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 One Fiscal 2025 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 to 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 that has been the most significant event in our company, and I'm sure that most of the investors would be anxious to know more about it. The RBI order had come on 4th of March, where it ordered cease and desist from sanctioning and disbursing gold loans and assigning and securitizing as well. However, the order allowed us to continue servicing the gold portfolio through usual collection and recovery. The supervisory concerns of the RBI were there in the press release done by RBI, which related to deviations in assigning and certifying security at the time of loan sanction and auction, the cash transactions above INR 20,000 of loan disbursement.
The standard auction process recommended by RBI in Master Direction was not followed, and then there were issues related to loan-to-value glitches, which again were linked to the security certified at the time of sanction and at the time of auction. So in terms of company resources, we ensured that there's a full compliance. All the remedial actions have been taken, and we have made sure that we have full adherence to not only the findings in the inspection order but also all the RBI directives and guidelines which are there in the Master Direction for NBFC. And we also took the root cause analysis for the deviation to make sure that there's no recurrence of these issues. Further, we also done management training.
We have hired a few people at CXO level, and we are in the process of hiring a few more to strengthen our senior management team and also the entire assurance organization. That means that even the mid-level and low-level, we are announcing the resources. The assurance organization comprises risk audit and compliance. The special audit was commissioned by RBI, and that has been completed on May 27th, a couple of months ago. We believe that it was satisfactory and that verified and validated all the compliances that we had done. The same was again verified by the internal audit team and internal auditors of the company and reviewed by the audit committee. That compliance certificate also has been submitted to RBI as required.
Impact on the business has been very significant, and you'll see in the financial numbers, and then there's a disclosure of gold loan AUM currently, which is as of yesterday or as of August 5th, as of this Thursday. So the gold loan AUM, which was a little above INR 26,000 crore, has fallen to INR 12,162 crore, so less than half. More than 1 million customer accounts have closed their accounts and safely taken their jewelry. And as you're aware, many of these loans were co-lending arrangements with the banks and direct assignment to the bank. So we have paid about INR 13,500 crore 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 been given 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 trial by fire is faced very seldom by any financial institution. But I think these are two tests of the quality of assets that only when you start liquidating, you know whether your assets realize or not. In terms of future outlook, we are committed to make sure there's a full compliance and legal and spirit, and we are engaging with RBI and communicating with them. We expect that RBI will lift the restrictions in a short time from now.
But we have actually the RBI's processes are involved, and therefore we cannot have any certainty on when this will happen, but we anticipate it to happen at an early date. We are dedicated, obviously, we'll not only survive but 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 are not retrenching any employees or shutting 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, the 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 gone up.
Secondly, about our business loan and digital finance, our entire focus is now on MSME, and that business has been growing well at a steady pace and on a small basis growing quite well. We believe that from a long-term perspective, our branches can contribute significantly to this business. In this time period of last five months, we have trained our branches to handle this business as well. It's a long process, but it's on the way. Our home loan business has seen a slack 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 or 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 by banks in the wake of orders on our gold loan business. Also, in the last quarter, due to election, the asset quality has suffered, and provisions and losses remained 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 has been impact of guidance by MFIN also on the number of loans which customers should take, the maximum number of loans, and the amount that's linked to the income.
With this, I hand it over to Kapish to take you through the financials in more granular detail, and then we can have Q&A. Thank you.
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. I would just highlight at a consolidated level for the quarter Q1 FY25, the profit after tax before non-controlling interest was INR 338 crore, down 28% YoY, and down 21% on a quarter-on-quarter basis for reasons Nirmal highlighted earlier. We recorded pre-provision operating profit of INR 647 crore, down 18% YoY, and down 35% on a quarter-on-quarter basis. For the quarter, consolidated loan AUM grew by for this quarter, right? Consolidated loan AUM grew by 2% on a YoY basis. If I dissect it by company, the growth in asset finance in particular was around 25%. However, both housing finance company and Samastha entity recorded almost like 20% growth YoY.
