IIFL Finance Limited (IIFL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IIFL Finance Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kapish Jain, Chief Financial Officer, IIFL Finance. Thank you, and over to you, sir.

Thank you very much. Very good afternoon, ladies and gentlemen. Thank you very much for taking your time out to our quarter 1 Fiscal '25 earnings call. I have with me in this call Mr. Nirmal Jain, Founder and MD of IIFL Finance; and we also have Mr. Monu Ratra, CEO of IIFL Housing Finance. We have Mr. Venkatesh, who is the CEO for IIFL Samasta and the rest of the management team as well. I'll now hand over the call to Nirmal give his opening remarks. And Nirmal, over to you.

Thank you, Kapish. Good afternoon to all the participants and good morning to people who are joining from U.K. or some other geographies. In terms of updates, maybe I'll start with the update on the RBI, because there is the most significant event in our company, and I'm sure that most of the investors will be anxious to know more about it. So the RBI order had come on 4th of March, where it ordered cease and desist of sanctioning and disbursing gold loans, and assigning and securitizing as well. However, the order allowed us to continue servicing the gold loan portfolio through usual collection and recovery. The Supervisory concerns by RBI was there in the press release on the RBI, which related to deviations in assaying and certified purity at the time of loan sanction and auction, the cash transactions of above INR 20,000 of loan disbursals. The standard auction process recommended by RBI and Master Directions were not followed. And then there were issues related to loan-to-value breaches, which again, were linked to the purity certified at the time of sanction and at the time of auction. So in terms of company's response, we ensured that the full compliance, all the remedial actions have been taken. And we have make sure that we have full adherence to, not only the findings in the specs and order but also all the RBI directives and guidance, which are there in Master Direction for NBFC. And we also do the root cause analysis for the deviations to make sure that there's no recurrence of these issues. Further, we've also done management strengthening. So we hired a few people at [ the extra ] level, and we are in the process of hiring a few more to strengthen our senior management team and also the entire assurance organization. So that -- I mean, that in the mid-level and low level, we are enhancing the resources. The assurance organization comprises risk, audit and compliance. Special audit was commissioned by RBI and that has been completed on May 27, a couple of months ago, and we believe that it was satisfactory and that verified and validated all the compliances that we've done. And the same was again, verified by the internal audit team and internal auditors of the company and reviewed by the Audit Committee, and the compliance certificate also has been submitted to RBI as required. Impact of the -- on the business has been very significant, as you've seen in the financial numbers and then there's a disclosure of gold loan AUM currently, which is as of yesterday, or as of August 5, as of day before yesterday. So the gold loan AUM, which was a little about INR 26,000 crores has fallen to INR 12,162 crores, which is less than half, more than 1 million customer accounts -- have closed their accounts and safely taken their jewelry. And as you're aware that many of these loans were co-lending arrangements with the banks and the direct assignment to the bank. So we have paid about INR 13,500 crores to banks from the liquidation and realization of these loans. Very important thing here, from a longer-term perspective note is that while more than half of the gold loan assets have been liquidated, funds have repaid to banks and jewelry has been returned to customers, without a single issue in terms of, any issue of any significance, about customer satisfaction, asset quality or our operations. That demonstrates that there's a robust asset quality and operations. This kind of trail by fire was faced by very seldom by any financial institution. But I think with the 2 tests of the quality of assets that only when you start liquidating, you know whether the asset's realized or not. In terms of future outlook, we are committed to make sure that the full compliance in letter and spirit, and we are engaging with RBI and communicating with them. And we expect that RBI will lift the restrictions in a short time from now. But we have absolutely -- the RBI processes are involved and therefore, we cannot have any certainty on when this will happen but we anticipate this to happen at an early date. We are dedicated, obviously, we've not only survived but we come out stronger from this in terms of our systems, our processes and our risk management as well as our compliance. So all our businesses are continuing. We have not refrain any employee, nor have we shut down any branch. So we continue to be confident and optimistic about our resumption of normal business as soon as possible. Other than this, in terms of environment, as you're aware that economy has been doing well but a very brief overview of all our businesses. Gold loan business is suspended at this point in time but gold prices have been firm. And secondly, about our business loans and digital finance, our entire focus is now on MSME, and that business has been growing well at a steady pace, and the small base is growing quite well. And we believe that from a long-term perspective, our branches can contribute significantly to this business. So in this time period of the last 5 months, we have trained our branches to handle this business as well but it's a long process but it's on the way. Our home loan business has been very flat quarter in April to June but the government has come out with very strong support and impetus for this business. They allocated significantly higher resources for affordable housing. So we expect that this business, which had a relatively slow growth rate in the last 1 to 2 years, will also have a stronger growth, and we are fully prepared to seize the opportunity. And microfinance business has also been impacted by the squeeze of credit lines of banks in the way of order of our gold loan business. Also, in the last quarter due to elections, asset quality has suffered, and provisions and losses remain at an elevated level in this business in this quarter also. But this is in line with the industry trends at this point in time. Maybe Venkatesh will speak a little more about it later in our Q&A but there is an impact of guidance by MFIN also on the number of loans which customers should take maximum number of loans and the amount is linked to the income. With this, I hand it over to Kapish to take you through the financials in more granular details, and then we can have Q&A. Thanks.

