Nirmal Jain on how IIFL�s NBFC biz cracked the profit code
Our gross non-performing assets have been less than 2% in this entire period, says Jain.
If you look at the whole year, then profit after tax in NBFC has grown by 55% including one exceptional item, said?Nirmal Jain, Founder & Chairman,?IIFL Group, in an interview with ETNOW.
Edited excerpts:
There has been over 30% growth in profits this quarter. How has been the segmental performance?
We had an all-round good performance. In fact, despite headwinds, the profits have grown well in the NBFC sector and we also had a 7.6% volume growth quarter over quarter which becomes almost 30% annualised. If you look at the whole year, then profit after tax in NBFC has grown by 55% including one exceptional item.?
We sold our commercial vehicle business and if I exclude that gain net of tax, then profit after tax for the year for NBFC has grown by 36% at Rs 633 crore. The year-on-year growth for our wealth business looks modest. It is just 4% at Rs 384 crore, but one important thing to note here is that, last quarter we changed our accounting and the business model. We are now focussed more on the advisory and annuity-based income rather than the upfront income where you actually get to book a lot of income upfront when the products are logged in.?
How did availability of liquidity improve and we did not see as bad an impact on the NBFC end on account of the slowdown?
Our NBFC is actually a little different because we are focussed more on the retail assets and these assets can be sold to banks. We have been securitising, assigning and selling the assets. Our liquidity is not impacted as much. In December quarter, the volumes were down. We just grew by 1.6% but at least at the retail end of the market, in March quarter, we could come back to normal disbursement growth. Also consistently for the last 10 years, we have been able to maintain good quality of assets. Our gross non-performing assets have been less than 2% in this entire period.?
Our provision has been very conservative and significantly higher than the requirements of RBI. As of 31st March 2019, our provision coverage stood at almost 139% of the gross non-performing assets. Our standard asset provision coverage provides fair cushion for any asset quality challenges that you come across. As I said, our primary growth is driven by retail nature of our business.?
The wealth business is not getting impacted by the market correction. What is the feedback you are getting from your HNI clients?
In the wealth business, again our asset growth has been fairly robust and basically our model is more to focus on the advisory and all the assets of the customers whether they are part of fixed income or equities.?
In a volatile market like this, allocation of assets may move from equity to fixed income but at least in terms of franchise or strength of our relationship with the customer or our ability to get new customers or new assets, I do not think there has been any impact of the market slowdown. Obviously, there is stability at political level after elections and we will see that the economy also recovers faster and we can see even more traction in terms of volume growth.?
When exactly is the business rejig taking place -- the proposed demerger of businesses into separate entities and the listing of those subsidiaries eventually?
That has already taken place. At yesterday?s board meeting, we had given effect to re-organisation. IIFL Wealth and IIFL Securities will be demerged and that is the first step. Record date will be announced very soon. In the next 10 to 15 days, you can have a record date when shareholders of IIFL holdings get allotted shares of IIFL Securities and IIFL Wealth.?
Post that, basically the IIFL holding will have only NBFC and housing finance and micro finance as the subsidiary companies. We will change the name of IIFL holding to IIFL Finance Limited and then will apply to RBI for NBFC licence in the holding company which may be renamed. Once it gets the NBFC licence in the holding company, we merge the subsidiary company into the holding company.?
As far as securities wealth and the three listed entities are concerned, the process is done. Now the record date may be in the next couple of weeks and from there, the exchanges may take four to six weeks to get these two companies listed independently.?
Given global cues and elections, what is your market outlook at the moment?
Markets are impacted globally by the US-China trade war and uncertainty is surrounding it. Locally, it is obvious that people are waiting for election results on 23rd and starting from exit polls on the evening of 19th or morning of 20th. For next few days, I do not think one should expect much from the market and the trends would emerge only after there is clarity on outcome of central elections.
