IIFL Finance is planning to raise ₹2,500-5,000 crore by selling a 10-20% stake to a minority investor, while promoters may subscribe to warrants to limit dilution. According to reports from The Economic Times, the proposed dilution would translate to approximately ₹2,500 crore to ₹5,000 crore at the current market capitalisation of around ₹26,000 crore. Nirmal Jain, founder of IIFL Group, confirmed that the company aims to enhance its capital position amid evolving market conditions. In an interview with The Economic Times, Jain emphasized that the company is looking at a minority investor, with no question of ceding control to a strategic investor, stating that promoters R Venkataraman and he can subscribe to some warrants to keep their dilution as low as possible.
Fairfax Financial Holdings is likely to reduce or exit its investment in IIFL Finance after its proposed acquisition of a 60% stake in IDBI Bank. As reported by The Economic Times, Jain stated that regulatory norms may not permit a bank and an NBFC with overlapping loan products to be under common ownership, with Fairfax therefore likely to reduce or exit its stake in IIFL Finance over time. The timeline remains undecided, but even a year should be acceptable, with Fairfax best placed to answer questions about its stake exit while the company is willing to cooperate depending on investor requirements. A private equity investor could infuse fresh capital while acquiring Fairfax's existing stake, creating potential synergies for IIFL Capital as part of IDBI Bank.
Being part of a bank and a Fairfax subsidiary will create significant synergies for IIFL Capital across investment banking, wealth management and other capital-market activities. According to Jain's interview with The Economic Times, this integration should improve credit rating and provide access to the bank's SME, wealth and retail customers for investment products, cross-border transactions and capital-market activities. The existing customer relationships will also lower acquisition costs, as seen with ICICI Bank and HDFC Bank. Jain noted that their model is to complement and partner with banks, highlighting that of India's 85 million MSMEs, nearly 80 million have working-capital requirements of less than ₹1-2 lakh, where NBFCs with specialized underwriting capabilities can play an important role in financial inclusion.
IIFL Finance's total AUM stands at around ₹1.24-1.25 lakh crore, with approximately ₹65,000 crore in gold loans. As reported by The Economic Times, the company remains comfortable with gold loans being 50-60% of the book but wants to diversify the mix over the longer term. The company is developing loans against property and other products, and remains open to adding more through branch and digital networks. Jain emphasized that presently, unsecured lending and microfinance have slowed, and some of those customers are also moving towards gold loans, while the company remains cautious about concentration.
IIFL Finance's home-loan business focuses on affordable housing with loans of ₹15-25 lakh for homes, expecting AUM to grow 18-20%. According to the company's strategy outlined in the interview, Abu Dhabi Investment Authority owns 20% of the home-loan business, which is well capitalised and does not need another investor currently. The company is also open to bringing in an investor for Samasta MFI, though timing and structure remain unclear given current market conditions. Jain noted that an IPO or demerger are also options, but no decision has been taken, with a separate listing possibly through a demerger that gives the parent's shareholders proportionate shares in the subsidiary.
