are pivoting more towards affordable and the balance we are also into emerging. We have completely cut down on prime, which means no margin. So, every year you take, if you look at any company's portfolio, I think the year's disbursement will account to 18 to 20% of the entire book. Three years time, it's been 50 to 60% of the entire book color will change, and that should lead to profitable growth, and it will also give us good return.

So, Gery, if like in terms of trajectory probably what they are trying to understand is that how the acceleration will happen? But based on our plans, I mean, quarter after quarter, we should see profitability improving faster than the loan growth.

The answer is all my questions. Thank you so much, and I wish you a team the very best.

Thank you. The next question comes from the line of Prithviraj Patil with Investec. Please go ahead.

Hi, thanks for the opportunity.

So, I just had the first question on the income tax note, the footnote that's there in the financial statement.

If you just elaborate on the 470 crore impact that's there.

No, it's nothing, which is what we discussed last time. So, there's no new development on that. So, there's a demand of 475 crores, which, again, which we have final appeal with CIT. And, you know, the process of income taxes that first we find appeal with CIT, then you can go to Tribunal, and then you can go to High Court and Supreme Court. So, there's no new development there.

Okay, thank you. And also for the SRs, I see that the stand-alone entity, the SRs are the same quarter on quarter,

and if you could just elaborate on the SR position for the,

for the, uh, subsidiary role that I could give.

So SRs, basically, uh, the redeemments will happen in a lumpy way, uh, but as we had guided last time, that in 12 to 18 months, probably more or less, uh, all the SRs will be fully redeemed, uh, and, uh, you know, as I said last time also that, uh, you know, we believe that we'll realize more than what the book value is. And actually, last quarter, there was not much movement, but in the rest of the year, and so I think by September 27, more or less, you know, this book will be completely wound up.

Good. Thank you.

Thanks very much.

Thank you. The next question comes from the line of Love Sharma with 0.72. Please go ahead.

Hi. Thank you for taking the question. If you could just highlight what was the credit And secondly, on the credit ratings on the international market, given that you have been very active, any indication of what your engagement has been with the agency, given you are on positive outlook from two of them? And I know you recently got a higher rating from Moody's, but just from the other two, where do we stand in terms of your communication and your discussion? Thank you.

Thanks. So, Moody's has upgraded our rating, which is one notch above Fitch and S&P. Fitch has been actively engaged, and immediately after the results, they will take it to the committee. We are very optimistic that even Fitch ratings will get upgraded. So, you know, and also will engage with other agencies, other international agencies, as well as local. Our credit cost for the first quarter is around

1.6%.

Okay, when we say credit cost, it's based on the average loan book. Okay. And I think we have guided similar numbers, 1.5, 1.7. You know, going forward, gold loans reported GNPS can be slightly higher as the book grows and the prices are volatile. But, you know, we always have enough cushion. So, if the gold prices have fallen, then we don't press the button, trigger, and just auction everything, depending on the margin that we have. So, you know, in terms of reported number, it can vary. But the loss given default in gold in the last 15-16 years has almost been zero.

And just on your borrowing cost, I mean, I know there's a slight uptick in the cost of funds for this quarter, given I think probably you have raised more in the international market. But just generally, where do you see the trend for the next quarter?

So, we raised $500 million by dollar bond, which is, you know, with the fully hedged, our cost is slightly higher. But this is an international, you know, market which we should diversify and we should tap, you know. Companies like CERAM has done a wonderful job by being consistent in this market, and over a period of time, the cost comes down. So, that has basically been one of the reasons for increasing our meter leverage costs. But as I said, the expectation is that after this FCNR, liquidity will improve domestically, and we should see the cost coming down.

Okay, understand. Thank you so much. Thank you.

Your next question comes from the line of Rajiv Patak with GC Holdings. Please go ahead.

Hello. Good evening, everyone. And congratulations on a very good set of numbers. A few questions. First, on our gold loan business. So we have done a fantastic 21% QOQ growth there. If you can just touch upon how much of this growth would be tonnage-led and how much would be value-led. So if you can share that number. Secondly, if you look at the LTV, I think from March, we were at 63%. Right now, we are going to an LTV of 70%. Is there a headroom for us to now increase the LTV or now the growth will primarily be volume-driven growth going forward for the next couple of quarters? That is on the golden part. On the asset quality, maybe we will take it up later.

It has not been 21%, but 11% quarter over quarter. Hello? Yeah, it has been 11% quarter over quarter.

Yeah, sorry, 11% quarter over quarter, yeah.

And, you know, the 5-6% has been the tonnage growth. The gold prices have corrected in February, and not in this quarter. So, I think we are maintaining a healthy cushion there.

Okay. Okay. So, and on the asset quality in the gold loans, so if you were to look at the 1 to 30 DPD and the backups that you generally give, we have seen an increase as compared to Q4. So, basically, the gold loan portfolio and the MSME, both secured and unsecured, have seen an increase in the 1 to 30 and the 30 to 90 DPD buckets. What would be the reasons?

