IIFL Finance Ltd

NSE:IIFL

Earnings Call Analysis

Steady growth expected despite challenges in microfinance and loan portfolios.

IIFL Finance reported a net loss of 18% year-over-year and a pre-provision operating profit of INR 723 crores, up 31% year-over-year. Their loan book grew 4% quarter-over-quarter to INR 6,954 crores, supported by gold and microfinance segments. However, there were exceptional losses due to regulatory provisions related to investments. With NPAs under control at 2.4%, the company expects growth in the home loan segment at 20% and overall liquidity to improve. The gold loan business aims to recover momentum by March 2025, as recent easing has enhanced customer interest and demand.

Navigating Through Challenges

In the second quarter of FY 2025, IIFL Finance faced significant hurdles, reporting a net loss before non-controlling interest, which was down by 18% year-on-year and 28% quarter-on-quarter. The decline stemmed primarily from the need to adjust asset provisions in compliance with RBI regulations, which forced a comprehensive provisioning of 100% on certain investments that could not be liquidated promptly. Despite these challenges, the company reported a pre-provision operating profit of INR 723 crores, demonstrating a 31% increase year-on-year, albeit a modest 3% increase quarter-on-quarter, indicating resilience despite the losses.

Loan and Asset Management Insights

IIFL's total consolidated loan book experienced an 8% decline year-on-year, yet saw a 4% increase quarter-on-quarter, reaching INR 6,954 crores. The company's focus on microfinance and gold-backed loans has returned, with microfinance contributing significantly to its growth. However, higher operational costs and challenges in asset management resulted in a reduction in the average loan book. The non-performing assets (NPAs) ratio has stabilized, reported at 2.4%, while the net NPAs are at 1.1%. This shows some control over the asset quality, although there is still a minor uptick on both fronts compared to the previous year.

Growth Projections for the Coming Quarters

Looking ahead, IIFL Finance is optimistic about its growth trajectory, particularly in the gold loan sector, which is expected to recover to prior levels by the end of Q1 FY 2026. The company's strategy includes enhancing operational efficiencies and managing risks effectively. Home loan growth is projected at an impressive 20%, while the broader housing finance segments should see a growth of 17% to 18%. The leadership reiterated the focus on maintaining a balance between risk and growth, with risk-based pricing strategies now in place to adapt to market conditions.

Investment in Future Technologies and Compliance

IIFL has made significant strides in ensuring compliance with regulatory frameworks, which has improved its operational foundation. The management emphasized a commitment to leveraging digital technologies to enhance customer service and bolster operational efficiencies. The future focus shifts not only to growing their loan book but also investing in robust digital infrastructure that would ultimately serve to retain customers and reduce costs associated with delinquency from unsecured loans.

Understanding Risk Management and Operational Strategy

The company anticipates maintaining credit costs within a reasonable range, estimating overall losses will hover around 4% in the current fiscal year. Of particular note, the challenges presented by over-leveraging in the microfinance sector and the accompanying regulations have pushed the company to pivot its strategy towards secured lending, especially in gold loans. As evidenced by feedback during the call, a robust recovery in this area is not expected to unfold without meticulous management and adjustment based on customer needs and market dynamics.

Looking Forward

In summary, IIFL Finance is navigating through a transformative period, marked by strategic adaptations and a focused approach to recovery. While challenges persist, especially in microfinance due to stringent regulatory actions, the positive indicators in home lending and gold loans present a promising outlook. The management's expressed confidence in bouncing back to previous operational capacities by Q1 of FY 2026 should be carefully monitored by investors, given ongoing commitments to compliance and technological adaptation.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the IIFL Finance Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Kapish Jain, Group CFO, IIFL Finance. Thank you, and over to you, sir.

[Kapish Jain, executive]

Thank you very much. Thank you very much, ladies and gentlemen, for joining us -- joining in our quarter 2 earnings call for financial year 2025. And I just would handover the line to Nirmal Jain, our found managing director to give you a perspective on the company's performance or quality before I take it by again and talk on our numbers as well.

[Nirmal Jain, executive]

Thank you, Kapish, and welcome, everybody, on the call. I think a lot of you are aware about RBI that RBI has been Amazon the golden business in terms of sanctioned disbursement on March 4 of this year. And the same was lifted on the sector by about 6.5 months later with -- so I think we have been able to satisfy any time compliance rectifications and all the corrections that we did -- and we have strengthened our compliance as well as all assurance functions, we comprise risk and audit as well, and we continue to do so. So why this figure has been challenging, but I think this be much stronger from this, and this is something that would have happened to many strong companies that they face factor challenges. In the last 1 month, what we are seeing is the resilience of the company and the team that we are coming back strongly. The customer's unit royalties are very hard a satisfying as we restarted our business in the month, we would have seen that the golden book, which has fallen from INR 26,000 crores to around INR 10,000 crores by the time the amount was listed is around down. And as you know, we could apply to banks only after the bar listed and line from a process of 3 to 4 weeks. So we expect the liquidity to improve and that it allows us to grow the book or continue to grow the book at a good pace.

