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Informist, Monday, Aug. 17, 2026

--Fitch ups IIFL Fin's long-term issuer default rtg to BB- ; outlook stable 

NEW DELHI – Fitch Ratings Monday upgraded IIFL Finance Ltd.'s long-term issuer default rating to 'BB-‌' from 'B+' with a stable outlook. The rating agency also upgraded the ratings on the company's senior secured debt and global medium-term note programme to 'BB-‌' from 'B+', and withdrew the recovery rating on the senior secured debt. Fitch said a recovery rating is not required for issuers rated 'BB-‌' and above under the agency's rating criteria.

Fitch said the upgrade reflected a sustained improvement in IIFL's credit profile, particularly in its business and risk profiles, and asset quality. Loan growth rebounded after regulatory restrictions on the company's gold-backed lending business were lifted in September 2024. This was supported by stronger funding flows that enabled fresh disbursements across key product lines. The upgrade also reflected stabilisation in asset quality and credit costs as IIFL shifts its portfolio toward secured lending categories. As of Jun. 30, the company's gross non-performing asset ratio was 1.6%, up 9 basis points from the previous quarter. The net non-performing assets ratio was 0.8%, also up 9 bps sequentially.

"IIFL steadily regained market share in gold-backed loans over the past two years among major lenders active in the product," Fitch said. "IIFL's pan-India franchise helps retain customers, and its loan pricing remains in line with that of large peers. Its successful tie-ups with banks for co-lending and direct assignments further support growth in assets under management. Gold-backed lending, which is a lower-risk business, is likely to remain the largest lending segment, at above 50% of the consolidated portfolio, over the medium term." The company's consolidated assets under management rose 38% on year to INR 1.16 trillion as of Jun. 30.

Fitch expects IIFL's portfolio to remain focused on secured loans, as the company has exited unsecured business and personal lending and is maintaining caution on microfinance expansion. The agency said a higher share of secured loans should help reduce asset-quality risks, provided it is managed well.

Loans grew 27% in the financial year 2025-26 (Apr-Mar), driven mainly by secured categories, compared with 8% growth in FY25 that lagged the sector. The share of secured loans, including gold-backed and mortgage products, increased to 90% by end-March 2026 from 80% a year earlier.

Fitch expects non-performing loan formation to moderate over the medium term, driven by the shift to secured loans, resolution of the stressed microfinance portfolio, and the exit from riskier unsecured products. The agency also expects credit costs to remain contained. Credit costs stood at 1.6% annualised in 1QFY27, compared with an average of 2.4% between FY23 and FY26. This will be supported by improving portfolio quality and provision coverage of 90%.

"IIFL's NPL ratio eased to 1.5% in FY26 from 2.2% in FY24 on firmer underwriting standards and improved risk and collection frameworks," Fitch said. "Irregular non-loan assets, mainly legacy commercial real-estate loans sold to asset reconstruction companies, are likely to fall below 5% of credit exposures in the near term, as the company is in advanced stages of their resolution."

On the business side, Fitch expects a recovery in loan volumes, stable net interest margins, and contained operating and credit costs to support profitability over the medium term. Annualised pre-tax profit improved to 4.1% of average assets in Apr-Jun, recovering from a sharp fall to 1.1% in FY25. It stood at 3.1% in FY26, helped by higher business volumes boosting revenue, the rating agency said. The gold loan assets under management, which comprise 51% of the total assets under management of the company, rose 11% sequentially to INR 584.06 billion in the June quarter.

According to the rating agency, IIFL's wholesale funding profile remains sensitive to market confidence, but access has improved over the past two years. Funding sources have diversified through foreign bonds and loans, greater use of off-book channels, and bank borrowings. Lower borrowing rates also point to improved lender confidence.

A positive asset-liability maturity profile supports upcoming debt repayments and creates room for new lending. In addition, a higher share of short-tenor gold loans is likely to support receivable inflows to meet near-term debt maturities.

Fitch said the rating could be downgraded if IIFL posts sustained loan growth above the industry average alongside weaker underwriting standards, if debt-to-tangible equity stays above 5.0 times, or if liquidity weakens to a point where short-term receivables no longer cover short-term debt repayments.

 Negative rating action could also follow a sharp rise in problem assets, including non-loan exposures, weakening funding access, or any significant operational, compliance, legal or reputational event. IIFL's debt-to-tangible equity ratio rose to 4.5 times at the end of June from 3.8 times in FY25, 4 times in FY24, driven by loan growth.

Meanwhile, Fitch said a broader and more mature loan portfolio, a longer track record of sound asset-quality management, and improvements in infrastructure that reduce operational risk could support a rating upgrade. Stronger asset-liability maturity buffers and the presence of an established professional senior management team would also be positive for the ratings.

For the June quarter, IIFL Finance had reported a consolidated net profit of INR 6.75 billion on revenues of INR 39.19 billion. Monday, its shares closed at INR 630.05 apiece on the National Stock Exchange, slightly down from Friday.  End
 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Vaishali Tyagi

Edited by Himanshi Gupta 

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