On a consolidated basis, we do grew by around 12% on a quarter-on-quarter basis, touching AUM of around INR 69,610 crore. If I further dissect the AUM on our core products, which is largely microfinance, gold, home, digital, and lab, there we grew by YoY by around 4%, and we grew by around 12% on a quarter-on-quarter basis to INR 57,853 crore. The core 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 credit loss on the book, provision coverage ratio on NPA stands at 128%.
In line with our capital allocation strategy, we have done DAs and co-lending for other businesses, and our off-book stands at around 35%, which is an aggregate of assigned and co-lending book as of 28th June. The assigned book stood at around INR 14,609 crore, which is down by 17% YoY and 11% QoQ. The co-lending assets stand at around INR 9,524 crore, which is up 6% YoY. Our quarterly average cost for borrowing decreased by 2 basis points YoY and 2 basis points on a QoQ basis as well. Just to add to what Nirmal highlighted, we additionally also repaid to our capital market lenders close to around INR 3,239 crore. So in aggregate, the entire repayments since the embargo to all our lenders have been around INR 15,700 crore. In addition to that, our liquidity stood at around INR 2,886 crore.
Sorry, in addition to that, we also raised funds in aggregate to around INR 2,886 crore through term loan, bond, refinance, and also assigned around INR 17,609 crore of other loans. Our cash and cash equivalent, including commercial trade lines from banks and institutions, was around INR 6,858.3 crore, 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 NCS cover exceeds the outflows across all buckets. And with the infusion of capital that we raised in the month of May of 2024, our net gearing stands at around 2.8%. Supported by that, our capital efficiency for the NBFC entity stood at around 27.8%. For HFC, it was 46.5%, and for Samastha, it was 27%, each of them much higher than the minimum threshold of 15% defined later on by the regulator.
Our overall annual ROE stood at around 10.3%, while ROA was at around 2.3%. The basic earnings per share for the quarter was around 7.2. With this, I finished my update on the financial numbers and open the floor for Q&A, which you can then join later on. Thank you very much.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question needs to press star one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah, good afternoon, everyone, and thank you for taking your questions. I had three questions. First one, on gold loans. Nirmal Sahib had shared in the last quarter's earnings call that in case we don't get RBI's approval or the ban is not lifted, then maybe we will look at sourcing loans further, banks acting as BCs. I just wanted to check, I mean, while you've already said in your opening remarks that we are very confident that this ban should be revoked sometime soon. Are there other proposals also which are being 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 are seeing in the sector for some of the other listed MFI players has not shown that kind of a stress on our balance sheet as yet. So Venkatesh sir can comment on different states, some color there, and then I'll end this. And lastly, in terms of the ART transactions that we have done during this quarter, if you can just kind of throw some light on that, where they come 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 both SR? Those are the three questions.
Thanks, Abhijit. So gold loan, we see proposal evaluated, but then we discovered that banks have a little longer process to open BC, which starts with RFP, and then you submit a proposal, and then there's evaluation. So we have started participating, I mean, we've participated 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 destruction to the resources as well as process because once you start a BC, then obviously banks will expect certain commitment in the volume. And from a commercial point of view, that may not be as viable for our cost structure as the other proposals are because in the BC structure, you get a fee, and the banks probably typically will keep the entire interest income and the margin.
So that is the first question that you have. The second question is about LAP. So that also linked to MFI because a significant part of our LAP was also done by our microfinance company. So the LAP, which has a very small ticket, is done by HFC as well as MFI. But as I said, the MFI in particular has created a relatively higher resistance from banks in terms of opening of credit lines. In fact, after the embargo, most of the banks had basically frozen their credit lines, even the existing ones, and there had been a few trickles here and there. But in case of HFC, we have a higher capital efficiency, and also the co-lending and the DAs continuing. And that basically is making sure that we don't have the constraint there as much. But the LAP is also impacted a little bit.
