Volume Growth, falling cost of funds & control over operating costs helped us to perform better in Q2FY21: Nirmal Jain, Chairman, IIFL Finance
Growth was quite reasonable in microfinance and home loans, there is an improvement in their outlook. But the growth in the gold loan was very good because the cost of gold prices has increased a lot due to which people can get more money on it
Nirmal Jain, Chairman, IIFL Finance Ltd. talks about the September quarter numbers, segments where growth is visible and company’s exposure in home loan segment among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: IIFL Finance has posted good numbers in the September quarter especially in terms of the bottom line. What led to this performance?
A: Three things happened in this quarter
1. Volume growth came - If you look on a quarter-on-quarter basis than our loan book has increased by 7%.
2. Interest Cost has declined – Our average cost of funding came down by 23 basis points.
3. Control over operating Cost – After COVID, we controlled our operating cost in a way that you can be benefitted by Rs 40-50 crore in a quarter.
Apart from this, the income of our strategy to assignment to the banks has also grown a lot. So, the combined result of all these things is that we were able to post good growth in profit. If you look at it in comparison to the previous quarter, then it will look extraordinary because that quarter was affected by COVID and we made a huge provision in that quarter. Apart from this, the business was almost closed in that quarter. But if you look at it on the YoY basis then pre-tax profit has increased by 20%, which is a normal growth rate and I have talked about the factors related to it.
Q: Can you tell us about the segment that grew the most and what trends of growth is visible in that in future from a point of view of sustainability?
A: The strongest growth was in the gold loan segment in the previous quarter. Apart from this, growth was quite reasonable in microfinance and home loans, there is an improvement in their outlook. But the growth in the gold loan was very good because the cost of gold prices has increased a lot due to which people can get more money on it. Apart from this, in the case of gold loan, you can get a loan in just 5 minutes after you bring you the gold to us. When you are starting a business there is a need for urgent working capital then the gold loan is the most convenient form of a loan.
Segments like business loan or unsecured business loan and loan against property did not grow a lot in the last quarter but I think that it will grow in this quarter. Possibly, the gold loan may slow down in this quarter because people generally withdraw the gold at the time of Diwali. Our outlook on these four segments, which is our core segments, is very good.
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Q: What is your exposure in the home loan segment what kind of growth is expected in this segment?
A: As far as home loan is concerned then we have an exposure of Rs 20,000 crore in HFCs. Our outlook on a home loan is very good because the demand for affordable housing has increased in the market and it has happened due to certain reasons
1. Pent-up demand – In the last four-five months' people have postponed their decision.
2. Interest rate – It has reduced which reduces your EMIs
3. Stamp-Duty reduction - State like Maharashtra has reduced its stamp-duty.
Apart from this, many of the builders with tight liquidity position have also reduced their prices a bit. So, this is the best time to buy houses for those who want home loans. This is why the outlook on home loans is very strong.
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