Iifl Finance Limited · NSE:IIFL
Iifl Finance — Investor Day (September 2022)
47 slides from Iifl Finance's investor day presentation, Sep 29, 2022
Slide 1: Stock exchange disclosure cover letter
September 29, 2022 The Manager, The Manager, Listing Department, Listing Department, BSE Limited, The National Stock Exchange of India Ltd., Phiroze Jeejeebhoy Tower, Exchange Plaza, 5th Floor, Plot C/1, G Block, Dalal Street, Bandra - Kurla Complex, Bandra (E), Mumbai 400 001. Mumbai 400 051. BSE S
Slide 2: Analyst Day, Mumbai - September 29, 2022
ANALYST DAY MUMBAI - SEPTEMBER 29, 2022
Slide 3: Disclaimer
Published in September 2022 IIFL Finance Ltd. All rights reserved. Regd. Off: IIFL House, Sun Infotech Park, Road No. 16V, Plot No.B-23, Thane Industrial Area, Wagle Estate, Thane – 400604. Certain statements in this release relating to a future period of time (including inter alia concerning our fu
Slide 4: Our mission
Our mission is to be the leading non- bank player delivering small loans to under- banked people and enterprises in India Coverage 3
Slide 5: Our strategy is to partner with banks
Our strategy is to partner with banks for ‘sourcing and servicing’ retail & priority loans, efficiently by leveraging branch network and digital technology. 4
Slide 6: Core strengths and nation's credit needs
CORE STRENGTHS ~3500 branches, ~30,000 employees, cutting edge technology form our moat to source & collect small loans most efficiently NATION’S CREDIT NEEDS Government & banks face a huge gap in target vs actual delivery of credit to people & small businesses in under-banked areas. 5
Slide 7: Branch network, technology, balance sheet and brand
BRANCH NETWORK TECHNOLOGY BALANCE SHEET & BRAND Network of own branches and Proprietary technology and Robust balance sheet and people built over two decades digital innovations’ DNA, brand assiduously built with demonstrated over years impeccable track record MANAGEMENT SYSTEM AND PROCESSES Committ
Slide 8: Our business goals by FY25
Loan AUM CAGR OUR BUSINESS 25% GOALS* BY NET PROFIT (₹ bn) FY25- 25 25/25/25 CAPITAL ADEQUACY 25% 7 * Internal targets, may not be achieved
Slide 9: Loan AUM growth
LOAN AUM GROWTH ₹ Cr 3,094 3,541 4,898 5,178 Crisis has consolidated the industry 5,715 5,742 49,667 47,669 39,790 Unsatiated demand for retail credit 32,773 29,189 25,486 Banks keen on co-lending FY18 FY19 FY20 FY21 FY22 Q1FY23 Retail assets Corporate assets Physical network expanded CAGR over 5 ye
Slide 10: Net profit growth
NET PROFIT GROWTH ₹ Cr COVID IMPACT 20.6% 20.5% Cost to income to improve 17.9% 15.3% 13.3% 11.3% 1,188 Expect credit rating to upgrade 761 712 503 465 330 Healthy product mix FY18 FY19 FY20 FY21 FY22 Q1FY23 PAT ROE Credit losses to normalize CAGR over 5 years YoY growth (June, 2022) Cross sell inco
Slide 11: Capital adequacy
CAPITAL ADEQUACY Conservative balance sheet policies 30.49% 23.85% 17.83% Conservative dividend payout 21.11% Co-lending is capital efficient 16.02% 15.85% IIFL Standalone HFC Samasta Tier II is not fully tapped Tier I Tier II Capital infusion done in HFC 10 As on Mar’22
Slide 12: Maintaining best in class asset quality
MAINTAINING BEST IN CLASS ASSET QUALITY RBI CIRCULAR IMPACT Experienced Team with proven track 3.15% record 2.58% Robust systems & processes 24.79 17.62 17.25 16.08 Technology first DNA since inception 12.98 10.08 Partnering with the fintech 1.67% 0.79% 1.74% 0.63% 2.04% 0.96% 1.98% 0.97% 2.30% 1.83
