IIFL holdings Q1FY18 Concall Summary

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 Financial Highlights

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  •  59% YOY growth in the group’s net profits
  • Current Net profit is INR 252 crore for the first quarter FY18
  • Net profits after minority interests have grown by 44% YOY to Rs. 198crores.
  • Net worth = 4581 crores
  • ROE = 17.7 %
  • ROA = 2.3 %

Business updates

  • The business of IIFL is divided into 3 parts
    • Loans and Mortgages( includes NBFC and House Financing subsidiary and micro finance subsidiary)
    • Wealth and Asset Manage
    • Capital Markets
  • Strategy for the firm is doubling, durability and de-risking.
  • Doubling strategy’s target is to double their income and multiply our profits by 2.5 times.
  • In incremental loans, significant contribution is coming fromsmall ticket home and SME loans

Macro- Environment

  • GST and RERA have been passed recently .
  • GST more smoothly passed then demonetization .

Loans and Mortgages

  • In NBFC strategy is retail lending and digital delivery
  • Reduced exposure to large ticket loans.
  • The firm’s Balance Sheet is becomingmore granular, lot more retail oriented,and lot more geographically diversified as well.
  • Demonetisation hit commercial vehicle finance also starting to look up

NBFC

  • Loan AUM grew 26% YOY and 5% QOQ to INR 23,3000 Crores.
  • Profit after tax grew by 31% YOY to INR 116 Crores.
  • Net Worth – Rs 3580 Crores.
  • Tier 1 CAR is 18.1 % and total CAR is 20.6 %
  • Well capitalized to meet growth requirement for next 2-3 years
  • AUM growth primarily driven by 52% YOY growth in small ticket home loan
  • Headcount grew by 5% YOY to 7800 members.
  • NBFC branches still same at 1114 .

Home loans

  • Focus primarily on self employedsection , contributing 60% of Home loan portfolio
  • The fastest growing segment in is the affordable home segment with average ticket size of Rs. 10 to 12 lakhs. Called Swaraj Loans
  • More than 10% of home loan business are Swaraj loans.
  • Among the top six HFCs ingovernment’s Credit Linked Subsidy Scheme or CLSS , customers received Rs 90 Crore subsidy so far
  • Availed NHB refinance of Rs. 150 crores in this quarter taking the total to Rs. 325 crores
  • Regulators have confidence in the firm’s portfolio and mix
  • Crossed 31,000 customers in HFC  and the target of  50,000 by financial year end
  • Average ticket size for loan is 22 Lakhs
  • LAP book has seen a slight QOQ decline as the focus is to grow retail home loans
  • LAP products’ yield, andprofitability remainunder pressure due to competitive reasons
  • To focus on small ticket LAP ofbelow Rs. 50 lakhs and micro-LAP of up to Rs. 10 lakhs
  • The firm is doing larger number of home loans with ticket size of Rs. 10 to 12 lakhs and SME loans with ticket size of about 20 lakhs
  • 4500 approved housing projects up from 2000 in 2016 .
  • Cost of borrowing declined by 20 basis points QOQ and 140 basis points YOY to 8.6 %.
  • Borrowing from banks at their MCLR .
  • NIM at 6.6 % up 50 basis points YOY and down by 21 basis points QOQ .
  • Cost to income ratio at 39%  down 370 basis points YOY and flat QOQ .

 Wealth Management

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  • Record quarter in terms of new money
  • Highest collection of new money
  • With new money and other organic growth , the wealth business has done very well
  • Wealth PAT grew by 64% YOY to RS 86 Crores .
  • Assets under advice, management anddistribution have grown 60% YOY and 17% QOQ to reach Rs. 1.26 trillion.

Additional Disclosures this year

  • Reclassified the assets into five categories and removed few assets which were being doubled
  • Provided breakup of the retention yield into fee-based and fund-based yield.
  • Provided breakup of our retention yield into fee-based and fund-based yield.
  • The firm raised Rs.11,250 crores in net new money which is 50% of the net new money garnered in the whole of FY17.
  • In AMC, the firm raised Rs. 4000 crores in special opportunity fund to invest in pre-IPO and IPO situations.
  • AIF assets have grown 67% YOY to more than Rs. 8300 crores.

Capital Market Business

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  • IIFL is a leading player in the Industry
  • In last 2 decades , the firm has made strong franchisee in capital markets
  • The capital market sector is quite volatile as per the insights based on 10-15 years business
  • Emerged number 1 in Primary equity issuance
  • Average daily cash turnover was up 34% YOY to Rs. 1112 crores.
  • Average daily total turnover was up 53% YOY toRs. 11,063 crore.
  • The mobile trading app IIFL Markets, has had over 1 million downloads, and presently about 36% of retail broking clients trade through the mobile app
  •  IIFL is ranked number one investment banker in equity issuances from January 1, 2016, to June 30, 2017.
  • IIFL is ranked number one investment banker in equity issuances from January 1, 2016, to June 30, 2017.

Effect of Demonetisation

  • Commercial Vehicles finance which was hit by the demonetization is starting to look up.
  • The payment cycle from bank operator has gotten longer post demonetisation.
  • Karnataka and UP Portfolio affected by the policy and was compounded by the political

NPA

  •  Moved to 90 day NPA norm
  • GNPA were at 2.04% up from 1.82% .
  • NNPAS were at 0.94% up from 0.58% last year
  • NPA’s largely in the CV segment , as industry is still going through a slowdown in volume growth and collections .

Digitization

  • 100% gold loans , 77% of CV loans , 26% of HFC Loans and 71% of SME loans were booked in digital mode in June 2017 .
  • 14% of Gold loans were sold through E-Sign.
  • Launched UPI-based collection on the mobile app to allow seamless and real-time payments into the loan account.

E-KYC

  • 99% of gold loans, 30% of CV and SME customers now getting booked on E-KYC platform

Analytics

  • Strong focus on maximizing the use of data and analytics to drive business decisions
  • strengthen the risk analytics capabilities and incorporate scorecards into the digital on-boarding mechanism for core retail product

Acquistion of Majority Stake in Samasta microfinance

  • The firm acquired a majority stake in Samasta Microfinance
  • Samasta Microfinance is headquartered in Bangalore
  • Promoted by Venkatesh
  • Assets under advice for the firm was Rs. 284 crore .

Geographic Split and Reach

  •  35% South , 35% West , 12% East and 18% north
  • North business potential not fully utilised .
  • 1100 Branches in the country.

MSME

  • For Small Ticket loans , the firm has digitized the process for loans .
  • They plan to create insta loan for loans less than 10 lakhs .
  • Rs 10 – Rs 50 lakh loans is main focus for the firm.

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