Thanks a lot, Nirmal. Our investor presentation is on our website, and it has now further been detailed out by company as well. So you can get a differential view as well there. However, just to highlight at a consolidated level for the quarter of Q1 FY '25. The profit after tax before noncontrolling interest was INR 338 crores, down by 28% Y-o-Y and down 21% on a quarter-on-quarter basis, for reasons that Nirmal highlighted earlier. We recorded pre-provision operating profit of INR 647 crores, down 18% Y-o-Y and down 35% on a quarter-on-quarter basis. For the quarter, our consolidated loan AUM grew by -- for this quarter, right, updated consolidated loan AUM grew by 2% on a Y-o-Y basis. If I dissect this by company, the degrowth in asset finance, in particular, was around 25%. However, both housing finance company and Samasta entity has recorded almost like 20% growth Y-o-Y. On a consolidated basis, we grew by around 12% on a quarter-on-quarter basis, [ touching ] AUM was around INR 69,610 crores. If I further dissect the AUM on our core products, which is largely microfinance, gold, home, digital and LAP, there we grew Y-o-Y by around 4%, and we grew by around 12% on a quarter-on-quarter basis to INR 67,853 crores. The gold loan AUM now comprises 37% of the overall AUM for the firm as a whole. Our gross NPA stood at around 2.2% and our net NPA is around 1.1%, which is up by around 40 basis points and 4 basis points, respectively, when compared to the same period last year. With the implementation of the expected trade loss under Ind AS, provision coverage ratio on NPAs stands at 128%, with -- in line with our capital operation strategy, we have done these and co-lending in some of our other businesses. And our book stands at around 35%, which is an aggregate of assigned and co-lending book as of 30th June. The assigned books stood at around INR 14,609 crores, which is down by 17% Y-o-Y and 11% Q-on-Q, and the co-lending assets stand at around INR 9,534 crores, which is up 6% Y-o-Y. Our quarterly average cost of borrowing decreased by 2 basis points Y-o-Y, and 2 basis point on a Q-on-Q basis as well. Just to add to what Nirmal highlighted, we additionally also repaid to our capital market lenders, close to around INR 2,239 crores. So in aggregate, the entire repayments in the embargo to all our lenders have been around INR 15,700 crores. In addition to that, our liquidity stood at around -- sorry, in addition to that, we also raised funds in aggregate to around INR 2,886 crores through term loan, bonds, refinance, and also assigned around INR 1,769 crores of other loans. Our cash and cash equivalents, including committed credit lines from banks and institutions, was around INR 6,853 crores. Adequate to meet not just our near-term liabilities but also to support growth in some of the other businesses, which continues to operate. We have a positive ALM, whereby inflows cover exceeds the outflows across all buckets. And with the infusion of capital that we raised in the month of May of '24, our net gearing stands at around 2.8%. Supported by that, our capital adequacy for the NBFC entity stood at around 27.8%, for HFC 46.5% and for Samasta, it was 27%. Each of them much higher than the minimum threshold of 3% if I laid on by the regulator. Our loan -- our overall ROE stood at around 10.3%, while ROA was at around 2.3%. The basic earnings per share for the quarter was around INR 7.2. With this, I finish my update on the financial numbers and open the floor for Q&A, which we can then jointly address. Thank you very much.

[Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal.