Slide 13: Liquidity policies vindicated in crisis times
LIQUIDITY POLICIES VINDICATED IN CRISIS TIMES ASSET LIABILITY MATCH (ALM) – SURPLUS OF SCHEDULED 45,124 ₹ Cr ASSET REALIZATION OVER LIABILITIES ACROSS ALL BUCKETS Board led experienced ALM 39,424 committee Cumulative inflow Cumulative Outflow 33,921 Surplus 22,028 Conservative liquidity & ALM 17,023
Slide 14: AUM mix by product as on Q1 FY23
(as on Q1 FY23) AUM (₹ cr) % SHARE Most new loan assets are priority HOME LOAN 18,618 35% sector or zero risk weightage for bank GOLD LOAN 17,130 32% Value intact collateral or cash flow backed lending BUSINESS LOAN 7,643 15% Riding on India's rapidly expanding MICROFINANCE 6,276 12% digital infrast
Slide 15: Home loans sourced from small towns
HOME LOAN (MORTGAGES) ARE SOURCED FROM SMALL TOWNS/ SUBURBS, LEVERAGING OUR PROVEN CAPABILITY TO UNDERWRITE WITHOUT FORMAL INCOME DOCUMENTS ₹ Cr 18,618 17,727 14,439 12,197 12,443 Affordable home loans ~₹1-2mn is growing 8,579 & under-penetrated market ADIA equity infusion of ₹22bn FY18 FY19 FY20 FY
Slide 16: Gold loan customers look for quick, flexible loans
GOLD LOAN CUSTOMERS LOOK FOR QUICK, FLEXIBLE LOANS IN A NEIGHBORHOOD BRANCH AND ARE ATTRACTED BY OUR FAIR AND TRANSPARENT BUSINESS PRACTICES ₹ Cr 17,130 16,228 13,149 9,125 6,195 Safe collateral and short duration 4,037 Growing through physical branch network FY18 FY19 FY20 FY21 FY22 Q1FY23 Gold loa
Slide 17: Business loans secured and unsecured mix
BUSINESS LOANS ARE A MIX OF SECURED AND UNSECURED, SOURCED AND SERVICED DIGITALLY AT LEAST COST, THROUGH OWN BRAND AND DIGITAL PARTNERS ₹ Cr 8,117 7,805 7,643 7,559 7,464 7,361 Huge addressable market- 63mn MSMEs1 Technology advances are game changers FY18 FY19 FY20 FY21 FY22 Q1FY23 Strategic partne
Slide 18: Microfinance for small women-run enterprises
MICROFINANCE IS TYPICALLY FOR VERY SMALL WOMEN RUN ENTERPRISES. RBI POLICY CHANGES GIVE A FILLIP TO THE BUSINESS & GEOGRAPHICAL SPREAD MITIGATES THE RISK ₹ Cr 6,155 6,276 4,738 3,400 2,286 Vast untapped market 840 RBI reforms resuscitate the industry FY18 FY19 FY20 FY21 FY22 Q1FY23 Operate with scal
Slide 19: Construction and real estate portfolio
CONSTRUCTION & REAL ESTATE PORTFOLIO IS NOW LESS THAN 5% OF BOOK AND INCREMENTAL LOANS ARE FOR AFFORDABLE/ GREEN PROJECTS POST APPROVALS ₹ Cr 5,055 4,727 4,355 4,235 Discontinued funding against collateral of land or projects awaiting approvals 2,899 2,487 New funding only for construction where IIF
Slide 20: Top institutional shareholders
Top Institutional Shareholders % holding Fairfax 22.3 (Formerly CDC Group) Capital Group 5.2 2010 2016 Bank Muscat India Fund 3.3 Ward Ferry 2.8 Vanguard 2.8 Nomura 1.5 2007 2011 2022 Abakkus 1.2 Morgan Stanley 0.9 Started credit Life Insurance Corporation of India 0.8 business Bavaria Industries Gr
Slide 21: Environment Social Governance
ENVIRONMENT SOCIAL GOVERNANCE 6 of 9 Independent Directors 2 Executive Directors • Multiple recognitions from 7 Govt. of India for contribution Non-Executive Directors towards affordable housing • Received funding from Asian • Brought 32,000+ out of school • Strong standards guided by our Developmen
Slide 22: Q1 FY23 financial results
₹ Cr Q1FY23 Q1FY22 Y-o-Y Q4FY22 Q-o-Q Interest income 1,451.30 1,245.00 17% 1,423.40 2% Interest expense -776 -700.9 11% -773.2 0% Net interest income 675.3 544.1 24% 650.2 4% Non-fund based income 513.7 280.4 83% 488.3 5% Total income 1,189.00 824.5 44% 1,138.40 4% Operating expense -515 -315.2 63%
