IIFL Finance shares declined 4% following news that a subsidiary company has been served with a ₹963 crore tax demand, according to latest market reports. The stock movement reflects investor concerns over the significant tax liability that could impact the company's financial position and future cash flows.
Motilal Oswal has issued a buy rating on IIFL Finance with a target price of ₹760, according to their research report dated October 15, 2026. The brokerage firm raised their FY27E EPS estimates by approximately 6% to factor in slightly lower operating expenses and lower credit costs. The target price is based on September 2028E sum-of-the-parts valuation.
IIFL Finance's Net Interest Income (NII) grew 50% year-on-year and approximately 8% quarter-on-quarter to ₹21.6 billion, which was in line with expectations. Other income stood at ₹1.8 billion, representing a 34% miss compared to ₹4.9 billion in Q2FY26. This included assignment income of ₹280 million (previous quarter: ₹3.5 billion). Net total income grew 21% year-on-year to ₹23.4 billion, also in line with projections.
Operating expenses grew 13% year-on-year to ₹9.8 billion, which was approximately 6% lower than Motilal Oswal's estimates. The cost-income ratio declined to 42.1% (previous quarter: 44.5% and previous year: 45.2%). Pre-Provision Operating Profit (PPoP) stood at ₹13.5 billion and grew 28% year-on-year, meeting expectations. Profit After Tax (post NCI) was ₹7.7 billion, also in line with projections.
Calculated Net Interest Margins (NIMs) expanded 5 basis points quarter-on-quarter to 7.2%. Credit costs stood at ₹2.8 billion, approximately 6% lower than Motilal Oswal's estimates. This translated into annualized credit costs of 1.4% (previous quarter: 1.6% and previous year: 3.4%). For FY27, management guides for 25% year-on-year consolidated AUM growth, credit costs of 1.5-1.7%, Return on Assets (RoA) of 3.1-3.3%, and Return on Equity (RoE) of 16-20%.
