IIFL group chairman Nirmal Jain
IIFL group chairman Nirmal Jain has his hands full, leading a financial conglomerate that has listed entities such as IIFL Finance, IIFL Securities, IIFL Wealth Management and 5paisa.com. As the second coronavirus hits India hard and concerns grow for businesses and the economy, Jain expects a smooth sailing—the group has invested a lot in technology which helped it tide over the challenges posed by the lockdown.
IIFL customers can get loans at a click of a button but Jain, who founded IIFL in 1995 as a research house six years after starting his career with Hindustan Unilever, is big on physical branches as well. Local presence, he says, boosts customers’ trust.
For someone who is neck-deep into financial world, Jain doesn’t seem to be keen on getting a banking licence. They are too many things to consider, he says. In an exclusive interview of Moneycontrol’s Tarun Sharma, Jain shares the company's fund-raising plans, the growth map and upping the game in the discount brokerage space. Edited excerpts:
What is happening with different businesses of yours? How was the FY2021 for IIFL Finance, IIFL Wealth Management, IIFL Securities and 5 paisa.com?
All our businesses are in financial services and they are growing in line with the industry trends. Each of our core business has been investing in technology independently for more than five years. I think that has helped us tide over the challenges posed by COVID-related lockdowns. So, FY2021 was a good year for all our businesses as we witnessed recovery in the second half.
Tell us more about IIFL Finance's business strategy? What is with the Rs 3600-crore alternative investment fund (AIF) for real estate?
IIFL Finance strategy is two pronged—one, to focus on retail small-ticket loans delivered digitally and two, win-win partnerships with banks and fin-techs. To ensure superior customer service and asset quality, we have invested in our own branch network manned by our own employees.
IIFL Finance operates more than 2,000 branches serviced by close to 20,000 employees. Despite being at the forefront of technology, we continue to invest in the physical network of branches for local storage of gold, so that loan disbursement and release of collateral can be done in a few minutes. Also, local presence is a huge boost to customers’ trust and helps better collection.
On AIF front, with the target corpus of ₹3,600 crore is to take over substantial portion of wholesale portfolio of real-estate loans (currently 9.5 percent of loan AUM) as that will leave the company with almost entirely retail loan portfolio.
Do you plan to become a retail-only NBFC? Which new businesses do you want to add?
We do plan to become retail-only NBFC, focused on a diversified yet focussed portfolio. Currently, IIFL Finance, the listed company, has two subsidiaries for housing finance and micro finance. The listed company provides gold and business loans. At this point in time, we do not want to add any new business.
You have earlier spoken about co-lending partnerships with banks as a win-win. What is happening on that front? What is the plan this year?
We have made good progress and signed up co-lending or co-origination partnership with a few large banks, including Standard Chartered, ICICI Bank and CSB. We are discussing with many other large banks. The process was affected due to restricted mobility and in-person meetings due to COVID. We expect many new co-lending partnerships to fructify this year.
In a previous interview, you spoke about significant digital transformation for IIFL Finance? Where are you on that? Would you become a financial technology firm?
It is very interesting the way we are innovating with technology. We have great talent and the advantage of proprietary data of millions of customers. We are seeing transformation in all our businesses. I don’t know whether transformation is the right word, as innovation is not a project but the process or way of life. We have launched a new app MyMoney, where MSMEs can take business loans, completely paperless and in a few minutes.
Our gold loan customers can leave the gold with us and at one tap, can borrow again or repay and stop the interest meter. We are about to launch a co-branded prepaid card with many innovative and path-breaking features.
In the last quarter, you raised funds through non-convertible debentures (NCDs). Will you do the same this financial year? What is the amount you are looking at?
We do have plans to raise more funds by NCD issues this year but it is difficult to place a target or timeline, as they depend on broader money and capital market conditions.
Raising funds from international market is affordable due to liquidity. You recently got ratings outlook upgrade from Fitch. Any plan to tap dollar bonds again?
Not really. International money when fully hedged is currently more expensive. Actually we bought back our dollar bonds as much as RBI regulations permitted. We are looking at market carefully and are open to tapping international markets whenever pricing is competitive and fair.
Many NBFCs and fintech firms are looking for suitors. Would you take the inorganic route?
While we are open to opportunities, we do not have any target or any transaction on the anvil.
You recently got an investment into 5paisa.com and it turned profitable in FY21. What is your business strategy?
5paisa.com is evolving from a discount broker to one-stop digital investment platform. Our strategy is to make investing easy as well as rewarding for our customers. Many new discount broking houses have come up in recent times, chasing new customer numbers. Most of them promise to make investing and trading easy. 5paisa believes making investment easy is the first step, more like hygiene but not health. The customer’s real need is to ensure that investments generate superior returns for given risk profile. This requires understanding of risk appetite and prudent asset allocation. 5paisa strategy is to fulfil the customer’s unmet needs.
IIFL Securities remains cash-rich and profitable. What is the strategy for the next level of growth—will you explore the discount broking path?
IIFL Securities is a full-service broking house catering to institutional clients, corporates looking to raise capital, affluents looking for research-backed advice as well as millennials taking first steps in the capital market.
For IIFL, discount broking is one of the products for a small set of target customers. Many customers prefer full service even if brokerage is a little higher. Mostly these customers have long-term investment orientation and brokerage by itself is negligible cost.
Would you apply for an on-tap banking licence? Also, would you explore merging with a bank like IDBI?
We shall evaluate the pros and cons of converting to a bank by either greenfield licence or through M&A, from the perspective of all stake- holders. As we know, being a bank gives access to deposit franchise but you have to meet CRR, SLR, priority sector norms from Day 1 on your entire portfolio. Besides, there are many other considerations. Decisions like this call for a very detailed and careful study of all factors.