In terms of -- otherwise, the environment is very good about the good look as well as MSME business. So -- and all our businesses, even the affordable home on business also we have seen that the demand is picking up as interest rates seem to be peaking out. We'll see that the demand growth continues the new [indiscernible] has also introduced at the monitor the affordable housing incentives through [indiscernible] and so on. Microfinance business has been passing through a bit of challenging times maybe later indication are on we can display this more, but primarily because after the liberalization of loan to the microfinance or Sunbelt Group, there are customers about over borrowing by these customers. And then [indiscernible] came up with the guidance of not more than 4 nodes per customer, and that basically would have -- has led to some bit of stress in some of the borrowers. We believe that it might take maybe this quarter and next quarter. But again, the business will bounce back with [indiscernible].

With this, I hand it over to Kapish for a more detailed discussion on the financials and then we'll come join you back for Q&A.

[Kapish Jain, executive]

Thank you, Nirmal Jain. Yes. So for the quarter, for the second quarter, Q2 '25 item finance at a consolidated level reported a net loss before noncontrolling interest of manifesto by 18% Y-o-Y and 28% quarter-on-quarter. We recorded a pre-provision operating profit of INR 723 crores, which is not 31% Y-o-Y and 3% on a quarter-on-quarter basis. For the quarter, consolidated loan break you by 8% on a Y-o-Y basis, and grew by 4% on a quarter-on-quarter basis to INR 6,954. After AUM on recalls are focusing on microfinance, gold home businesses are known. It grew by around 7% Y-o-Y and 4% Q2 would be 65 45, forming around 97% of the total loan AUM. There is 1 exception item which we have reported in our financials, which is also elaborated follow on Slide #5. So company had certain AS investments, which was due to mature in June '24, for which we preferred into distribution of assets. So depending on underlying company in VBS investments. Subsequently, we went in the assigned to an ARC. The book value of the SRs with the same underlying assets as of September '24 was INR 56.5 crores. The RBI circular on December 19 2023 on investments in air required 100% provisioning of the inverse. If they are not liquidated within 30 days of the circle. The clients invest with the spirit of the circular, a provision equivalent to 100% the book value of the was made in this quarter, which caused in an overall loss. However, this is absolutely except in item. We do not expect this to rate and the same will disclose hence for and rightly as an exceptional item.

On the business ideal basis or dropped NPA under control at around 2.4% and net NPA around 1.1%, which is marginally up by 61 basis points and 3 basis points, respectively, compared to the same period last year. Our EC potion gives the overall coverage on the NPE assets on 26%. We assigned loan book stands at around INR 948 crores, down by 24% Y-o-Y and 5% Q-on-Q. Beside these are full ending assets of INR 849 crores, which is again down by 20%, all business net because of [indiscernible] was largely in place for the last 6 months. Quarterly average cost of borrowing marginally increased by 12 basis points Y-o-Y to around 9.15%. From a liquidity perspective, during the quarter, we did from INR 326 crores through term loan bonds, commercial paper, including INR 1,082 crores was rated to reassert of our loans. From a cash and cash equal perspective, we hold crores which is additive to meet our near-term liabilities, and we are looking for, as Nirmal mentioned, for the mobilization of liquidity to boost our growth in [indiscernible] has been lifted. We are positive on ALM on across all our buckets and our net gearing with the inclusion of capital that we raised in quarter 1 of around INR 322 crores is completely plans around 2.7%. Our annualized ROE to stand at around 52% negative, while was 0.7% negative. As of September, our capital adequacy with infusion of capital stands at [indiscernible] in the auditorium excluding to 49% in person, and you see it from 30.5%. So card all in [indiscernible] way above the minimum 15% requirement from regulatory susceptive.

That's all ladies and gentlemen. I'll now open the floor for question and answers. Yes.

[Operator]

[Operator Instructions] The first question is from Dhaval from DSP.

[Dhaval Gada, analyst]

Just 2 questions. One is relating to this provision that we created. When do we expect the write back? Any thoughts around that would be useful. And the second question was relating to the gold book now that the ban has been lifted. How do we see the ramp-up and when do we get back to our original size? Like do we have a time frame and strategy around that? Some color around that would be useful.

[Nirmal Jain, executive]

Thanks. So recovery will take about -- all the full recovery of the underlying assets as they get monetized make about 2 to 3 years. And gold loan No. I mean, it's very difficult to say, but I think by March quarter end, we should be back to where we were a year before. So that is not my estimate will be. But I think nobody can really see how things can pan out from here in terms of market, but that's what my guess would be.

[Dhaval Gada, analyst]

And Nirmal, just on the gold business come back. So this -- like what are the 1 or 2 big changes that we are sort of doing in terms of like the absolute quantum delta in the next few quarters that you expect is quite material. So what are the 1 or 2 big changes? I've already seen rate, but any other points that you want to highlight to sort of see how we get back the lost business?

[Nirmal Jain, executive]

So I think we aren't doing anything extraordinary in terms of being aggressive or over. We are just -- customers are coming back. There's a relationship with the customers that we have for many customers common -- and as they ended down and the loan wherever they have taken the role, the carrier gets longer, then we see that the customers -- in many cases, they prefer to contact to us. And secondly, on the good thing that has happened in the industry is that now I think it becomes completely capital is more or less is become do digital, which is easier from a long-term perspective and good for the industry going forward. And what we realized is that lease that if we move away from clients and customers will go back to money lenders. But I think customers have digital general account of UPI. Sometimes you have to educate and make sure that the activation happens. But as even the competition has gotten away from cash, so that is thinker. And I think more or less the industry is now becoming fully compliant. And -- so that also is a good development, I would say. And given that the gold price or from say, and there's a demand at the ground level in the economy. Many of our customers are small businesses again. So we see that there is not -- there will be good traction going forward in next few months.

