Buy IIFL Finance; target of Rs 600: Motilal Oswal

Motilal Oswal is bullish on IIFL Finance recommended buy rating on the stock with a target price of Rs 600 in its research report dated September 19, 2024.

Broker Research

September 20, 2024 / 13:12 IST

Buy

26 Aug, 2025 12:21

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Motilal Oswal's research report on IIFL Finance

IIFL’s gold loan AUM stood at ~INR260b as of 4th Mar’24, when the ban came into effect. It subsequently declined to ~INR147b as of Jun’24 and ~INR122b as of 5th Aug’24. Assuming that ~10% of the outstanding gold loans run down every month, we expect IIFL’s gold loan AUM at ~INR105b as of 19th Sep’24, when the ban was revoked. We expect IIFL to now make a strong comeback in the gold lending business to regain its market share in the segment. We believe that IIFL could even take pricing actions and compete aggressively (if needed) to accelerate its gold loan growth. While this could have some impact on the segment’s profitability in the near term, it will help IIFL regain its market share from its peers (like MUTH, MGFL) and even some banks. While the profitability in the gold loan segment (particular for NBFCs) could be under pressure in the near term, we clearly do not expect a repeat of the episode when there was cut-throat competition and gold loans were offered in India at lowest rates of 0.5%-0.8% per month (between Oct’21 and Mar’22). However, the advantage for MUTH/MGFL due to the gold loan ban on IIFL will now end. Higher gold prices will still remain a tailwind for the entire sector.

Outlook

The stock trades at 1.5x FY26E P/BV and ~10x P/E. IIFL could see a valuation re-rating as investors get renewed confidence in its ability to claw back its market share in gold loans. We maintain our BUY rating on the company with a revised TP of INR600 (based on Mar’26E SOTP of the standalone business and the two subsidiaries).

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