Why did IIFL Finance crashes 17% despite reporting 1,041% net profit growth? Check the reason

Synopsis: IIFL Finance shares fell 17% to ₹515 despite Q3: profit up 1,041% YoY, AUM up 38%, GNPA improved to 1.6%, amid audit and GST concerns.

The share of this company engaged in providing Home Loans, Gold Loans, Business Loans, Microfinance, Loans Against Securities, Digital Finance, Wealth & Asset Management, Broking, and Insurance is in focus after Q3 results filings

With a market capitalization of Rs 22,500 crore, IIFL Finance Ltd’s shares on Wednesday made a day low of Rs 515.25 per share, down by 17 percent from its previous day’s close price of Rs 622.7  per share. The share is trading at an overvalued P/E of 27.2x, more than the average industry P/E.

The company has been directed by the Income Tax Department to conduct a special audit under Section 142(2A) for a specified period as part of ongoing assessment proceedings. The directive is procedural, involves no adjudication, and currently has no determinable financial impact.

The company has received GST orders from the Bihar and Gujarat authorities imposing penalties aggregating over Rs 13.3 crore under Sections 73 and 74, primarily relating to tax on exempt interest income and ITC issues. Appeals have been filed or are underway, with no material financial or operational impact. The company’s Chief Information Security Officer (“CISO”), Mr. Sameer Gadve, with effect from January 22, 2025.

QoQ 

The NII grew by 3 percent QoQto Rs 1,098 crore in Q3 FY26, and GNPA decreased by 54 bps to 1.6 percent in Q3 FY26 from 2.1 percent in Q2 FY26. Net profit grew by 20 percent to Rs 501.3 crore in Q3 FY26. As a result, Loan AUM grew by 9 percent QoQ to Rs 98,336 crore in Q3 FY26 from Rs 90,122 crore in Q2 FY26 with an ROA of 2.5 percent in Q3 FY26, up 29 bps QoQ and a ROE of 14.3 percent, up 241 bps YoY.

YoY 

The NII grew by 16 percent YoY to Rs 1,098.6 crore, and GNPA decreased by 82 bps to 1.6 percent in Q3 FY26 from 2.4 percent in Q3 FY25. Net profit grew by 1,041 percent YoY to Rs 464.3 crore in Q3 FY26. As a result, Loan AUM grew by 38 percent YoY to Rs 98,336 crore in Q3 FY26 from Rs 71,410  crore in Q3 FY25 with a ROA of 2.5 percent in Q3 FY26, up 198 bps YoY, and a ROE of 14.3 percent, up 1,299 bps YoY.

Home loans AUM grew 5 percent year-on-year but declined 0.4 percent sequentially, remaining on track. Gold loans saw a sharp growth of 189 percent YoY and 26 percent QoQ, driven by strong demand and stable asset quality. MSME loans rose 17 percent YoY and 4 percent QoQ due to a shift toward secured lending, while microfinance AUM declined 19 percent YoY and was flat QoQ amid macro pressures.

IIFL Finance Ltd is a diversified NBFC in India engaged in the business of loans and mortgages along with its subsidiaries. It offers a wide spectrum of products such as home loans, Gold loan, business loans, microfinance, capital market finance, and developer & construction finance, etc.

The company has a debt-to-equity ratio of 4.53x, with ROCE of 8.81% and ROE of 4.9%, showcasing that there is room for improvement and that resource allocation can be improved by the company

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Why did IIFL Finance crashes 17% despite reporting 1,041% net profit growth? Check the reason appeared first on Trade Brains.