[Dhaval Gada, analyst]

Sure. And just last question on the MFI business. How do you think the credit cost is likely to move in the next like couple of quarters and how are we looking to navigate this cycle? Any color on that would be.

[Nirmal Jain, executive]

Yes, I think entities the CFO of our microfinance should take this question.

[Kapish Jain, executive]

Yes. I mean if you look at the most of the stress we stand out in the quarter 2, we are seeing some mild improvement in quarter 3. I mean, it's still early days for us in the month of October. Given the whole thing, if you look at given 65% of our overall customers who borrow our agree or agree with Allied and their income levels have well, given the monsoons have done when they're not see a bit, and we see that these things are stabilizing. And also our fresh lending, if you look at it, we introduced our Badri even much before infant bought about it. We have got it in nothing. So our new book has been doing well. And the set is only that there are older thing which will also ease out and by the quarter 3 and quarter 4 will look much better.

[Operator]

The next question is from Abhijit Tibrewal from Motilal Oswal.

[Abhijit Tibrewal, analyst]

Just circling back to the volume business. We've also seen a management change on business [indiscernible] group role now. So are we now looking to appoint someone internally to meet this business? Or are we looking for an external hire? Also, I mean, earlier to the question when Dhaval asked about your outlook on moon business, we shared that we are looking for normalcy to come back by March quarter and maybe go back to where we used to be prior to the bank. But are we working with some more loan growth targets now in mind, if not for this year, at least from next year onwards? That is my first question.

[Nirmal Jain, executive]

Sorry, what is the second question? Next year, I'm not going to do so what are your question about?

[Abhijit Tibrewal, analyst]

So the question is, and why we said that by March quarter end, we are expecting it expecting that we will be where we used to be prior to the bank in the gold lending business, not in terms of loan book, but in terms of momentum. So I mean, if not for this year, at least from next year onwards, are we thinking about how we want to go in terms of some loan growth targets for the gold loan business?

[Nirmal Jain, executive]

Okay. So firstly, on the management changes are in normal course of the business. So people I mean there is there for long term. So there's nothing more than that to reading. In terms of hiring internally or extending these things are unless they are done, it's very difficult to make a statement on this because we have quite a few talent available inside also. But obviously, we are being the jobs. I mean there's -- and at the same time, we also understand in our management team which -- and actually, normally, all our businesses, we prefer across these tenants where we're trying to take it from a few very good players in the industry so that we get the respective from multiple players. So these are things which are very difficult to make a futuristic or a forward-looking statement because we have a very good attack team in LRP, which is long disintegration committee. So they look at all the senior management and take a part of that. Second thing is how do we look at the growth next year. So 1 is that you wouldn't know when we say digital loan, which is our business loan, and this is the SME loan and that goes in a way, many of our customers are understanding. So in terms of -- when we look at our stand-alone company, we'll try and diversify a little bit more. So the lowest property, which is the secured business loan an unsecured business role. I mean that business probably will grow faster. Next year growth will depend on a number of factors, including gold prices as well as the economy and the economic activity. So I'm not we do want to make any guidance or a forward-looking statement, but that all because in the industry and recovery. But in terms of strategy for a particular product, we have been grown business loans -- I mean given the small base and the investment that we made in last 6 months, that grow that is expected to grow faster. But just again, as I said, depends on the [indiscernible].

[Abhijit Tibrewal, analyst]

Got it. Second question was that I had was for the [indiscernible]. Sir, I mean while you said that early days seeing mild improvement in third quarter and the fact that we already implemented those countries that Anton recently came out. I'm just trying to understand, I mean, in your assessment, I mean, what could mean like ready to post peak for the MFI business for this full year, given that, I mean, you already saw Q2 was elevated. And when you speak to other your NBFC MFI peers, 1 is really kind of giving that sense that things have already peaked out in the MFI space. So how are you thinking about the MFI business?

[Nirmal Jain, executive]

Yes. Earlier when I answered I said, it is early signs of some kind of a stabilization. I didn't say it has peaked out or something. But in terms of the credit cost, if you look at it, we should be hovering anywhere between the kind of it for this year.

[Abhijit Tibrewal, analyst]

Got it. Got it. And sir, last question that I had, I mean, some of it is data keeping and some of cases on the credit cost. One is, I mean, this time around, if I go through our -- on the other income side, some of the items like net gain on fair value changes and the assignment income that you report, they are higher. So just trying to understand, I mean, are they going to be at these levels or there is something lumpy out there? And also on the Hinman income side, have you done any assignments after the goal loan ban was lifted is 1 thing that I wanted to understand. The other thing is if I look at credit cost for this quarter, credit costs even in our stand-alone entity was elevated. So was just trying to understand, was it just some residual cleanup on the bolt on side that we did? Or this was predominantly coming from our CRE business.

[Nirmal Jain, executive]

No, I think you have 2 questions on or about attainment. So the ascendent was done in housing finance because 1 business will continue. And given our strategy where we really believe in maybe 40% of books. So that can be added by our sandwich or pole. So primate transactions, you can expect more as every quarter. And the second, coming to the lumpy, yes, there is 1 that the shares, I mean most significant part of it has been sold and that profit has been moved in a about INR 80 crores or something. So I think that is not recurring. But from the treasury, we have something on other there are opportunities, but there is no lumpy item in the fare. You would recall we had anything which we sold in last quarter.