And therefore, 0 to 30 and 30 to 60 can be higher, but mostly these are small traders, shopkeepers, businessmen, mom-and-pop shops, you know, so you generally collect before 90 days. So I won't be worried about, you know, slight increase in the RDPT in the gold loans.

Okay.

But, and which is also not very significant if you compare number quarter to quarter, it's very large.

Yeah, in terms of absolute amount, it will not be worth. So, basically, if you were to take a point, that means you are saying that while the gold price is maybe volatile, maybe even downward going over the next two quarters, for example, your buckets may move in between 30-60, but your 90 DPD, you don't think that it will go up, right?

Yeah, yeah. And even if that goes up a little bit, few basis points, the losses will not be there, ultimately it comes back.

Okay, sure. And, sir, on the MSME part, both secured and unsecured?

So, MSNB unsecured is a discontinued picture. So, there, I think, we are recovering whatever the balance portfolio. So, the denominator keeps shrinking, so you might see some increase. In case of MSNB secured again, I need a very marginal movement. There is hardly any two races per movement.

Okay.

Yeah.

Okay. Okay. And, sir, on the microfinance portfolio, so we have seen a growth coming this quarter also. So, would you see a same quarter-on-quarter AEM growth trend now going forward, and even for the profitability and ROA in this business improving quarter-by-quarter going forward?

Yeah, microfinance industry has picked up. So, there's about 3-4% growth quarter-on-quarter. Within that also, the microfinance is also diversifying more into retail and the secured other loans, which is nearly catered to other products that we do. But microfinance industry Okay, it will not grow at 30, 40, 50, 60% what it grew in 24, but steady 4% and 3-4% growth per quarter will happen.

Okay, and what is the ROA, ROA targets that you would have here?

How are your targets for?

Microfinance, Kamushka?

I think it will be around 2.5 to 3%. Is Veket is there all night? Yeah, Nirmal. We will hit around 2.5 to 3%.

2.5 to 3%. So 2.4 will go to 2.5-3% kind of ring by the end of the year. Thank you very much and wish you all the best.

Thank you.

Thank you. The next question comes from the line of Shripal Doshi with the query. Please go ahead.

Thank you for giving me the opportunity. My question is pertaining to the gold finance book. So, this quarter we have seen the new RBI framework being implemented for the lenders. So, what sort of challenges or, you know, development that we've done, that we've seen during the quarter while doing the business, as well as have we made any changes in terms of tenure, in terms of, let's say, product launches within the gold loan portfolio, or we are still continuing with the vanilla gold loan portfolio for product that we had?

So, you know, income assessment has become mandatory. So, okay, you can define the loan as consumption or income generating loan. In consumption loan, you cannot go beyond 75% LTV. And in income generating loan, you can go beyond 75% LTV, but you have to make sure that, you know, you do the assessment of cash flows and income. So, we are working with this. We have a good technology driven system to do that for small businesses that borrow from us. So, in a way, I think these developments are healthy from a long-term point of view, and our systems are fully tuned to that.

Just follow up on that. So, we have launched an income-generating gold loan product as well, do you mean to say?

We have income-generating gold loan product also, and we take a certificate and business proof for that also, yeah.

Got it, got it. And with respect to the new framework, like, as you also put up, like, you have launched this product as well. But at ground level, did we change anything on the tenure side? Because, you know, implementing in the consumption loan product, implementing the newer LTV norms could actually lead to lower disbursements for the customers. So have we tweaked anything on the tenure side during the quarter?

Not very much. So we always have the tenure of two years available for customers, so that continues.

Got it, sir. Thank you so much for answering my question. Thank you.

Thank you. The next question comes from the line of Varun Kajaria with Umkara Capital. Please go ahead.

Yeah. Hi, sir. Thank you for taking my question. Congratulations on a good set. I just wanted to understand on the previous question that one of the participants asked, if you could just walk us through the 30-plus slippages. And if there is any part that you are concerned about, I am sorry if you already answered this.

So, 30 plus slippage is in which product we are saying?

Overall, in the asset quality metrics that you have mentioned, right? 1 to 30 and 30 plus.

If you look at our slide 12, that gives you the numbers for every product on 30+, 60+, and beyond.

Yeah, I'm aware of the metrics. What I'm trying to get at is, there's a sharp increase in those metrics, especially in gold. So, if there's anything concerning about it.

Now, gold loan, I think the 30 plus is how much now? One second. 30 plus is 3.8. As I said, it's a very marginal increase first, and secondly, you know, gold loan, I mean, sometimes some customers don't pay on time, then we, based on our margin, we hold back. We just don't auction or don't, but this is not something which is not manageable. But this is more or less, you know, if you see historically, the numbers have been in this range.

So this is sort of seasonal and nothing that you're worried about, right? Okay, thank you.

Thank you. The next question, sorry, your next follow-up question comes from Pawan Kumar with Edelweiss Public Halls. Please go ahead.

Mr. Kumar, your line is unmuted.

Please put me in your question, yes.