Slide 23: Home Loans
HOME LOANS 22
Slide 24: Home loans AUM, branches and disbursement
ASSET UNDER MANAGEMENT (₹ Cr) HOME FINANCE BRANCHES DISBURSEMENT (₹ Cr) 5yr CAGR: 27% 17,727 18,618 268 14,439 225 12,186 12,443 6,103 5,386 8,567 127 127 125 4,442 4,147 79 2,388 1,784 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 SALARIED / SELF-EM
Slide 25: Total addressable market for home loans
Housing (EWS/LIG) shortage (FY22E) 9.5 Cr units Aggregate loan demand ₹35 trillion Addressable loan market TOTAL ADDRESSABLE MARKET ₹21 trillion Current loan outstanding ₹8.9 trillion 24 Source: CRISIL report; IIFL Estimates
Slide 26: Credit growth outlook for FY23
Credit growth outlook for FY23 is 9-11% and affordable HFC is expected to grow at a faster pace than the overall industry Housing finance industry has consolidated with a few players exiting the space Multiple government initiatives, PMAY, tax incentives, RERA, GST, special financing window, aimed a
Slide 27: Home loan capabilities
Ability to underwrite and source small ticket home loans for low income segment without formal income documentation Captive technology team which enables customizations and provides agility for best in class TAT which brings scalability and operational efficiencies Ability to leverage group distribu
Slide 28: Home loan growth focus areas
Focus on low ticket home loans with priority to first time home owners and women owners. Offer small ticket LAP loans to small business and traders Continuous digital innovation across the value chain of business Focus on Tier 2/3/4 towns Partner with banks for growth through co-lending and assignme
Slide 29: Gold Loans
GOLD LOANS 28
Slide 30: Gold loan AUM, branches and tonnage
ASSET UNDER MANAGEMENT (₹ Cr) GOLD LOAN BRANCHES AUM PER BRANCH (₹ Cr) 5yr CAGR: 41% 16,228 17,130 2,359 2,455 6.9 7.0 13,149 1,881 7.0 1,738 5.3 9,125 1,357 4.6 3.9 6,195 1,036 4,037 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 TONNAGE PORTFOLIO YI
Slide 31: Gold loan total addressable market
Gold Holding in India1 28,000 tonnes 65% in form of jewellery2 18,200 tonnes Gold loan market3 TOTAL ADDRESSABLE MARKET Expected to Grow by 12-14% in FY234 ₹12.3 trillion SOURCES: 1. World Gold Council Report (65% of gold loan market is unorganized) 2. Return of gold financiers in India’s organized
Slide 32: Gold loan competition
Banks have become more aggressive than ever before Intense competition from new NBFCs, Fintechs During FY22, established NBFCs had reacted with teaser schemes which have stopped now Gold prices rose sharply in 2020 and remain at higher levels Gold loan companies require RBI approval for expanding be
Slide 33: Own network, digital technology and brand
OWN NETWORK DIGITAL STRONG VISIBILITY AND PEOPLE TECHNOLOGY AND BRAND RECALL Over 2,400 dedicated gold Industry first proprietary Aggressive investment in loan branches spread across tablet based fully digitized national and local branding 25 states/UT, manned by processes for paperless on- in
Slide 34: Gold loan growth strategy
Expand branch network in Tier IV and under-penetrated markets Focus on scaling up recently set up branches Focus on SME cross-sell to supplement core business along with insurance Build on co-lending/BC partnerships (Canara Bank, DCB, DBS, Union Bank, Shivalik SFB) Grow customer base with partnershi
Slide 35: Business Loans
BUSINESS LOANS 34
Slide 36: Business loans AUM, disbursement and mix