[Abhijit Tibrewal, analyst]

Yes, sir, if I recall that. And sir, again, the second question was credit cost in the stand-alone entity also appear a little elevated, was it some cleanup that you have done on the gold loan side? Or was it predominantly coming from the CRE portfolio?

[Nirmal Jain, executive]

No, it's coming from SME actually and the essay book is also growing. So we increased our proven and we are fairly temperate to save. So the increase in the LMC in the stand-alone is primarily because of at.

[Abhijit Tibrewal, analyst]

Got it. And sir, just trying to squeeze in 1 last question. Sir, I mean, given how the environment is, everyone is talking about broad-based stress that we are seeing in unsecured segments. Despite that, I mean our guidance that we continue to grow our digital loans, unsecured business loans. I mean how are we looking at it? I mean, in an environment like this?

[Nirmal Jain, executive]

It's a very good question. So the worry about unsecured loan is more of a personal loan in Caliber, which is a feature or a personal loan there many guys several people because the opportunity loans and they get overlying. Our focus of digital loan as an unsecured loan is our entire business role. And there, there are 2 advantages that we have over personal loan and unsecured personal business. One is these are covered by insurance. So I think government has 2 very good insurance schemes, [indiscernible]. So the 1 covers loan less than in government covers loan above INR 100. We'll apply and we have got the approval on. So the onward taking will be able to apps recently come at the process and their view to comply with it. So from this quarter onwards, we'll be able to take advantage of that also. Secondly, all the banks, because on their own, they try to different the Moa targets or the or need segment of the priority sector lending. So we are seeing very good reports from the banks to partner with these roles. And also the risk is priced in. So there is the losses which can go up to a bad cycle to 56%. But then the interest rate also is around 30% to 34%. So -- our strategy basically is to make sure that we are protected by insurance cover. Of course, our credit quality also we can be stick and not that we don't underwrite anything, but we try to leverage our distribution network to [indiscernible]. And third is that the bank paretic model where risk along with the benefit of priority sector, which is also transferred [indiscernible].

[Operator]

The next question is from Shubhranshu Mishra from PhillipCapital.

[Shubhranshu Mishra, analyst]

So 2 questions. The first 1 is what is the level of provisions and write-offs you are going to see in the microfinance business going forward in the next couple of quarters? Second is on the gold loans, are we seeing. Any customers -- or what is the proportion of customers who are coming up and pledging their gold in order to pay up for the unsecured exposure.

[Nirmal Jain, executive]

I think today spoke about around 4% -- 3% to 4% of LLP in this year in terms of -- which is, I think, the first 2 quarters, we have done a we've taken INR 300 crores already in some and the book is around INR 2,000-odd crores. So maybe microphone -- and the total -- so whether in terms of the current expectation is the recourse quarters. we are talking about what would be the write-off the home loan to repay our secure you have seen that kind of tendency. I mean it's somebody is not disclosing the different things because there's not something that we normally captured in the stated anus. But I might refer talking to people. I don't think that the excess remember them.

[Shubhranshu Mishra, analyst]

Understood. And what has been the write-off in micro finance in the first 2 quarters? And what is the write-off we are expecting in the next 2 to 3 quarters?

[Nirmal Jain, executive]

So I think the write-offs and loan loss provisions put together will be run this thing. So what are the -- if you were to have some of the write-offs in product in the first 2 partners, we have taken the total loan losses in proven INR 300 crores. No, I guess that right INR 200-odd crores and over it INR 100 crores in 10%.

[Shubhranshu Mishra, analyst]

So what is the write-off we're expecting in the next 2 quarters or 3 quarters?

[Nirmal Jain, executive]

I think what is your estimate with you or if you look at the last -- it will be -- we are trying to minimize things. I mean if you look at it in the last quarter, we were able to figure out what it could scale up to now we have a collection mechanism where we will be working on even if there'll be a lot of pullback in terms of the 90-plus and the provisions we have made and even the write-offs you have taken. So we don't expect it to go practically above of what we have already done in the first 2 quarters. Incrementally, I think if you see 4% as a loan loss write-off at provisions put together can be done [indiscernible]. Yes, that should be Unless based on the current estimate, but is that going to make a forward-looking statement with how does that evolve [indiscernible].

[Operator]

Next question is from Vivek Ramakrishnan from DSP Mutual Fund.

[Vivek Ramakrishnan, analyst]

It's a continuing question with the other questions. So let me start with micro finance. [indiscernible] micro finance, when you say this stability, the past you're going to part 3, going higher, has the flow stopped as the momentum of flows been improving over the last few quarters, do you see any improvement from that? Another way of asking the question is, what was there, you're going to be writing it off, but the new flow is not going to be that significant.

[Nirmal Jain, executive]

See, Vivek, if you look at the flows have actually not complete stock. I mean, if you look at the quarter 2 was the first quarter, I mean, we have gone through. What I mentioned earlier was given that we have the to month is a lot of holiday thing. We are seeing size stabilization in terms of the flow. So I mean, we'll be post all the customers getting done. So that's when the stability of the sector would be seen. So we think post somewhere around the normal 15 kind of a thing where the stability will be able to be. As of now, the collection efficiencies are slightly improved from what we saw in the month of September.

