S&P Upgrades IIFL Finance Outlook to Positive on Gold Loan Recovery Prospects
S&P Global Ratings has upgraded IIFL Finance's outlook to Positive from Stable while affirming B+/B ratings, driven by the company's recovering gold loan market share following the lifting of central bank embargo. The rating agency projects improved financial metrics with return on assets expected to rise to 2.30%-2.60% in FY27-28 from current 1.90%, while credit costs are anticipated to peak at 3.50% in FY26 before declining to 2.20%-2.30% over the next two years.
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IIFL Finance received a significant boost to its credit assessment as S&P Global Ratings upgraded the company's rating outlook to Positive from Stable while maintaining its existing credit ratings. The revision reflects improved credit prospects driven by the company's gold loan market share recovery and anticipated operational improvements.
Rating Revision and Rationale
S&P Global Ratings made several key rating decisions for IIFL Finance Limited, with the outlook upgrade supported by specific performance expectations:
| Rating Component: | Previous Status | Current Status |
|---|---|---|
| Rating Outlook: | Stable | Positive |
| Long-term Issuer Credit Rating: | B+ (Affirmed) | B+ |
| Short-term Issuer Credit Rating: | B (Affirmed) | B |
| Foreign Currency Issuer Rating: | B+ (Affirmed) | B+ |
The rating agency cited the recovery in IIFL Finance's gold loan market share as a key factor supporting the positive outlook. S&P noted that this comes a year after a central bank embargo on the company sanctioning or disbursing fresh gold loans was lifted. The company has grown its gold loans assets under management by 2.20x in the 12 months to September 30, 2025, making its market share in the gold loan segment second only to Muthoot Finance Limited among non-bank financial institutions in India.
Financial Performance Projections
S&P Global Ratings provided detailed financial expectations for IIFL Finance over the next few years:
| Financial Metric: | Current/Recent | Projected |
|---|---|---|
| Return on Assets (FY27-28): | 1.90% (H1 FY26) | 2.30%-2.60% |
| Credit Costs (Peak): | 3.50% (H1 FY26) | Expected to peak in FY26 |
| Credit Costs (Future): | Current elevated levels | 2.20%-2.30% over next two years |
| Risk-Adjusted Capital Ratio: | 20.40% (March 2025) | 18%-19% over next two years |
S&P anticipates that IIFL Finance's credit costs will peak in fiscal 2026, reflecting ongoing stress in the microfinance segment and the company's past offering of riskier products. The company has since discontinued these products and reduced exposure to microfinance loans, leading to expected gradual improvement in credit costs.
Market Position and Growth Drivers
The rating agency highlighted several factors supporting IIFL Finance's strengthening position in gold-backed financing. The company is benefiting from elevated gold loan prices and robust consumer demand, supported by its extensive branch network of 4,904 branches across India. S&P expects the company to sustain its growth in gold-backed financing, with very strong capitalization levels supporting this expansion.
Regulatory Compliance and Disclosure
IIFL Finance communicated this rating development to both BSE Limited and The National Stock Exchange of India Limited in compliance with regulatory requirements. The disclosure was made pursuant to provisions of Regulations 30 and 51 read with Schedule III of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. The company serves over 8 million customers through its pan-India network and digital channels, offering a wide spectrum of financial products including home loans, gold loans, business loans, microfinance, capital market finance, and developer construction finance.
Historical Stock Returns for IIFL Finance
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +2.60% | +0.71% | +7.92% | +20.69% | +41.95% | +447.91% |
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