Okay, the first quarter is a significantly soft quarter. In the last quarter, when what you are comparing with the QOQ 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 the provision, yes, we have actually transferred a couple of large CRE cases to ARC. And what our experience is, that's 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 they default, then it goes into NPA, and then it's very difficult to do the incremental loan or sustain the project. But unlike banks, we really can't have a DSRA or a 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, and this is an industry practice in line with the standard accounting, is there's a valuation done every quarter by the ARC. And there's a fair value based on the realizable value of the SR. And that's the value that we take in our book. 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 I just respond my response to all three questions. Can you move on the next slide?
Yeah, Abhijit sir, if you 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. I mean, not quite seeing that same stress in our book as yet. So what is the view which is there? I mean, yesterday also there was a bankrupt manager who reported, and they talked about very high leverage building up at customers and customers having more than 5 lenders lending to them. And that proportion of such customers who have more than 4 or 5 lenders has actually shot up significantly in the last 10 months. So what is our view on this piece?
Yeah, good afternoon. 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, we have picked up this very early. I mean, we did it in January itself in terms of we brought in some kind of control. We looked at the credit score of customers. We started implementing, I think we were 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 things. And yeah, there were some certain stress in certain pockets because of elections and continuous rain and certain aspects of it.
We have in a very few states like Rajasthan, MP, and Odisha have been showing a different color, but we have been able to hold good because we were able to implement certain things early in the third quarter of last year. Also, we have relatively lesser exposure to Punjab, which has been more impacted.
Got it. So what is happening is, I mean, in this quarter, when lenders have reported what was just restricted to Punjab until last quarter, it's getting much more broad-based. Like Venkatesh sir said, Rajasthan, MP, Odisha are also some of the states which were flagged off yesterday as states which are highly impacted or states with more stress compared to other states in India.
That's fine.
This is Paul from Amritsar. Thank you, and all the very first to be invited.
Thank you.
Thank you. The next question is from the line of Rajagopal Ramanathan from Centrum Broking. Please go ahead.
Am I audible?
Yes, sir, you're audible. Please go ahead.
Okay. Just one question, and I would appreciate comments from 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 wherein the gold finance business has seen 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? Thank you.
Thank you, Rajagopal.
Yeah, so first of all, the commercial vehicle business that we sold and that was sold in the beginning of, I think, 2019 sometime. The diligence and the payment terms were 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 was deteriorated for the buyer. This did not have any relationship whatsoever to the kind of business that we did and the asset quality of the business when we sold it. 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 assets is. Obviously, there was no deviation from what we represented.
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 remark, that is like maybe unprecedented in the history of the financial world that 1 million customers have taken their gold back, and the money has been paid back without any single issue. That also because if there's an asset quality issue, then obviously when there are more than 1 million customers that are redeeming their loans, then they will show up. And then they will come out and obviously you'll find hidden NPAs or fines. So that again is our testimony to the fact that our asset quality, our credit underwriting, and our collection processes are absolutely robust.
Now the learning from this is that of course you should 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 violations that have been identified by RBI were industry practices. They were done by other gold loan companies as well. Now, in terms of extent and in terms of what are the reasons for the we 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 fully with all humility I accept that there's no excuse for any compliance violations. There are no deviations. And we are committed to make sure that we rectify them, and we also make sure that they don't recur.
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 the regulator, and everybody else with respect to your ability to conduct any funding business going forward. I hope that is well understood within the management.
There's no doubt about it. At the same time, in the recent past, regulatory action has happened against many regulatory entities. This is something which has been in a way an industry-wide awakening of the regulatory entities. Maybe sometimes 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. Obviously, if somebody has to enforce the rules very strictly, they need to pick up one or two and make an example of that. But at the same time, if everybody follows the rules, then it becomes a level playing field, and it becomes very easy to comply with that. I hope you take the right lesson.
