Home loans to drive growth; gold biz dull: IIFL MD

IIFL Holdings, the listed entity of the IIFL group, reported a 28 percent increase in consolidated net profit of Rs 140.3 crore for the September quarter on better asset quality and overall growth in revenue. R Venkatraman, managing director, IIFL, says the company's gold business saw a degrowth and the company will now focus on its loan business.Below is the verbatim transcript of R Venkatraman's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Your fund based business outperformed the other divisions while your capital markets business saw a mild pressure. Any reason for this pressure on your capital market business and what is the outlook for the fund based business, does it do even better? A: If you look at our fund based activities then we saw the aggregate loan book which is about Rs 15,472 crore grew about 19 percent on year-on-year (Y-o-Y) basis and about 5 percent on a quarter-on-quarter (Q-o-Q) basis. So, we have talked earlier also, the NBFC or the consumer finance business along with the wealth business has been a key driver of growth and we are seeing significant traction in that business. Second thing is that we have also benefitted from improvement in the gross and the net non-performing assets (NPAs). Gross NPAs for the previous quarter was about 1.6 percent with net NPA of about 0.8 percent. That has improved thanks to our collection efficiency to about 1.4 percent for this quarter and net NPA about 0.5 percent for this quarter. Plus, our cost to income ratio has also improved. So, overall, our NBFC business is continuing to do well. Coming to our capital market business, if you see the last quarter, which is Q2 of this year, market has been a bit lackluster plus in the month of August we had seen the market being hugely volatile. So, exchange volumes are down and average daily equity turnover was down by about 9 percent on a Q-o-Q basis. Capital markets are inherently volatile and we are in the bottom of if I can say a recovery. Sonia: You were telling us about the revenues, what kind of revenue growth would you expect from the NBFC business in FY16 and what would be the driver of that growth? A: It is extremely difficult for me to give any forward looking statement. So we think that going ahead our strategy for growth in our fund based business is primarily focused on secured lending. Secured lending has got multiple asset classes. I would say we are a multi-product NBFC if I can use this word. We give loan against security of mortgages and then we also give gold loans, commercial vehicle finance, medical equipment and capital markets. If you look at the overall composition of the book, our focus as I had told earlier also has been focus on home loans and that is one segment which is showing growth. We have seen some kind of degrowth or consolidation in gold loan business and gold loan as an overall percentage of the book has come down. The other segment which we are seeing traction is the commercial vehicle finance. Capital markets given the state of the capital markets remains good. So, going ahead I can say that the home loans will be the key driver of growth and we continue to invest in building the home loan capabilities.Latha: What is the call on the market right now, there seems to be a bit of congestion in a narrow range, not quite able to emphatically move above that 8,300 mark. What is your sense? A: We think that the market is in a consolidation phase and it will digest news of this current earning season. The second uncertainty is Bihar elections. I think the market is waiting and watching to see what is going to happen in the Bihar elections. Apart from these two specific things, on a broader long to medium-term view, India is in a good state the reason being simply because we are seeing in the bottoming out with the macroeconomic indicators and I think a gradual macroeconomic cyclical recovery is on the tracks. So, we are quite optimistic. If you look at the rest of the world, China is having its problem; other emerging markets are having problems so India remains a beacon of hope. We think that it will remain an attractive emerging market destination and as and when they see the economic activity pickup, we are optimistic about the indices and the market