[Vivek Ramakrishnan, analyst]

Excellent. The second question is on the digital loan or the unsecured SME loan. I normally had mentioned about credit loss guarantees which are there. How much does it cover in the sense that what is the typical SME loan loss in an unsecured portfolio -- in your portfolio that you're estimating? And then what will be the overlay of insurance that reduce it to -- for -- going forward?

[Nirmal Jain, executive]

So Vivek, it's quite complete skin and stand briefly explaining to you. So that team of metritis and less than [indiscernible]. So about 10 they cover only twice the premium. So 1% is the premium to me, they can cover 2%. So broadly 1% of losses can be covered by the above INR 10, you get it. Leather contacts, what they do is you can cover 15% of your portfolio in which 3% of ate will be borne by the org maker like us by the company. And out of the remaining losses, 75% is given by the insurance. So to put numbers in perspective, if you are INR 1,000 crores in your portfolio, you can cover exam. So that's good enough because normally 1 wouldn't expect more than 15% of losses. And out of that, 3%, with about 4.5% is bound by you. and say, out of the remaining losses, 75%, they will pay you. So roughly INR 109 crores can come from them. If you have thousands of portfolio and your losses at maximum [indiscernible]. But this as the numbers work. I mean you got it. For the less [indiscernible].

[Vivek Ramakrishnan, analyst]

Yes, perfect. This is very useful.

[Nirmal Jain, executive]

Around 100 basis points, that's for you to summary about you should can distribute to 2% otherwise, and they're also like a 1% premium, 1% subsidy. In less than [indiscernible] significantly better. But of course, they will -- 75% get back, [indiscernible] still year to bear. 25% over above us 3% of losses.

[Operator]

Next question is from Yash Antiware from Dante Equity Capital.

[Unknown Analyst]

Am I audible?

[Nirmal Jain, executive]

Yes.

[Unknown Analyst]

Yes. So I wanted to know, now on the gold loan side, going forward, since we have a lot of capital, right? And we've raised capital to write it, et cetera. What I want to understand is are we going to focus on gold loan itself or is going to focus on coal lending because right now, we have no regard to focus on core lending because we have to capital and we want to get profitability. And poor lending is not very profitable, right? And can you put some light on that whole area? How you're going to go forward?

[Nirmal Jain, executive]

So right now, our capital rigs is good. But in 3 to 6 months, and we get back to the earlier level, it will get back to those again, the older levels. So as a strategy, market changes because we continue to focus on both coal ending as well as our own loan book in a ratio of 640 that we had historically for the entire portfolio.

[Unknown Analyst]

Actually, we should be focusing on gold loans itself, right, by [indiscernible].

[Nirmal Jain, executive]

[indiscernible] is liquidity and the use of capital and that allows you to grow without balancing feel. So at this point in time, what we are saying right that this quarter, next quarter, we can see that we can do our own book. But you on our capital equity also to be 5% in requirement, but we want to be around 20% or more just as a margin of 50%, and that is where [indiscernible].

[Unknown Analyst]

See, the reason I raised this point is your micro finance is clearly slowing down, and I don't see microfinance recovering for the next 6 to 8 months. So definitely, on the micro financing, we're not going to be able to increase the book side. Home loan side, that is going to be at a steady rate of 15% to 20% from what I'm able to see. Now since the microfinance part is not going and you don't want to grow your unsecured book, you're obviously going to focus on growing our secured book, which is the gold finance book at a much higher rate, you don't need to full line at least 6, 7 months, right? Because coal lending -- you're completely right at the point on the capital side, the core lending is not very profitable. So any way is this 10 I wanted to take.

[Nirmal Jain, executive]

What you're saying is right that now, I think the focus is more on the sector where golden as well as [indiscernible] product, which is also a secure product as a part of business growth.

[Unknown Analyst]

Great. Do we see MSME...

[Nirmal Jain, executive]

Coal lending is a long-term strategy because what happens is if you go like our -- what it allows you to leverage. So even it's a reasonable your can be significantly higher. But for the time being, maybe like we have see for next 1 or 2 quarters and then to electing.

[Unknown Analyst]

You are completely right. Coal lending work. We've been doing it you've been growing at a 30%, 35% CAGR in the gold loan space. Absolutely [indiscernible].

[Nirmal Jain, executive]

[indiscernible] decent pace of growth. I mean for the time being, we will watch for the next 1 or 2 quarters and then gave [indiscernible].

[Unknown Analyst]

Exactly. Exactly. I was just saying, at least for the first 6 months, I think you can focus on good I'll take it into our loan book and then maybe focus on co-lending as and when the old book is be back up. That was something I wanted to point out because clearly, unsecured space is kind of mobile for the next 6 to 9 months, I please the whole micro finance cycle plays out. So that was point on the point. Now can you talk more about our focus on the SME portion. How are we planning -- are we planning to grow that at a significant pace in your sector talking about how are you focusing on that core segment? And also on the housing loan front, there have been talked about an IPO for value unlocking, I think in the last interview that I watched he said something about 2 years sort of time line. So could you throw some light on that, too?