I had three questions. First one on gold loans. Nirmal sir, you had shared in the last quarter's earnings call that, in case you don't get RBI's approval or demand is not lifted, then maybe we will look at sourcing loans for the bank acting as BCs. I just wanted to check, I mean, while you already said in your opening remarks that, we are confident that this ban should be revoked sometime soon. Are there other proposals also, which have been evaluated? That is on gold loans. The second one, again, a related question. I mean, gold loan, while there is a ban, we are also seeing slower disbursements in LAP as well as MFI. MFI, you said, there is some liquidity problems, which are there after there was a ban. So just trying to understand, because when we talk about MFI, the kind or the extent of stress or pain that we have seen in the sector for some of the other listed MFI players, not showing that kind of a stress on our balance sheet as yet. So Venkatesh sir, can comment on different states, some color there on the MFI business? And lastly, in terms of the ARC transactions that we have done during the quarter, if you could just kind of throw some light on that, where they from the CRE book? And out of the total quantum of SR that we have on the balance sheet, what is the provision cover that we have on for SR? Those are my three questions.

Thanks, Abhijit. So gold loan, BC proposal evaluation. But then we discovered that banks have a little longer process to open BC, which start with RFP and then you submit a proposal and then there's an evaluation. So we have started participate -- I mean we'll participate in it. But we have all along been engaging with RBI and we believe that if in the short term, we are going to restart our lending and co-lending, then it may be like unwarranted distraction to the resources as well as process, because once you start a BC, then obviously, banks would expect certain commitment in the volume. And from a commercial point of view, that will not be as viable for our cost structure as the other proposals are. Because in the BC structure, you've got a fee and banks probably typically will keep the entire interest income and the margins. So that is one -- the first question that you have. The second question is about LAP. So they're also linked to MFI because a significant part of our LAP is also done by our microfinance company. So the LAP ticket of a very small ticket is done by HFC as well as MFI. But as I said that MFI, in particular, has faced a relatively higher resistance from banks in terms of opening of credit lines. In fact, after this embargo, most of the banks have basically frozen the credit lines, even the existing ones, and there has been a few trickle here and there. But in case of HFC, we have a higher capital adequacy and also the co-lending and the BA is continuing. And that basically is making sure that we don't have the custom there as much. But LAP is also impacted a little bit but the first quarter is seasonally flat quarter and the last quarter when what you are comparing with no Q-on-Q is a significantly better quarter. But that apart, the LAP business, the micro LAP what we do to MFI has also been impacted. The third question about CRE and the SR valuations in a provision. Yes, we have actually transferred a couple of large CRE cases to ARC. And what our experience is that from a long-term point of view, that may be a better way to manage these exposures, primarily because, 90-day income recognition norm for a real estate developer, and project becomes difficult, because even once the default, then it goes into NPA and then it's very difficult to do the agreement and move or sustain the project. Unlike that, we really can't have DSRA or debt service reserve account. And therefore, these exposures will be better managed through ARC structure. In terms of SR provision, the way SR are valued, the industry factors in line with the standard accounting is that this is a valuation done every quarter by the ARC. And there's a fair value way based on the realizable value of the SR. And that's the value that we take in our books. So if there is an increase or a decrease that comes into a fair value line item in the profit and loss account. Yes, I think, that's for my response to all three questions. So can you move on the next one? Yes, Abhijit, do you have some more?

Sir, just wanted to have some more color from Venkatesh sir as well, in terms of the sectoral stress, which is there in the MFI space today. And I mean, not quite seeing the same stress in our book, as yet. So what is the view which is there? I mean yesterday also, there was a [indiscernible] who reported and they talked about very high leverage kind of building up at customers, and customers having more than 5 tenders lending to them. And that proportion of such customers who have more than 4, 5 lenders has actually shot up significantly in the last 12 months. So what is our view on this space?

Yes. I mean in terms of -- if you look at recently, the guardrails have been announced by MFIN in terms of number of lenders and what would be the total outstanding per borrower. But if you look at what we have done internally, is we have picked up this very early. I mean we did it in January itself in terms of we bought in some kind of control, we looked at the credit score of customers, we started implementing. I think we're the one of the first ones to implement taking the credit score of the customer to lend to a customer. And also, we have also started looking at a rule-based engine, which has actually [ acting ]. And yes, there were some certain pockets is because of elections and continuous rain and certain aspects of it. We have in a very few states like Rajasthan, MP and Odisha has been showing a different color. But we have been able to hold good is, because we were able to implement certain things early last -- in the third quarter of last year.

Also, we have relatively lesser exposure to Punjab region being more impacted.

