Fitch revises outlook on IIFL Finance to positive; affirms rating at 'B+'

Fitch said it has also affirmed the rating on IIFL's senior secured debt at 'B+' with a Recovery Rating of 'RR4'.

Fitch Ratings on Thursday revised the outlook on IIFL Finance Limited's (IIFL) Long-Term Issuer Default Rating (IDR) to positive from stable, and affirmed the IDR at 'B+'.

Fitch said it has also affirmed the rating on IIFL's senior secured debt at 'B+' with a Recovery Rating of 'RR4'.

In addition, the global medium-note programme (GMTN) rating has been affirmed at 'B+', the global rating agency said in a release.

IIFL Finance is a leading non-banking financial company offering a diverse range of financial products and services. Its core business segments include gold loans, housing finance, microfinance, and small business loans.

"The outlook revision reflects our view that IIFL's credit profile could improve over the next two years, particularly its business and risk profiles, asset quality and funding diversity. An improved credit profile could be positive for IIFL's ratings," the agency said.

Fitch further said loan growth has rebounded following the lifting of regulatory restrictions on IIFL's gold-backed lending business in September 2024, with broadening funding flows supporting new disbursements in gold-backed loans and other products over the past several months.

The revision also reflects Fitch's expectation of a gradual decline in legacy problem assets over the next two years along with stabilisation of asset quality risks as management pivots the portfolio towards secured lending categories.

"Nonetheless, we believe near-term credit costs will remain elevated as management remediates existing problem loans, and rapid loan expansion could stretch risk and control frameworks, and raise operational risks," Fitch said.

It will take time to assess the robustness of IIFL's controls as the business scales following the lifting of the regulatory restrictions, the rating agency said.

IIFL's wholesale funding profile is sensitive to market confidence, but access has improved in recent months, it said and added that funding is more diversified, with foreign bonds and foreign loans, and greater use of off-book funding channels and bank loans.