Hi, thank you. In continuation of Sripal's question from earlier, right, A couple of gold loan companies mentioned they're looking to structure gold loans as interest-paying instead of bullet loans. Have you made any such change on the interest side? That's one. And the second thing, on the standalone entity, the assignment quantum actually increased year-on-year from 4,200 crores to 4,800 crores. This is the Q1 number. But the assignment income has come down from 173 crores to 43 crores. Any reason for that? And lastly, earlier you used to give data book. Have you stopped it? It used to be quite useful. The data book is there.

It's uploaded already on our website. So I think there is a link in the presentation that you should add. You upload it separately. The data book is already there on our website.

Okay. I have a mistake. Thank you.

I think the link which is there on the last slide is not there, but I will just make sure it's there. So that is about the data book. Your other question was, on

the interest, instead of being bullet loans, are you looking at?

Yeah, so we always have the product. So, see, you know, in gold loans, when a customer walks in, you can have a monthly interest payment, quarterly interest payment, six monthly, or a bullet, and the interest rates differ. So, if you, say, choose monthly interest, then your interest rate is lower, because, you know, we also know that the customer has a, is a regular income generating and is a good customer. So, we always had these products, so there is nothing new we need to introduce.

Is there any traction for that particular product? Particularly, like, you know, monitoring income generating loans is quite difficult compared, right?

So, because the entire income generating and these things have started in this quarter. So, we see the trend now. But, I mean, as of now, I don't have much variance or something which is significant.

Got it, sir. And the assignment income going down from 170 crores. Assignment income, just one second.

If an act has gone down because the assignments are smaller, but standard has gone up, the assignment income in home loan because of 15-year product or even 7-8-year behavioral will be much more, significantly more.

Sir, I am referring to standalone entity, the 173 crores to 43 crores, net gain on de-recognitionment.

Oh, yeah. I think you are talking about standalone, this thing. Yeah, correct.

And also, you have given...

Now, the code ending has picked up. But our assignment was also higher. Sometimes what happens, assignment day happens at the end of the quarter, then you can just take for a limited this thing. But I really need to get... Just give me one minute.

Yeah, I think...

So, what has happened, the incremental deals in quarter are lesser now because code ending has picked up. Although the portfolio might have gone up, But this happens based on the transactions done during the quarter. So that is why you see lower assignment income in standard loan.

But, sir, you disclose that like the assignment amount of loans assigned are 4,800 rows this quarter.

So the upfront income is based on the transactions done during the quarter.

Correct, correct.

So the transactions done during the quarter are fewer as compared to the previous year, same quarter. Am I going forward to the key?

This is last year, but the...

Is the first part right, sir, we are saying?

Correct, sir.

Maybe I'll have a look at this.

Okay, sure, sir. Thank you.

We'll just find out, analyze this and get back to you, Paul.

Thank you so much, sir, and congratulations.

But going forward, at least stand alone, we will see that this income comes down as the golden ring picks up. And, you know, this entire up-fronting will become almost negligible, you know, indexed with water.

Got it, sir. Thank you so much for that.

That's it for me. Thank you. The next follow-up question comes from Abhijit Tibriwal with Mautila Loswal.

Yeah, thank you for allowing me a follow-up. You know, sir, this thing that new government guidelines that got implemented from April And what you mentioned, consumption loan and income generation loans. So, on the co-lending arrangements that we have with banks, are banks ready with their assessment or the way they want to underwrite these income generation goal loans?

So, all banks have different policies. Some banks are more conservative and they have a lower threshold than RG is maximum allowed. And every bank has a different requirement. But I answered earlier that the fully aligned with the new framework, which is income generating, assessing the income and tracking them. I mean, that has not impacted our business much. And in a way, we think that's a positive development. You can't see the discipline in the type of loan that you're doing for consumption or for business. And for consumption, you'll be more conservative. For business, you can be a little more liberal based on the income and the prospects of the cash flows or the business.

Got it. And for this, banks need to be ready, right, in terms of how they want to assess these income generation norms. Is that the right understanding?

No, no. The banks basically work along with us. So, we have the similar, so we, it's like a joint lending. So, we work with banks in terms of what kind of income proof, and actually most of the banks that we work with, they are very happy in our process. We do a civil And then we also look at the digital data, and then based on what we talk to customers, we estimate the income. So, banks have to, when you do co-lending, banks have to accept your process, and that should meet their standards also, and then only you can start off. So, we talk to them, we engage with them, and we work out a joint process. So, suppose if our process, they need some more thing, then we add it. So, for every bank, we have to work separately.

Got it. Got it, sir. Thank you so much for answering your question.

Thank you. A reminder to all the participants, you may press star and one to ask a question. As there are no further questions from the participants, this concludes our question and answer session. I would now like to hand the conference back to the management for closing remarks. So, as there are no further questions, I would like to hand the conference back to the management for closing comments.

Thank you, and if you have any more queries or any questions, you can reach out to our minister relations or our CFO department. Thank you so much. Have a good evening ahead. Thank you.

Thank you. Thank you, members of the management. On behalf of IIFL Finance Ltd., that concludes this conference call. Thank you, everyone, for joining us. And you may now disconnect your line.