Got it. Got you. So does that what is happening is -- in this quarter when lenders have reported, what was just restricted to Punjab until last quarter is getting much more broad-based, like Venkatesh sir said, Rajasthan, MP, Odisha are also some of the states, which were flagged off yesterday, states which are highly impacted or states with more stress compared to other states in India?

That's right.

The next question is from the line of [indiscernible].

Am I audible?

Yes, sir. You are audible. Please go ahead.

Okay. Just one question, and I would appreciate comments on the management on this. A few years back, you sold your vehicle financing business to one of the other NBFCs. That business had significant issues subsequent to the other NBFC taking it over. You have now had a situation where in the gold finance business has been an embargo imposed by the RBI. So what are the learnings that the management has drawn from these episodes? And can you afford any similar accidents in any other business lines?

Yes. So first of all, the commercial vehicle business that we sold and that was sold in the beginning of -- I think in 2019, sometime. And the diligence and the payment terms are also over a period of more than a year, that obviously showed that we had full confidence in the asset quality that we demonstrated to the buyer. Unfortunately, the COVID happened after that. And that is when the asset quality were deteriorated for a buyer but that should not have any relationship whatsoever to kind of business that we did and the asset quality of the business when we sold it. So there's just first a clarification for the commercial vehicle business that we sold, because we were very transparent. We were very upfront on what the quality of asset is. And obviously, there are no deviations from what we have presented. But if there are unfortunate circumstances of COVID happening a few months later, that is something which is not in either our control or the buyer's control. Secondly, coming to gold loan business. So if you see the asset quality, as I said in my opening remarks, that is like maybe unprecedented in the history of financial world, that 1 million customers, they have taken their collateral back and the money has been paid back without any single issue. Is that also -- because it's this asset quality issue. Then obviously, there are more than 1 million customers are redeeming their loans, then they will throw up. And when that will come up and obviously, you can't hide it, you have a point. So that, again, is a testimony to the fact that our asset quality, our treasury underwriting and our collection processes are actually robust. Now the learning from this is that, of course, we have a diversified book, and compliance has become a much more significant issue now or a much more significant aspect to take care of. But I would like to say that, whatever we are doing in terms of the balances that have been identified by RBI, were industry practices. They were done by other gold loan companies as well. Now, I know in terms of expense and in terms of what are the reasons in our being the company to be penalized for this. I don't know the answer to this. But at the same time, I understand, I agree and I full -- with all humility, I accept that there is no excuse for any compliance violation, neither deviations, and we are committed to make sure that we rectify them. And we also make sure that they don't recur.

And I hope sincerely that we don't end up hearing such incidents in any of the other financing businesses. Because ultimately, that has significant ramifications on the confidence of lenders, the confidence of regulator and everybody else, with respect to your ability to conduct any funding businesses going forward. I hope that is well understood within the management there.

There's no doubt about it. And at the same time, in the recent past, a regulatory action has happened against many regulated entity. So this is something which has been in a way industry-wide awakening of the regulated entities. Maybe sometime I take an analogy of a traffic signal that if you travel abroad, then normally nobody violates the traffic signal, but in India, people basically take it in a very different way. And obviously, somebody has imposed the rules very strictly, then you need to pick up 1 or 2 and make an example of that. But at the same time, if everybody follows the rules, then because the level playing field and it becomes very easy to comply with that. I hope you take the example further if you really want to. Like suppose, you're disbursing cash more than INR 20,000, everybody else is doing it. Now if I follow very strictly the guidelines and the thing, then I'll lose all the customers. Because customers will walk with the gold loan branch and say, a big deal, you are not giving it. I'm getting from somewhere else. But what has happened is that after the actions taken on us, and then there is another circular of RBI, at least to my knowledge, everybody has stopped now giving above INR 20,000 in cash.

I understand that. I hope the right lessons have taken. That's all.

Absolutely. I think the right lessons are about compliance, which has to be strictly enforced. And that's what I said in my -- that we are strengthening our organization, we are making sure that our compliance becomes the top priority of top management, starting from me. And that, basically, our communication goes down the line to all the branches and employees. So we've taken a number of steps, Rajgopal, to make sure that these things don't recur. And I think we are fully committed to that. So I think -- that's what I can assure you.

The next question is from the line of [indiscernible].

Yes, am I audible?

Yes, sir. You're audible.

I just had one question. I was going through the numbers shared by you. While we understand that gold loan book is under embargo. However, the loan AUM growth in home finance book and MFI book is not that great either. So any reasons for a stagnation in the AUM in both these books?

