We have a target to reduce our cost by Rs 200 crore in FY21: Nirmal Jain, IIFL Finance

Nirmal Jain, Chairman and CEO, IIFL Finance, talks about June quarter results, asset quality, company’s liquidity situation and moratorium situation on the loans during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: Take us through the highlights of June quarter segment-wise and tell us about where did you face concerns and where have you seen stability?

A: If we look at the highlight of the quarter then our cost has reduced by almost Rs 45 crores quarterly. For the whole year, we have set a target to reduce our cost by Rs 200 crore. The money gets directly added to the bottom line. Apart from this, there has been good growth in the gold loan book. Branches started opening from May and June. The business has started in the home loan segment in June and there was modest growth in the quarter, i.e. 1% quarter on quarter. It looks that gradually we are heading towards normalcy and I believe that 50% of the normal growth will be back by the next quarter. And, even there is an improvement in the collections and the moratorium that stood at 60% in May has halved to around to 30-31% and going forward it seems that more loans will come out of the moratorium. These are positive trends.

Besides, people had a fear about what will happen to their business due to the COVID but it is not so as things are improving and business are returning. There has been a setback but I will say that if the luck supports a bit and disease starts decreasing from this level then a lot of recoveries will be seen in next 2-3 months. 

Q: How was the asset quality in this quarter and what is your view for further quarters?

A: It has improved a lot. As in quarter, we are standing at 1.95% in this quarter compared to 2.3% of the last quarter. Apart from this, the government’s guaranteed top-up scheme is a good scheme and liquidity situation is gradually improving in the market. Much deterioration is not visible in the asset quality and gradual improvement will be seen in it from here. 

Q: How is the liquidity situation of your company and are you getting support from the banks on the front of funding?

A: Situations have improved a lot from what it was in April and May. I feel that the interest rates will come down soon and the liquidity situation will improve even more. Many banks have also started processing the application. Proposals and meetings have started under the liquidity scheme. I feel that the liquidity situation will improve from here. 

Q: Loan book under moratorium has come down from 60% to 30%. What kind of gradual improvement you are seeing in this particular set up?

A: Moratorium will be bought down to 15% to 20% because always there is a fear in the moratorium cases that what will happen when they will get out of the moratorium. So I feel that it will come down to 15% to 20% in the next 2-3 months.

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Q: Gold is making new highs and has crossed Rs 50,000-mark. What kind of impact and benefits do you see for gold finance companies? 

A: It will increase the amount that one can provide on Gold. For instance, if you can sanction a loan of Rs 3.50 lakhs to Rs 4 lakhs on the gold with a value of Rs 5 lakh. If the value of the same gold increases to Rs 6 lakh in some time, then your loan amount will increase by 20%. If there is an increase in the gold prices then as per the loan to value the borrowing capacity of people will go up and they can make more loans. Wherever you feel that the credit is good then your business will grow by the same quantity of the gold.