For example, further, if you really want to, like supposing you are disbursing cash more than 25, everybody else is doing it. Now, if I follow very strictly the guideline and the thing, then I'll lose all the customers because customers will walk to the other gold loan brands and say, "Big deal, you are not giving it now, I'm getting it from somewhere else." But what has happened is that after the action taken on us, and then there's another circular of RBI, at least to my knowledge, everybody has stopped now giving over INR 20,000 in cash.
I understand that. I hope the right lessons are taken. That's all.
Absolutely. I think the right lessons are about compliance, which has to be strictly enforced. That's what I've said in my that we are strengthening our organization. We are making sure that compliance becomes the top priority of top management starting from me. That basically our communication goes down the line to all the branches and employees. We've taken a number of steps, Rajpal, to make sure that these things don't recur. I think we are fully committed to that. That's what I can assure you.
Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Arjun from RSP Invest. Please go ahead.
Hello, am I audible?
Yes, sir, you're audible. Please go ahead.
Yeah, thank you for taking my question. I just had one question. I was going to the number shared by you. While we understand that gold loan book is under embargo, however, the loan AUM growth in home finance book and NFI book is not that great either. So any reason for stagnation in the AUM in both these books?
No, so as I said, that the first quarter is seemingly flat and also due to election, also a lot of there are many days are lost and the activity also comes to a bit of a slowdown. I really have not compared with the peers in both these sectors, but I would suspect that a similar trend will be there more or less. We have been a little bit impacted also by the reluctance, the banks basically sort of holding back on the credit for other businesses as well. But the thing is also evolving and changing. So slowly, we have seen that the resources are becoming available. Our co-lending and DA and other businesses also are continuing.
Nirmal Jain, Monu Ratra.
Yes, please.
Just wanted to share with you that if you see Y on Y, the AUM growth is 22% for the quarter. Quarter-on-quarter looks flat because usually the Q4s are pretty spiked. I think we are almost in line with our expectations for this year as well.
Yeah, thanks. I think I would agree with that. Yeah.
Back to Home Loan, however, MFI book has been grown, in particular, P&Q.
Yes, MFI has been impacted. MFI, if you see the industry also has been volatile. That also turns us a bit more cautious. We have really seen how the industry and the credit is evolving here because last year, there were a lot of major changes done by RBI in terms of the loan amount liberalization as well as the rules which have settled. I think the industry is passing through the crater. Hopefully, the sector has a tremendous contribution to make to the economic growth. We are very optimistic on the long-term prospects of MFI as well.
Okay, okay. Understood. Thank you for the information.
Thank you. The next question is from the line of Murthy Nagarajan from Tata Mutual Fund. Please go ahead.
Yeah, thank you. I have only one question. What I wanted to know is that you are showing in this quarter, you have collected INR 2,886 from INR 2,886 disbursement which is happening to you. Can you give us some color about how much has come from banks and who are the guys from whom you have been able to borrow?
You said INR 2,886 borrowing?
Yeah.
Or resources, what is it?
Resources.
Just the fees?
Murthy, I'll surprise you on these results.
I think the INR 500 crore is the ECB that we have taken from Fairfax. Plus, we had some parameters that we raised from LIC Finance. Sorry, yeah. But we will come back to the detail on more. Is this a theoretically right situation to be in this?
No. Or with a DA transaction that is probably.
DA is separate. DA is INR 7,069 crore.
Okay.
Yeah. So in normal course, so maybe you can get back to, but I think broadly, these are the details in the final proof from Fairfax issuing lawyer.
Sorry, LIC Audit can get on.
It's on small rounds.
I'm worried that these are from two peers who guys do.
Yeah. So we wanted to know who are the guys who are lending to you right now so that you give us some confidence.
So there's a number of them. There's critical doubts. So supposing we are at INR 500 crore, we got INR 100 crore for some of them. So, but there are, as I said, after the initial holdback, slowly it's coming back. The resources are now becoming available.
Okay.
A few names that I would quickly tell you is Bank of India, Bank of Maharashtra, State Bank of India, and then we can talk more as well.
Okay, okay. Okay, thank you.