[Nirmal Jain, executive]

Okay. So MSME please -- so because we have a very large distribution network and as we roll out a product on a small base, growth can be good. But this is something which is because we've got our 2 branches of good loans. And if you add up all our branches, and we have more branches, including microfinance as a product. So the loan against property is a product which our branches can do. And in the 6 months, 6.5 months of base Wingo, where changing our people to do secured in secure business. Now secureness on business, although unsecured, which obviously evolves negative motion about risk and quality of assets. But as I said, that this is something which is priority sector lending, which is what government is also pushing banks to achieve the target because that's for the government growth. And just to give you a perspective of that, despite some push on MSME in India, SME contributes 30% of GDP. In China, South Korea, where the companies have grown very amply last 2 decades is 50% to 60% of the economy. So has a long way to go. And the only way atone can grow is by of credit and distribution of credit and the 85 million MSME. So the number is so large and normal that the banking system alone cannot achieve this target of this objective of mission. So we're a work in partners that's why government is supporting by your business schemes or by way of target to practice lending. What we have to do is that we have to partner with the bank and make sure that we do what we are good at. And then banks basically also we had back on strategies and make sure that the risk is contained within the price that we can. So there is about MSME. Sorry, the second question again?

[Unknown Analyst]

About listing of the...

[Nirmal Jain, executive]

Listing is, again -- sorry. So I don't think we'll do an IPO, yes, because unlikely, I mean I can't say we will not do or 2 because this is -- we have an investor in our house finance company. And every investor basically will need at some kind of option will exist or liter. But there's no rest or no hurry. But when we drew this whatever we have discussed the preferred option, what we have done for the group is a demerger of the businesses so that without any further dilution or without any change in the come interest of various shareholders, the subsidies get sorely distance. That is an advantage that you can affect different tier still because there are some investors who are keen to invest in microfinance who are more oriented towards social goal the investors who are very keen on how they in us and then the investors for gold on the other businesses. So -- but I think it's a process and the process takes time. At this point in time, nothing has yet been discussed or approved by the Board -- and whenever that happens, obviously, we'll let me know.

[Unknown Analyst]

Yes. But see, after the Bajaj housing sort of listing, it's very clear that Fishtalk percent sort of run rate and that our stable asset quality get a very decent price to book. I'm pretty sure that you have more inputs than me in this particular thing.

[Operator]

Next question is from Anusha Raheja from Dalal and Broacha.

[Anusha Raheja, analyst]

Is it audible?

[Nirmal Jain, executive]

Yes.

[Anusha Raheja, analyst]

That's Firstly, on the gold loan side, I think we had -- in to say first has been the boom of intent versus it was on trial and the competition is also intense. What have also [indiscernible] some of your market share. So in that sense, how do we see growth in this back drop.

[Nirmal Jain, executive]

So we have database of customers that are our customers, and workings are also there. And as people get to know that we have resume business as usual. So there's a flow of customers. So we have seen a very healthy trend there [indiscernible] and our people are really motivated and committed. So to get back the market share and obviously, the profitability and everything depends on that. So the trend is positive.

[Anusha Raheja, analyst]

Okay. And the Stage 2 assets, 31 to 90 DPD, there has been significant rise across all the loan segments and the levels are higher than what it was in Q1 as well. So what is causing such a significant rise.

[Nirmal Jain, executive]

Okay. So in gold loan, I think because we just started almost towards the end of the quarter. So we would not force customers to liquid the loan and obviously, they are also making person. If you see gold or typically because we are small customers, 50,000, 60,000 loans, they tend to pay to us just before 90 days to avoid an auction or set of equation. Then the special finance are lumpy businesses with 1 of the loans basically not in paid or elaborate day despite the number. And I think other businesses the trend would be similar to be able to get 90 days of the last quarter.

[Anusha Raheja, analyst]

And if you could just tell us what could be the mandate?

[Nirmal Jain, executive]

We had a 6% that's even 7%. And obviously, there is an increase in the gold loan part of it, which is a bilingual the margin. The 6% and the impact on the whole, we are talking about state.

[Anusha Raheja, analyst]

Okay. And what could be blended credit costs that we can factor in on the overall control book? For FY '25?

[Nirmal Jain, executive]

Microfinance has moved up more than what we had expected. Other businesses remain more less similar. So what we are talking about 2% may become 2.5% on the whole.

[Anusha Raheja, analyst]

Any number to put up there, including this credit cost on console book?

[Nirmal Jain, executive]

To we have 2% of the road assets of a steady state basis.

[Anusha Raheja, analyst]

Okay. And also on this...

[Nirmal Jain, executive]

In all segments of the litter. So those are slightly higher prepaid post in the we expect to go loans we -- as the business is fully rolled out properly. And the other trends are more or less. So the business loan will remain around 3% in terms. So I mean we can't get it down to 2.5 or a period time Yes.

[Anusha Raheja, analyst]

Got it. Yes. And if you can just take us through growth in -- across all segments, like you said that in gold loans, we would see by March 25, the growth will revise that -- and MFI is likely to see a consolidation. Some color on the growth for the home loans and digital loans and LAP loans, how do we see that segment growing in FY '25 and in the medium term?

[Nirmal Jain, executive]

[indiscernible] like?

[Unknown Executive]

Okay. Nirmal, you go ahead please.

[Nirmal Jain, executive]

So I think in asking for the growth in home loan segment of the [indiscernible].

