Buy IIFL Finance; target of Rs 635: Motilal Oswal

Motilal Oswal's research report on IIFL Finance

IIFL Finance (IIFL)’s 2QFY26 NII grew 7% YoY and ~11% QoQ to ~INR14.4b (in line). Other income stood at ~INR4.9b (PQ: INR3.8b). This was primarily due to higher assignment income of ~INR3.5b (PQ: INR2.3b). Net total income grew ~22% YoY to ~INR19.3b. Opex rose ~19% YoY to INR8.7b (~6% higher than MOFSLe), with the cost-to-income ratio declining to ~45% (PQ: 48% and PY: 46%). PPoP was INR10.6b; it grew ~24% YoY (~15% beat). Consol. PAT (post-NCI) was INR3.8b (~27% beat) in 2QFY26. Consol. yields/CoB rose ~25bp/10bp QoQ to ~13%/~9.9%. Calculated NIM rose ~25bp QoQ.

Outlook

We cut our FY26E EPS by ~2% to factor in higher credit costs, slightly offset by higher assignment income. The stock trades at 1.5x FY27E P/BV and ~11x P/E for an estimated RoA/RoE of 2.3%/14% in FY27. We have a BUY rating on the stock with a TP of INR635 (based on SoTP valuation; refer to the table below).