Synopsis: A domestic brokerage has maintained a ‘Buy’ call on a leading retail-focused NBFC, pointing to a strong earnings recovery, gold loan dominance, and improving asset quality as reasons to stay optimistic.
After a period of regulatory headwinds and portfolio restructuring, this non-banking financial company has come back strongly – posting record quarterly profits, a surging gold loan book, and meaningful improvement in bad loans. A top brokerage has set a target price of 600 i.e. over 36% upside from current levels.
When Gold Leads, Profits Follow
The single biggest growth story inside IIFL Finance Ltd. right now is gold loans. The gold loan AUM surged to ₹52,581 crore in Q4FY26, up 150% year-on-year and 21% sequentially – making it the dominant business segment for the company. With gold prices remaining elevated and demand for gold-backed credit growing from underserved borrowers, this segment is showing no signs of slowing.
The company has also fully complied with the revised RBI gold loan guidelines, particularly for loans above ₹2.5 lakh, where detailed credit assessment and ongoing monitoring are required. Gross NPA on the gold loan book stood at just 0.35%, making it one of the cleanest segments in the entire portfolio and a key reason why overall asset quality has improved so sharply over the past year.
A Quarter That Beat Expectations
IIFL Finance Ltd’s Q4FY26 numbers were broadly ahead of estimates across key metrics. Consolidated total income came in at ₹2,090 crore, up 51% year-on-year, while pre-provision operating profit rose 80% year-on-year to ₹1,173 crore. Profit after tax (pre-non-controlling interest) stood at ₹623 crore, up 148% year-on-year and 24% quarter-on-quarter.
For the full year FY26, PAT came in at ₹1,817 crore – a 214% year-on-year jump – reflecting how decisively the company has recovered from the disruptions of FY25. Return on assets stood at 2.4% and return on equity at 13.1% for the quarter, with the consolidated AUM crossing the ₹1 lakh crore mark to reach ₹1,08,180 crore, up 38% year-on-year.
Bad Loans Fall, Provisions Strengthen
Asset quality improvement has been one of the clearest positives of the past year. Gross NPA declined to 1.5% in Q4FY26, down 77 basis points year-on-year, while net NPA fell to 0.7%. The company’s decision to exit riskier segments like micro-LAP and unsecured personal loans has played a central role in reducing credit costs, with loan loss provisions for the quarter coming in at ₹326 crore – well below brokerage estimates.
The provision coverage ratio strengthened further to 93%, reflecting a more conservative and well-cushioned balance sheet. The microfinance segment, which had been a stress point in prior quarters, is also showing improving collection efficiency and stabilising asset quality, even as the company keeps growth in that segment calibrated and measured.
Brokerage View: Earnings Upgrade, Buy Maintained
Motilal Oswal has maintained its ‘Buy’ rating on IIFL Finance Ltd. with a target price of ₹600, based on its March 2028 sum-of-the-parts valuation. The brokerage has revised its FY27 earnings per share estimate upward by approximately 6%, factoring in higher income from co-lending and assignments, along with slightly stronger AUM growth expectations.
The stock is currently trading at 1.2x FY27 estimated price-to-book value and 8x price-to-earnings, for an estimated return on assets of 2.7% and return on equity of 18% in FY28 – a combination the brokerage views as attractive at current levels. With earnings momentum, cleaner asset quality, and a dominant gold loan franchise all pointing in the same direction, Motilal Oswal sees a potential upside of around 36% from current levels.
About the Company
IIFL Finance Limited is a leading non-banking financial company in India, offering a wide range of lending products including gold loans, home loans, business loans, and microfinance. The company has built a strong presence across urban and semi-urban markets, with gold loans being a key growth driver. Focused on improving asset quality and expanding its lending portfolio, it continues to strengthen its position in the retail credit space.
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