ASSET UNDER MANAGEMENT (₹ Cr) DISBURSEMENT (₹ Cr) ONBOARDING ATS (₹ lacs) 5yr CAGR: 5% 8,117 49.0 4,392 4,045 7,805 7,559 7,643 7,464 2,681 3,239 7,361 23.0 1,893 18.0 1,218 10.2 8.5 5.9 FY18 FY19 FY20 FY21 FY22 Q1 FY23 FY18 FY19 FY20 FY21 FY22 Q1 FY23 FY18 FY19 FY20 FY21 FY22 Q1 FY23 SECURED / UNSE
Slide 37: MSME addressable market
87.5 Lac Cr MSME Debt Demand 46.4 Lac Cr Addressable MSME ~ 95% of the MSME Market is primarily Market Proprietorship firms and ~ 70% of requirement is for Small ticket size loans 7.0 Lac Cr 15% served by Formal institutions The Digital lending market is growing by 34% CAGR from FY’20-’23 with the T
Slide 38: Digital lending ecosystem and India Stack
Industry is getting consolidated / rationalized Slew of measures by RBI intended towards fortifying the digital ecosystem India Stack (Aadhaar, UPI, Account Aggregator, OCEN) form the biggest enabler 1.1bn accounts linked on the Account Aggregator network; Twelve banks live OCEN network will enable
Slide 39: Strategic fitment and digital journeys
Strategic fitment in the lending ecosystem IIFL is uniquely placed in terms of reach, financial and innovation capital Best-in-class digital journeys First to launch an end-to-end loan to disbursal journey on Whatsapp with digital fraud checks and verification 100% digital journey enabled thro
Slide 40: Business loan growth strategy
Expand reach through strategic partnerships and via IIFL branch network Build brand awareness among SME businesses Optimization of lead funnels through implementation of AI/ML models Loyalty programs to enhance customer lifetime value JV with Open Money to transform banking & borrowing experience fo
Slide 41: Microfinance
MICROFINANCE 40
Slide 42: Microfinance AUM, branches and yield
ASSET UNDER MANAGEMENT (₹ Cr) MICROFINANCE BRANCHES AUM PER LOAN OFFICER (₹ Cr) 5yr CAGR: 61% 6,155 6,276 1.2 1.1 1.0 962 4,738 807 1.0 618 0.8 3,400 561 0.8 2,286 493 840 173 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 FY18 FY19 FY20 FY21 FY22 Q1FY23 AUM MIX % PORTFOLIO YIELD (%
Slide 43: Microfinance landscape and market opportunity
MICROFINANCE LANDSCAPE MARKET OPPORTUNITY Total MFI Universe (GLP) - ₹4,82,681 Cr NBFCs, 6% Others, Market Opportunity: Current 1% MFI market in India is ₹2.6 SFBs, 11% trillion (FY21) for JLG loans SHGs, 34% Indian MFI Market is NBFC- anticipated to grow at a MFIs, 23% CAGR of more than 40% through
Slide 44: New RBI guidelines and competition landscape
NEW RBI GUIDELINES TO BOLSTER COMPETITION LANDSCAPE GROWTH IN THE INDUSTRY Flexible Interest Rates Increased revenue for a 1 No capping sustainable business model Many MFIs are going through turbulent times due to covid related restructuring and losses Asset Qualification (75:25) Balanced portfolio
Slide 45: Diversified MFI portfolio
Well diversified MFI portfolio to weather geo- political risks inherent in the industry IIFL is well distributed across 17 states/UT with no state contributing more than 20% of the overall portfolio Balanced product mix to diversify risks further Retail book constitutes 12% of the AUM, of which
Slide 46: Microfinance growth priorities
Separate vertical to focus on collections • Hard bucket to be tracked by a separate vertical to improve both collection and sales efficiencies Drive Productivity from existing branches • Achieve scale in new branches • Increase in center size and customer per Loan Officer Retail products for MFI cus
Slide 47: Thank you
46 THANK YOU E23 11FL FINANCE |