No. So I have said that the first quarter is seasonally flat and also due to election also, a lot of -- there are many days are lost in the activity also comes to a bit of a slowdown. I really haven't compared with the peers in this -- both these sectors, but I would suspect that similar trend will be there more or less. We have been very much impacted also by the reluctance -- the banks basically sort of holding back on the credits for other businesses as well. But the best thing is also evolving is changing. So slowly, we are seeing that the resources are becoming available, our co-lending and other businesses also like continuing.

Nirmal, May I? Monu, this side?

Yes, please. Yes.

So I just wanted to share with you that if you see Y-on-Y, the AUM growth is 22% for the quarter, it looks -- quarter-on-quarter looks flat, because usually the Q4s are pretty spiked. And I think we are almost in line with our expectations for this year as well.

Yes. Thanks I think that -- I would agree with that.

Yes. So that's growing home loans. However, MFI book has degrown, in fact, if you look Q-on-Q?

Yes. MFI has been impacted and MFI, if you see the industry outside, is a little volatile. So that also turned us a bit more cautious. And we have to really see how the industry and the credit is evolving here. Because last year, there's a lot of major changes in the RBI in terms of the loan amount, liberalization as well as the rules whichever set in. so I think the industry is passing through [indiscernible]. But hopefully, the sector has the tremendous contribution to make this economic growth. So we are very optimistic on the long-term prospects of MFI as well.

The next question is from the line of Murthy Nagarajan from Tata Mutual Fund.

Yes. I wanted -- I have only one question. What I wanted to know is that you're showing in this quarter, you have corrected INR 2,886 crores, the disbursement, which is happened to you. Can you give us some color about how much has come from banks and who are the guys from whom we have been able to borrow?

You said INR 2,886 crores borrowing, yes or resources, what is it. Just, Kapish, just give him the...

Murthy, I'll get back to you on this with records.

I think the INR 500 crores we are the ECB that we have taken from Fairfax.

Plus we have INR 500 crores that we raise from LIC Housing Finance. Sorry, yes -- but I will come back to you with details on more.

And is this a [indiscernible] away rights issuances including in this? Or there is DA finances that are part of this?

No. DA is separate, DA is INR 1,769 crores.

See, the normal course -- so maybe you can get that. But I think broadly, these are the details that INR 500 crores from Fairfax, ECB.

Bank volume that we were from [indiscernible] Bank as well...

Yes. So we wanted to know who are the guys who are lending to you right now. So that will give us some confidence...

So there's a number of them. It's not -- the trickle down to supposing we had application of INR 500 crores. We've got INR 100 crores, some of them. So -- but there are -- as I said that after the initial holdback, that's slowly, that is coming back. The resources are now becoming available.

So few names, which I was able quickly tell you, Bank of India, Bank of Maharashtra, State Bank of India, and then we can talk more as well.

The next question is from the line of Nidhesh from Investec.

Sir, first on the gold loan, what is the count of employees that we have and versus what it was prior to the embargo -- RBI embargo. I want to understand how -- let's say, if the embargo is lifted in a quick span of time, how quickly we can come back to the previous disbursement run rate that we were doing?

So we have not refrain or sacked anybody. So what is the natural attrition is there. And if the embargo is lifted, then we can come back very quickly. That is what we have prepared for.

But is it reasonable to expect that the employee force would have declined by 30%, 40%?

No way, 4%,5%.

4%, 5% only.

Yes. Yes.

Okay. Secondly, if you can also give some color on the microfinance collection trends? In Q2 and July, how the trends are? And any data point around customer leverage, what percentage of customers would have more than or equal to 5 loans for us?

Venkatesh will take this.

Yes. I mean in terms of the collection trend, July actually, it dipped a little bit, but not significantly. But if you look at -- it's not the pace with -- see, once RBI has given us a thing of a number of lenders -- relaxation on number of lenders. We are not seeing the same [indiscernible], I suppose. I suppose, if we are properly assisted customer and we've given a loan, it doesn't mean that all the customers who have borrowed from file under the defaulting or something like that. This is a wrong note or pickup, which thing. But anyway, now we are also post looking at that guardrail of infant, all of us are adhering to that. We are following a co-lender rule that only con-lenders can exist to a customer, and with a maximum cap of INR 2 lakhs. But I mean, there is a very odd reasons for July being a spike month, rains across the country. And we had, I mean, difficulty in collection going or people going, I think. And in many cases, we also give a little bit of leeway for customers if they get into -- I mean, they're not able to generate their income during that period of time. But it's not a significant decrease in July.

