IIFL Finance Q4 FY26: Gold-led growth pushes AUM past 1.08 lakh crore

IIFL Finance ended FY26 with a strong fourth quarter and a clear shift in the balance sheet mix. Consolidated loan AUM rose to 108,180 crore as of March 31, 2026, up 10% sequentially and 38% year on year. Profit after tax before non-controlling interest came in at 623.2 crore in Q4 FY26, up 24% quarter on quarter and 148% year on year.

The quarter’s operating performance reflected both growth and a cleaner credit profile. Total income rose to 2,090 crore, up 51% year on year. Pre-provision operating profit increased to 1,172.7 crore, up 80% year on year, while profit before tax stood at 832.6 crore.

The mix shift is the story: gold loans and mortgages dominate

IIFL Finance has positioned secured lending as the anchor. In FY26, gold loans and mortgages together accounted for 88% of the portfolio, up from 79% in FY25. The largest contributor was gold loans, with AUM at 52,581 crore in Q4 FY26, up 150% year on year and 21% quarter on quarter.

Mortgages were stable. Home loan AUM stood at 32,125 crore, up 2% year on year, while the overall IIFL Home Finance AUM was 40,075 crore. MSME AUM was 10,349 crore with a continuing reduction in unsecured MSME, while microfinance AUM was 9,143 crore.

The company also continues to reduce non-core and discontinued books, although they remain visible in the disclosures. Discontinued business AUM was 2,650 crore at quarter end.

Asset quality improves, but MSME remains a key monitorable

The quarter showed a meaningful improvement in overall asset quality. Consolidated GNPA declined to 1.46% in Q4 FY26 from 2.23% a year ago. NNPA was 0.73%. Provision coverage was reported at 93%.

By product, gold loans continued to show low delinquency with GNPA at 0.35%. Home loans had GNPA at 0.81% in Q4 FY26, higher sequentially from 0.51% in Q3, while MSME GNPA was 2.85% and microfinance GNPA improved to 3.87% from 4.93% in Q3.

The disclosures also highlight that legacy and discontinued portfolios remain a drag. Discontinued business GNPA was 14.83% in Q4 FY26, indicating that while the company is de-risking, residual run-offs still require attention.

Capital-efficient growth leans on off-book and co-lending

A key lever in IIFL’s model is scaling through bank partnerships. Off-book AUM was 38,088 crore, representing 35% of consolidated AUM. The company reported cumulative co-lending originations of 50,512 crore since FY21 and 12 active bank partners.

FY26 direct assignment book rose to 23,704 crore and the co-lending book to 14,397 crore. In the earnings call, management indicated an intent to raise the combined off-book share from the mid-30s to around 40% to 45% over time, and also to increase co-lending share within off-book.

The company also outlined the RBI’s 2025 co-lending directions and positioned itself as operationally prepared with escrow flow mechanisms and near-real-time NPA mirroring.

AI initiatives move from narrative to metrics

The presentation included quantified snapshots of AI deployment across the lending lifecycle. It cited an AI-driven lead engine contributing about 1,000 crore monthly pipeline, agentic collections assisting about 450 crore, and AI-based image fraud detection flagging 1,895 loans for field audit.

Two near-term launches were also mentioned: agentic customer support across 22 languages with a stated go-live of May 2026, and a business loan referral agent expected to go live nationwide in June 2026.

FY27: guidance focuses on growth with lower credit cost

Management provided several forward-looking indicators in the call. For gold loans, the company guided for 20% to 25% AUM growth in FY27 assuming gold prices remain around current levels. It also guided for consolidated credit cost to reduce to around 1.5% to 1.7% in FY27.

Management suggested that ROA could improve from 2.4% towards 3% to 3.5%, driven largely by the expected reduction in credit costs. It also clarified that off-book losses do not accrue in the same manner since credit cost relates to the on-book retained loan book.

For IIFL Home Finance, the company guided for 18% to 20% AUM growth and 25% to 27% disbursement growth in FY27. Management acknowledged FY26 profitability pressures in housing finance due to stress in the legacy micro LAP portfolio and described the business as being at an inflection point after a strategic pivot to affordable and emerging segments and a higher focus on LAP.

What investors may track next

Two themes stood out as monitorables. First is capital and leverage. Net gearing was reported at 3.8x consolidated and 4.3x on a standalone basis. Standalone CRAR was 17.8%. Management indicated that scaling off-book and co-lending could reduce capital intensity, while equity raising remains an option when timing is right.

Second is the income tax matter discussed on the call. Management stated that assessment orders for some group entities had begun to arrive and that the company expected its own order shortly. It also said any demand would be appealed. While there was no quantification of any potential liability, the issue remains an overhang until there is clarity.

Closing take

FY26 reflects a reset year translating into measurable outcomes. Growth has been led by secured products, profitability has rebounded sharply, and asset quality has improved, backed by high provision coverage. The FY27 strategy is built around scaling the secured franchise, using co-lending for capital-efficient expansion, and applying AI tools to improve productivity and controls.

The next phase will likely depend on whether housing finance can regain momentum with improved yields and whether off-book scaling can keep leverage and capital needs under control, even as the tax assessment process reaches a conclusion.