[Unknown Executive]

Yes. So we have seen as a home finance as a whole, we're expecting about the AUM growth of about 17% to 18% for this year. And all the segments will move in the same tandem. We can expect home loan about a couple of percentage more about 20% growth in home loan and the other part of the business would be about 16% to 18%. That's what we expect in the housing finance business.

[Operator]

Next question is from Mr. Srikar Mandara from Vivo Commercial Limited.

[Unknown Analyst]

I just wanted more clarity on this exceptional item. So where would the AIF invest exactly made? And what is the reason for them not being liquidated?

[Nirmal Jain, executive]

Sorry. Yes, equipment was made in June '21, and it was to mature on first June '24. So in the month of March, Okay. The super of RBI came on 19 December, given 30 days to either liquidate or 100% provision for the sales liquidate in the 30 days, but what happened that in the month of March, when we got in is distribution, then those debentures that we got in our book were also dedicate because they're delinquent in the for them not entirely. So that thing is what we sold to ARC. And normally, on the gains, the relation meters through ARC, which is -- and basically, in the ERP, normally, we have to invest in the secondary. So the underlying core has been the same, what we have tried to do is that we'd be conservative and follow the regulation, not only in the letter, but also Sprint, while the asset has seen the problem of instead of AIs receipt, but underlying coatis the same. So it will be decided to make up for [indiscernible]. One can broadcast [indiscernible].

[Unknown Analyst]

Sorry?

[Nirmal Jain, executive]

This is onetime accessible provision that we are making, and this does not have any implication on the cash profits only thing which is [indiscernible].

[Unknown Analyst]

Can we expect the write-backs from this?

[Nirmal Jain, executive]

I mean test for maybe 2 to 3 years will take to realize [indiscernible].

[Operator]

Next question is from Kriti Tripathi from ABS Brokerage.

[Unknown Analyst]

So yes, in continuation with the EIS question just mentioned, I wanted to know that how much was the amount invested by ourselves and the company in the AIS. The initial amount and then now a share of profit and loss, what is the difference between that. So can you expand on that?

[Nirmal Jain, executive]

[indiscernible] INR 900 crores, INR 1,000 crore would be some retailers had happened INR 900 crores. And then when we got the , which will be a 75%, but I think there is a write-down and we have to then valuations and there's options leading core. So then our -- actually, so what we hold from that was INR 58.5 crores as margin. So there are lots of transitions in this. I mean I'll give you a broad estimate that we started post 500,000.

[Unknown Analyst]

Okay. So that's basically...

[Nirmal Jain, executive]

It doesn't come down to more [indiscernible].

[Operator]

Next question is from [indiscernible] from Investec Capital Services.

[Unknown Analyst]

I had a couple of questions regarding the gold business. For see, I wanted to know that have we reduced any interest rate on gold loans recently. Additionally, I wanted to understand how are the recent trends post the lifting of the RBI ban. And if you could just brief upon the strategy around how to scale up the gold business back to where it was as earlier. SP1 I'm sorry, if I may have missed the strategy-related part.

[Nirmal Jain, executive]

So we have not resorted to cut for price competition to get the assets back. But we have -- so there are various multiple schemes that you've done like so we have a 99% 12% interest where it has to be a monthly interest income. And now that we are kind of slightly lower NPV than the other schemes. So intel, we expect attractive to hold the lower seating products that we have. But we are not resorting to any cut on price to get the asset back. Second, our strategy is very simple to focus on the customer. So we are not really -- at this point in time, we don't see the need to be very aggressive out of way to focus on getting the customers are coming back. And if they're a growth return elsewhere, we are seeing good traction of customers getting back to us where they were here.

[Unknown Analyst]

Okay. Okay. Like any initial trends which you are seeing like it's a very small period, but how has been the disbursement trend in October?

[Nirmal Jain, executive]

Is very good, very positive. So in about a month, just to the time to get back to the momentum. So our loan to 10,000 has gone up.

[Operator]

Next question is from Raja Gar from Ambit Capital.

[Unknown Analyst]

Just 1 very small question in the stand-alone business. Is there any overlap between the digital gold loan customers and -- sorry, the town customers and the gold loan customers?

[Nirmal Jain, executive]

Which as that is [indiscernible]. I would say [indiscernible].

[Unknown Analyst]

Okay. Okay. And another question is, so when I look at Slide #12, right, which has stage by there, the digital loan assets is about INR 6,500 crores. Whereas on Slide 18, the digital AUM digital loan AUM is about INR 5,400 crores. So where is the difference in which entity? Or I'm just trying to reconcile these 2 numbers. Can you help?

[Nirmal Jain, executive]

No, on the Slide 11 INR 6,500 crores.

[Unknown Analyst]

No, sir, on Slide #12, the number is INR 6,500 crores. And on Slide #18, the number is INR 400 crores.

[Nirmal Jain, executive]

Yes, and -- hello. Can you hear me?

[Unknown Analyst]

Yes, I can hear you.

[Nirmal Jain, executive]

So there is some loans which are forced by some on a micro finance, and they have booked in the parent company. So that is a difference. So the way the individual loans, we can move through some of par for micro app. That is where I think there is a reconciliation which I'm very there Yes. If you go back -- go to Slide #35, home equity, which is Las secured, which is originated by Samasta booked NBFC.