Nidhesh, just to elaborate a little bit more on this. So RBI relaxed a number of lenders. So you can have more lenders than 4. Now what Venkatesh is trying to say that, a customer may default with 2 lenders also and may not default with 6 lenders also, as long as the more important thing is to do the credit assessment and underwriting properly. Nonetheless, the self-regulated organization MFIN has basically guided, which is not a regulatory guideline, but it's the association guideline, which have may not legally binding but we still abide by that, and we follow that being a part of the association. And they, basically suggested that, there should not be more than 4 lenders to a customer. Typically, this can be a good safeguard other things being equal. And the loan amount should not exceed INR 2 lakh to 1 borrower, overall exposure. So they put an overall guidelines, and which we are also now complying with.

Sir, the INR 2 lakh including all borrowings of the borrower or only microfinance borrowing?

Microfinance borrowing, at the household level.

The next question is from the line of Anusha Raheja from Dalal & Broacha.

Sir, on finance subsidiary this quarter, was there any increase in the NPLs, because if I just compare the credit costs, the provision line item for this quarter, it was, I believe, INR 60-odd crores, much higher than what was there in the last quarter. So what explains this higher provisioning?

So if you look at our ECL, then we have impaired the provisioning requirement for stage 2 and stage 3 customer. So as I said that microfinance provisioning is about INR 110 crores. Also for our HFC, the provisioning is about INR 54 crores, which is only INR 10 crores in the last quarter. So last quarter, we had some good recoveries as well. But these things have added up to the provisioning of around INR 251 crores, what we have as loan losses improving. So we also increased the provisioning of ECL to an ECL [ zero ] CRE portfolio. Other than portfolio is small, but we increased the provision there. Now the ECL, the competitions are in line, in discussions with our statutory auditors. So they make an estimate and we do that.

Okay. So how much already we're seeing the CRE and the capital market book down by around almost 50% on a Y-on-Y basis. But what is the broader call from henceforth, any more [indiscernible] further increase in the provisioning there?

No, I think -- so the books are small but that doesn't mean that there has anything to do with provisioning. Our provisioning is increasing in microfinance also. So the -- in case of microfinance, as you are aware that the industry -- I think, in microfinance, for the industry as a whole, what we are looking at 2% might because 3% is the guidance for the provisioning requirement in the year, loan losses and provisions. The industry -- in a way it become mature, so the loan ticket -- the total loan per borrower grows, of course, the risk is priced in, but that may be higher requirement provisioning. CRE portfolio, I mean the book is just like sort of tapering off and will become very insignificant just like our capital market. But for the time being, as recommended by auditors, we will give the provisioning.

Okay. And just one last thing on this AUM growth that we have seen. On a sequential basis, apart from gold loans, is there are declines in other segments as well. So is it more to do with the credit lines, which were available to you, and you got -- that was squeezed out and much lesser than -- you got much lesser than what was expected, and that has impacted the growth. Is that a better way to put it?

Yes, that has impacted the growth. But also the last quarter was impacted by the first quarter of financial year is a flat quarter, the elections and other disturbances in that quarter, and that has also impacted the business. All these factors are combined. But our growth in the Y-o-Y business still is in line with the expectations. So -- but now going forward, our first focus is to make sure that our compliance and assurance is robust, and growth can fall over a period of time. But in the first quarter also, we spent a lot of resources from the top management as well as the entire organization to make sure that at every stage, at every link we strengthen our compliance.

Okay. Sir, one last thing on this MFI. I think last quarter, you had shared that you're facing some liquidity concerns there. So what is the status on that side?

As of now -- I think liquidity concerns are easing slowly but the growth is impacted also by our conscious strategy and compliance as well as industry trends.

The next question is from the line of Franklin Moraes from Equentis Wealth Advisory.

Yes, I have got two questions. One is I just wanted clarity. What do you say, in terms of gold loan business, once assuming the RBI lifts the embargo, how long would it take to come to a normal business? How many months? And secondly, would you be open to selling part -- a part of your portfolio to any other entities?

So I think, once the embargo is lifted, we can start with business immediately. I -- this is unprecedented. So it's very difficult to say, how long will it take to get back to the original position or [indiscernible] existing. So this is -- we'll try our best to make sure that we reach out to customers and offer them the best product, and also with fully compliant with RBI's guideline as well. I really don't have any estimate or guess on this, that how long will it take. What is the other question you have, sorry?

