Jefferies has maintained its hold rating on IIFL Finance while cutting the target price to ₹600 per share, following a mixed December quarter performance that was overshadowed by regulatory developments.
IIFL Finance reported a PAT of ₹480 crore in the December quarter, marginally ahead of Jefferies’ estimate of ₹450 crore, largely driven by lower-than-expected provisioning. The brokerage noted that the company’s AUM grew a strong 38% YoY, reflecting continued traction across lending segments, while net interest margins inched up sequentially, offering comfort on underlying operating performance.
Asset quality metrics also improved during the quarter, with gross NPAs declining QoQ, aided by the sale of stressed assets to an asset reconstruction company. This led to a positive surprise on credit costs, which came in lower than anticipated.
However, Jefferies highlighted a key near-term concern after tax authorities directed a special audit of IIFL Finance’s accounts. While management has stated that the audit is procedural in nature, the brokerage believes it could remain an overhang on investor sentiment in the near term, pending further clarity.
Jefferies said that while the core business momentum remains intact, regulatory and compliance-related developments are likely to limit valuation upside in the near term, justifying its cautious stance.
Disclaimer: The views and recommendations above are those of Jefferies. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.