Yeah.
Thank you. The next question is from the line of Nitesh from Investec. Please go ahead.
Thanks for the opportunity. 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 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.
We have not refinanced or factored anybody. So, what is the natural attrition? Is there. If the embargo is lifted, then we can come back very quickly. That is what we are prepared for.
Is it reasonable to expect that the employee force would have declined by 30%-40%?
No way. 4%-5%.
4.5% only?
Yeah.
Yeah. Okay. Secondly, if you can also give some color on the microfinance collection trends in Q2 in July, how the trends are and any data point around customer leverage, what percentage of customers would have more than or equal to five loans for us?
When did you take this?
Yeah.
I mean, in terms of the collection trends, July, actually, it dipped a little bit, but not significantly. But if you look at, it's not the case. With, see, once RBI had given us a thing of a number of lenders, a relaxation on number of lenders, we have not seen the same trade cycle. Suppose if we had properly assessed the customer and we're given a loan, it doesn't mean that all the customers who have borrowed from five lenders are defaulting or something like that. That's a wrong note or pickup, which thing. But anyway, now we are also both looking at that guardrails of our end trend. All of us are adhering to that. We are following a four-lender rule that only four lenders can exist to a customer and with a maximum cap of two lines.
But I mean, there are very odd reasons for July being a spike month, rains across the country, and we had, I mean, difficulty in collection going people going to things. 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. Nitin, just to elaborate a little bit more on this, RBI relaxed the number of lenders. So you can have more lenders than four. Now, what mechanics can you say that a customer may default with two lenders also and may not default with six lenders also? As long as the more important thing is to do the credit assessment and everything properly.
Nonetheless, the self-regulatory organization MFIN has basically guidance, which is not a regulatory guideline, but it's the association guideline, which is legally binding, but we still abide by that and we follow that being a part of the association. They basically suggested that there should not be more than four lenders to a customer. Typically, this can be a good safeguard, other thing being equal. The loan amount should not exceed INR 2 million-INR 1 million borrower overall exposure. They put out overall guidelines in which we are also now complying with.
Is the INR 2 million including all borrowings of the borrower or only microfinance borrowing?
Microfinance borrowing.
Okay.
At the household level.
Short to short. That's it from my side. Thank you.
Thank you. The next question is from the line of Anusha Raheja from Dalal & Broacha. Please go ahead.
Yeah, thanks for taking the question. So on home finance, actually, this quarter, was there any increase in the NPAs? Because if I just compare the credit cost, the provisioning line item, for this quarter, it was, I believe, INR 760 crore, 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 increased the provisioning requirement for state two and state three customers. So as I said, the microfinance provisioning is about INR 110 crores. Also, for our HFC, the provisioning is about INR 54 crore, which was only INR 10 crores in the last quarter. So last quarter, we had some good recoveries as well. But all these things have added up to the provisioning of around INR 251 crore, what we have as loan versus the provisioning. So we also increased the provisioning of ECL two and ECL three of CRE portfolio. Although that's hopefully small, but we increased the provision there. Now, these ECL computations are in line with Ind AS ECL category auditors. So then we can estimate in the year.
Okay. So, Anusha , see, although we've seen the CRE and the capital market book down around almost 50% on YoY digits, but what is the broader call from HENCSBO? Any more further increase in the provisioning there?
No, I think so the books are small, but that doesn't mean that there's anything to be provisioning. We are provisioning increasing microfinance also. So in case of microfinance, as you're aware that the industry, I think in microfinance, but for the industry as a whole, what we are looking at, 2% might become 3% as the guidance for the provisioning requirement in a year, loan losses and provisions. The industry, in a way, it becomes mature so that loan tickets by the total loan per borrower grows. Of course, the risk is rising, but that way we add a kind of provision. CRE book portfolio, I mean, the book is just sort of tapering off and will become very insignificant, just like our general market. But for the time being, as recommended by auditors, we will increase the provisioning.
