India non-bank lender IIFL Finance may see a drop in annual earnings, Fitch says

Indian non-bank lender IIFL Finance will likely see its annual earnings fall from a year earlier due to reduced net interest margins and higher credit costs, Fitch Ratings said on Monday.

Earlier this month, IIFL Finance reported an 8% fall in loan assets under management to 714.10 billion rupees ($8.24 billion) for the first nine months of the fiscal year that ends in March.

The company reported a loss of 144.6 million rupees, not factoring in taxes and a one-time gain, in the nine-month period, against a profit of 5.58 billion rupees a year ago.


Nirmal Jain, managing director at IIFL, flagged a challenging quarter on asset quality stress in its microfinance segment, adding the gold loan segment faced pressure as the company struggled to regain customers.

In March 2024, the Indian central bank ordered IIFL Finance to stop disbursing gold loans, citing "material supervisory concerns". It lifted that ban in September.

IIFL has also faced other challenges, including a search by tax authorities at three of its companies.

Fitch Ratings said weak loan quality and narrower interest spreads will impact the company's near-term performance, which could also pose downside risks to its ratings.

Fitch's current rating on IIFL Finance is 'B+' with a stable outlook. Its assessment of the company's performance is based on the nine-month earnings.

IIFL's performance mirrors weakness in microfinance and other unsecured segments across companies, while credit costs remain high, the rating agency said.

($1 = 86.6880 Indian rupees)