IIFL Finance board to evaluate listing of mortgage, microfinance units: Nirmal Jain

IIFL Finance co-founder and managing director Nirmal Jain.

IIFL Group co-founder Nirmal Jain said a proposal to evaluate listing the company's mortgage and microfinance arms may soon be presented to the board. The listings aim to mitigate risks by allowing the IIFL Finance Ltd's units to independently access credit and capital markets, unfettered by holding company constraints.

Guiding for a broad timeline of 18 months, managing director Nirmal Jain said that when IIFL Finance was faced with a regulatory ban by the Reserve Bank of India (RBI), banks froze the credit lines to gold loans, housing finance and microfinance businesses. “That’s another thing we understood — that is to derisk the businesses,” Jain said in an interview explaining the rationale for the possible listing of the housing finance and MFI businesses.

On March 4, the RBI barred IIFL Finance from taking on new customers in the gold loan business. From a loan book of Rs 23,000 crore, its outstanding gold loans fell to Rs 12,162 crore as of August 5, 2024.

The central bank lifted the ban on September 20. During the period, the lender faced issues in drawing down sanctioned loan facilities and couldn’t access bank funding.

Prem Watsa’s Fairfax India Holdings, which is a shareholder in IIFL Finance with about 15 percent stake, provided Rs 500 crore of debt and participated in the rights issue in May.

“There are two types of structures we can to de-risk. One is like how some of the large conglomerates function — that is intertangled structure where you can control because of the cross-holdings or the second is to have a clear structure but then you may lose control because you retain only 51 percent stake. But then that mitigates the risk to some extent,” Jain said.

The RBI ban, in place for six and a half months, had no impact on businesses such as 360 One Wealth and IIFL Securities because they were separately listed, he said.

This seems to have prompted IIFL Finance to consider listing its subsidiaries. “Maybe we should look at that more seriously — that is to separate housing finance and microfinance. We would look at listing these businesses in the next 18 months,” he said.

In June 2020, the Abu Dhabi Investment Authority (ADIA) picked up a 20 percent stake in IIFL Home Finance for Rs 2,200 crore.

When asked if IIFL Finance would explore a pre-IPO funding round for IIFL Samasta, the microfinance unit, Jain said “that option is open”. However, the quantum of stake sold would be an outcome of negotiations. “Once we have the board approval, we will evaluate it,” he said.

Following the 2o18 IL&FS crisis, which hit most non-banks, IIFL Group decided to demerge its businesses into three entities and listed them separately as IIFL Finance, IIFL Wealth and IIFL Securities.

While IIFL Wealth was rebranded as 360 One WAM Limited in November 2022 following Bain Capital’s 24 percent equity investment, Fairfax holds over 20 percent stake in IIFL Securities.