[Unknown Analyst]

Understood.

[Nirmal Jain, executive]

I think maybe from the next basic will make it a little more clear in terms of how we classify for [indiscernible].

[Operator]

Next question is from Rishikesh from RoboCap.

[Unknown Analyst]

Am I audible?

[Operator]

Yes.

[Unknown Analyst]

Firstly, on gold loan. I see NP, we were around INR 200 crore, INR 23,000 crores of loan book do we have any internal targets to get there again and buy well?

[Nirmal Jain, executive]

No, we don't areas [indiscernible] as been got will get there in some in it won't get too long.

[Unknown Analyst]

Okay. And how do you see the growth in our LAP book going ahead?

[Nirmal Jain, executive]

So that over had 2 components. One or the old which is a larger ticket size. So that basically -- obviously, that is [indiscernible]. The overheat book, we only 1% growth -- but the normal lab book that we are continuing in a smaller ticket size is growing heavily. I do understand that about 7% to 8% is the trend there.

[Unknown Analyst]

Okay. So are we expecting this to grow by 17% [indiscernible]?

[Nirmal Jain, executive]

So the overall reported lab has order that book, which is [indiscernible]. So what growth you see here will be lower, not so much, but maybe slightly little lower.

[Unknown Analyst]

Okay. And just to come again on gold loan, what growth are we expecting going ahead?

[Nirmal Jain, executive]

No, I think, again, maybe everybody is very crises about this. Unfortunately, I'm not a question to give any forward-looking guidance on this. Only thing is that we'll continue to grow our steady pace as our customers come back. And because we have a distribution network in base of customers, we do not think that it will take too long to get back to what our loan assets were refer the value. But still, I can't point to put a forsaking the time frame. What we have got, and we want to make sure that Customer service will grow compromises our compliance and on the risk management. And at whatever pace we can grow the business, that would be healthy growth that is more important for us.

[Operator]

Next question is from Shweta D from Elara.

[Shweta Daptardar, analyst]

You actually partially answered my question, but nonetheless. So in light of regulatory for bearings and RBI calling out on interest rates. So do we see repricing of our assets on micro finance side on the lower side? And alternatively, I think you answered this. On the gold loan side, are we going to stick to competitive rate because we have seen a slight drop in your [indiscernible]. So in quest of growing the gold loan book, are we looking at keeping the rates competitive on the gold loan front?

[Nirmal Jain, executive]

So on the first point of interest if you see then we have implemented the risk-based pricing and that is not actually is looking at. And we did not have any predatory pricing in any of our businesses. So 35%, 40%, 45% base are not for any of our businesses. So we are really conscious about it. And also, we have a board of good policy for interest rate cap. So that is about the higher interest side. Then your second part of the question is on the lower testability. As I said, then the customers and they come back, the arb customers are more -- the flow will be the lower price scheme. But there, the requirement in the [indiscernible]. So the yield may fall a little bit. But as I said, that we are not getting into any [indiscernible] competition. So there will be a dramatic impact. [indiscernible], margination there in this quarter, next quarter, for sure.

[Shweta Daptardar, analyst]

Okay. So just coming back to the MFI side, I didn't imply user rates or something which you're not confirming with the rewound. All I meant was are we looking at recalibration in interest rate further on our NSIP?

[Kapish Jain, executive]

We've already introduced -- as Nirmal pointed out, the risk-based pricing is already introduced. So this is with the guidance with both ARB asked us to do. So -- that's already in forth as we speak.

[Operator]

The next question is from [indiscernible] who is an individual investor.

[Unknown Attendee]

I wanted some clarity on your security receives portfolio. So in your Slide 23, you've mentioned that your outstanding security receipts are about INR 3,600 crores, against which you have a provision of INR 612 crores. So the INR 3,000 remaining, is that also at risk? Why aren't we providing against those?

[Nirmal Jain, executive]

So second, we see accounting is done based on the accounting principles. So there's a fair based on that, we will make sure that the revenue. So do access thing just to make sure that RBIs complied with the latest. But the other sector industries are good in terms of their expectations on the or portfolio, we expect it to recur fully, and we don't see any need to provide for it, but I try cage you more color on the portfolio of securing received. But we make sure that is there any help or any expectation of a loss in deployed for, but we don't expect any loss in the portfolio.

[Unknown Attendee]

Okay. So of the INR 3,600 crores, you've provided for INR 5 crores. So we are saying that the remaining INR 3,000 crores, we are not expecting any credit costs also to occur in our P&L.

[Nirmal Jain, executive]

[indiscernible] that you have. I think that the record around with some interest or whatever we should have to improve the argument borrower. That is what our expectation.

[Unknown Attendee]

Okay. I understand. So no further charges is what we expect on the P&L? Do I understand that correctly?

[Nirmal Jain, executive]

Yes, you're right.

[Operator]

That was the last question in queue. I would now like to hand the conference back to Mr. Kapish Jain, for any closing comments.

[Kapish Jain, executive]

Yes. Thank you very much. Thanks a lot, ladies and gentlemen, for joining our quarter to earnings call. For any further queries, we are available to connect to us at our MH relations [indiscernible] or each or to separately and we'll be more than happy to clarify things anything further from the results.

[Nirmal Jain, executive]

Thank you.

[Operator]

On behalf of IIFL Finance, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.