IIFL Finance shares are in focus. The brokerage house Motilal Oswal has given a ‘Buy’ rating to this NBFC sector stock. With a target price of Rs 600, the brokerage is factoring in a potential upside of around 34%.
According to the brokerage report, the company’s performance in the latest quarter, along with improving trends in asset quality and growth segments is a key factor to watch –
Let’s take a look at the key reason why the domestic brokerage house is optimistic about this stock –
Motilal Oswal on IIFL Finance: Earnings outlook gets a lift
One of the key changes highlighted by the brokerage in its report is an upward revision in earnings estimates. This is mainly due to higher expected income from certain business activities and a gradual improvement in assets under management.
Motilal Oswal in its report noted, “We raise our FY27 EPS by ~6% to factor in higher other income due to assignments/co-lending and slightly higher AUM growth.”
The brokerage has maintained its positive stance on the stock, adding “We have a ‘Buy’ rating on the stock with a target price of Rs 600 (based on Mar’28E SoTP).”
Motilal Oswal on IIFL Finance: Gold loan segment
According to the Motilal Oswal report, one of the biggest drivers of growth for IIFL Finance has been its gold loan business.
Strong demand for gold-backed loans, along with supportive gold prices, has helped the company report healthy numbers.
Furthermore, the report added, “The company has fully complied with the revised gold loan guidelines, particularly for loans above INR250k, where detailed credit assessment and ongoing monitoring are mandated.”
Motilal Oswal on IIFL Finance: Microfinance business
The microfinance segment, often considered a high-risk area for lenders, is also showing signs of improvement. Motilal Osawal in its report added, “The MFI segment is showing improved collection efficiency and stabilizing asset quality, though growth remains calibrated with a focus on asset quality and stability.”
According to the brokerage report, the company has also reduced its exposure to riskier loan segments, which has helped bring down credit costs.
Motilal Oswal on IIFL Finance: Strong quarterly performance
The company’s financial performance for the Q4FY6 shows an improvement across key metrics.
As per the brokerage house report, “IIFL Finance’s Net Interest Income in the Q4FY26 rose 31% year-on-year to around Rs 1,720 crore, in line with estimates.”
At the same time, overall income growth remained strong.
Furthermore, the report added that the net total income in the fourth quarter of FY26 rose around 50% year-on-year to about Rs 2,090 crore, in line with estimates, while profitability also improved during the quarter, with profit after tax (after non-controlling interest) coming in at around Rs 590 crore, about 10% higher than expectations.
Motilal Oswal on IIFL Finance: Asset quality improves, costs decline
Another key positive, as per the brokerage report, is the improvement in asset quality.
The company’s decision to exit riskier segments like micro-LAP (Loan Against Property) and unsecured personal loans has contributed to lower credit costs.
“Credit costs stood at Rs 330 crore (~12% lower than MOSLe),” added the brokerage house.
At the same time, operating efficiency has improved, with the cost-to-income ratio declining.
Motilal Oswal on IIFL Finance: Tax developments and management stance
The brokerage also highlighted ongoing tax-related developments involving group entities. It noted, “Management indicated that income tax assessment orders for group entities have begun to come through, with the order for IIFL Finance expected over the next few days.”
Motilal Oswal on IIFL Finance: Valuation and outlook
From a valuation perspective, the brokerage believes the stock is trading at reasonable levels compared to its expected performance. Motilal Oswal added, “The stock trades at 1.2x FY27E P/BV and 8x P/E for an estimated RoA/RoE of 2.7%/18% in FY28.”
Disclaimer: The information provided reflects third-party brokerage analysis and specific price targets which involve inherent market risks. These projections are not an offer or solicitation to buy or sell securities, and actual performance may vary based on market conditions. Readers are encouraged to consult a SEBI-registered investment advisor before making any financial decisions to ensure alignment with their individual risk profile and goals.
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