So the other question was like, would you be open to selling part of your gold loan business to any other entity?

As of now, the RBI restriction is also on selling the portfolio.

Assuming the restrictions are lifted?

We will be open. I mean, the portfolio can always be sold to a buyer or anybody else, it doesn't matter. And until the restriction lifted, it's very difficult to speculate on that.

The next question is from the line of Vivek Ramakrishnan from DSP Mutual Funds.

My question is on microfinance portfolio in the...

Sorry to interrupt Mr. Vivek. Can you Please come a bit closer to your mic?

Okay. I am very closer to the mic but here the signal is bad, I think. Is it better now?

It's better.

Yes, go ahead. I can hear you, Vivek.

Okay. Sir, my questions are on microfinance. The question -- the first question is that besides elections, heatwave and rains and so on, there's also been an incidence of overleveraging with customers, which you have pointed out. So is there -- is there any kind of income shock with the customers that will -- that make -- that the default will be a permanent one, because we've always had with other narratives that CIBIL scores are becoming more and more important. So when the customers pay back. So that's question number one. And question number two, Venkatesh you talked about some rule engines that get put in place. If you could give a little more detail on how that helps that will be really useful. That's it for my side.

Vivek, for the first question, in terms of the income, you said are they over-leveraged, if I'm right?

See, the customer can be over-leveraged and facing an income stock. But as far as I can see, there's no major income shock in the economy. So I just wanted to know whether that's -- whether it will eventually pay you back.

Yes. Sure. The aspect to that, if you look at April, May, there was a heatwave in a couple of days and thing. Yes, in time, if you look at, there would be some kind of a little income shock, but it was not -- I mean it was for -- we take for 10 to 15 days kind of a thing. And it was also impacting a very few states with the aspect of it. And in terms of -- if you look at the over-leverage aspect of it, it is not that -- again, when we start assessing the customer properly, we see a good thing. So what we went about is, I'm actually answering your second question now. The credit scores of the customers became very important. We realized it very early. So the third quarter of last year, we started implementing it, and we tied up with an entity called Synaptic, where we were able to use their rule engine to put in. And if you look at -- we have also gone state-wise, we were able to figure out the ticket size. It's not that when we are onboarding and new to Samasta customer, we went about with the same ticket size in all the states, and we handle the new to credit in a different way. So all these are helping us out in terms of [indiscernible]. And July was, again, given the rains and all, it was a light spike but it's not a significant spike in terms of the microfinance portfolio for us.

[Operator Instructions] The next question is from the line of Ashlesh Sonje from Kotak Securities.

A few questions on your MFI portfolio. Firstly, can you share what is the proportion of your borrowers who have more than 4 lenders?

Can you repeat it, please?

What would be the proportion of your MFI borrowers, who have more than 4 lenders?

Yes. I mean, if you look at it, we have less than 15% of our customers with more than 4 lenders.

Okay. Got it, sir. And secondly, can you share what was the slippage for the quarter in the microfinance business?

Slippage for the quarter in microfinance? One second.

INR 110 crore provision this quarter.

Yes. You're asking about the NPA?

2.32% actually.

Sir, this is the slippage on the stage 3 that you're talking about?

2.3, stage 3.

I wanted the slippage number, if you have it?

We did a close to INR 100 crores write-off in the [indiscernible].

I think he wants to know the 0 DPD, or 10 to 30 DPD increase this quarter versus previous quarter. I think we don't have the data. We just... you understand, Venkatesh, which is the increase.

We're asking the increase for...

[indiscernible].

Got it. The write-off, you said was INR 100 crores in MFI this quarter.

Yes.

Got it. Okay. And sir, just lastly, a qualitative question. In the recent few quarters, 3, 4 quarters, have you seen an increase in cases of employee frauds or borrower frauds, in the microfinance business?

Yes. But I mean for us, we have seen it with competition and which has impacted us, but we -- it's also restricted to a few states again. But I mean, it is there. We have seen some impact.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Nirmal Jain, Managing Director, for closing comments.

Thank you very much. Thanks to all of you, and please do reach out to our IR team in case you need any further clarifications. Thank you so much. Have a good day ahead.

On behalf of IIFL Finance, that concludes this conference. Thank you for joining us. You may now disconnect your lines.