IIFL Finance RI review - (Apply)

•    IFL is one of the leading financial service providing plethora of products across the board.
•    The company has marked steady growth in its top and bottom lines for the reported periods. 
•    The RI is at a discount of around 27.73% to its last traded price.
•    Investors may park funds for the medium to long term rewards in this worthy bet. 

ABOUT COMPANY:
IIFL Finance Ltd. (IFL) is a Non-Banking Financial Company - Middle Layer ("NBFC-ML") registered with the RBI, catering to the credit requirements of a diverse customer base with its plethora of products. Its offerings include home loans, gold loans, loans against property and medium and small enterprise financing, micro finance, construction and real estate finance and capital market finance, catering to both retail and corporate clients.

The Company has received a registration as a Non-Banking Financial Company bearing registration number N-13.02386 vide certificate dated March 6, 2020.Over the past several years, it has diversified its products and expanded presence into segments that are of greater relevance to the evolving business environment and customer demand trends. IFL's key strategy is to steadily grow high quality, diversified retail assets focusing on under-banked segments, with effective risk management and cost optimization through well-defined processes and leveraging technology.

As of December 31, 2023, December 31, 2022, March 31, 2023 and March 31, 2022, its consolidated assets under management (AUM) were Rs. 77,444.16 crores, Rs. 57,940.55 crores, Rs. 64,637.64 crores, and Rs. 51,209.79 crores, respectively. As of December 31, 2023, it had 39267 employees on its payroll and was operating with 4681 branches network. As of the said date, its loan book stood at Rs. 47209.74 cr., and average cost of borrowing was 9.06%.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 42394270 equity shares of Rs. 2 each at a fixed price of Rs. 300 per share to mobilize Rs. 1271.83 cr. The RI opens for subscription on April 30, 2024, and will close on May 14, 2024. The company is offering RI in the ratio of 1 for 9 to its eligible stakeholders as of the record date of April 23, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 4.78 cr. for this RI process, and from the net proceeds, it will utilize Rs. 1267.05 cr. for augmenting the capital base.

The RI is jointly lead managed by Ambit Pvt. Ltd., and Motilal Oswal Investment Advisors Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 76.31 cr. will stand enhanced to Rs. 84.79 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 12718.28 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has (on a consolidated basis) posted a total revenue/net profit of Rs. 7023.61 cr. / Rs. 1188.25 cr. (FY22), and Rs. 8447.11 cr. / Rs. 1607.55 cr. For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 1543.59 cr. on a total revenue of Rs. 7587.88 cr. Thus it continued to mark steady growth in its top and bottom lines for the reported periods. 

IFL's net NPAs reduced from 1.83% as of March 31, 2033 to 1.08% as of March 31, 2023, and further to 0.87% as of December 31, 2023. Its interest spread increased from 6.54% as of March 31, 2022, to 8.21% as of December 31, 2023.

DIVIDEND POLICY:
The company is a dividend paying company. It paid a dividend of 150% (FY21), 175% (FY22), 200% (FY23 and FY24). It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532636 (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 420.90 on April 22, 2024, and opened on an ex-right basis at Rs. 409.40 on April 23, 2024. Since then, it has marked a high/low of Rs. 425.00 / Rs. 405.90. The scrip last closed at Rs. 415.10 as of April 26, 2024. For the last 52 weeks' it has posted a high/low of Rs. 683.78 / Rs. 304.17. 

The promoters' holding has been around 24.8% for the last three quarters ended with March 31, 2024. The counter has been marking trades above the RI pricing and is a worthy bet for medium to long term rewards.