Okay. And just one last thing on this AUM growth that we have seen on fixed interest basis, apart from gold loans, there are decline in other segments as well. So is it more to do with the credit lines which were available to you? 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?
Yeah, that has impacted the growth. But also, the last quarter was impacted by the first quarter of the financial year, flat quarter, the elections, and other disturbances in that quarter. I mean, that has also impacted the business.
Okay.
Also impacted that our growth in the YYBB system is in line with the expectations, so. And now, going forward, our first focus is to make sure that our compliance and assurance is overseen and work can follow over a period of time. But the first part, actually, we spend 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 stand in our compliance.
Okay. So one last thing now, just MFIN. I think last quarter, you had shared that you were facing some liquidity concerns there. So what is the status on that side?
As of now, so I think liquidity concerns are easing slowly, but the growth is impacted also by our concerted strategy and compliance as well as the industry trend.
Okay. Okay. Thank you.
Thank you. The next question is from the line of Franklin Moraes from Equentis Wealth Advisory. Please go ahead.
Yeah, sir, thanks for taking my question. So I have two, four 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 will it take to come to a normal business? How many months? And secondly, would you be open to selling a part of your portfolio to any other entities?
So I think once the embargo is lifted, we can start the business again. This is interesting. We have to say, how long will it take to get back to the original position or the existing? So this is where they are best in making sure that we reach out to our customers and offer them the best product and also fully compliant with RBI's guidelines. I really don't have any estimated guess on this, that how long will it take? Which is another question we had, sorry?
The other question was, 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.
Yeah. So assuming the restrictions are lifted?
Will be open. I mean, the portfolio can always be sold to a bank or anybody else as a lender. Until the restrictions are lifted, we will be speculating on that.
Okay. Very good. Thanks a lot, sir.
Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Funds. Please go ahead.
Hello, good afternoon. My question is on the microfinance portfolio only.
Oh, sorry to interrupt, Mr. Vivek. Please come a bit closer to your mic.
Okay. I am very close to my mic. But anyway, signal is bad, I think. Is it better now? It's better.
Yeah, go ahead. I can hear you.
Okay. Thanks, sir. And thanks as well. So my questions are on microfinance. The first question is that besides elections, heat wave and rains and so on, there's also been an incidence of over-leveraging with customers, which you have pointed out. So is there any kind of income shock with the customers that makes sure that the default will be a permanent one? Because we've always had this other narrative that CIBIL scores are becoming more and more important, so when the customers even pay back. So that's question number one. And question number two, Venkatesh, you talked about some rule engines that you had put in place. If you could give a little more detail on how that helps, that would be really useful. That's it from my side. Thank you.
Vivek, for the first question, in terms of the income, you said they are over-leveraged, if I'm right?
No. So the customer can be over-leveraged and facing an income shock. But as far as I can see, there's no major income shock in the economy. I just wanted to know whether that's whether they eventually pay you back?
Yeah. Sure. With the aspect of that, if you look at April, May, there was a heat wave in a couple of states and things. Yeah. In that time, if you look at, there would be some kind of a little income shock, but it was not, I mean, it was for, you can say, for a 10-15 days kind of a thing. And it was also impacting 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, I'm actually answering your second question now. The credit scores of the customer 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 Scienaptic, where we were able to use their rule engine to cut in. And if you look at, we have also gone statewide. We were able to figure out ticket size. It's not that when we are onboarding a new-to-Samastha customer, we went about with the same ticket size in all the states, and we handled the new-to-credit in a different way. So all these are helping us out in terms of things. And July was, again, given the range and all, it was a slight spike, but it's not a significant spike in terms of the microfinance portfolio for us.
Excellent. Thank you very much, and wish you good luck.
Thanks. Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Ashley from Kotak Securities. Please go ahead.
Hi sir, good afternoon. A few questions on your MFI portfolio. Firstly, can you share what is the proportion of your borrowers who have more than four lenders?
Can you repeat it, please?
What would be the proportion of your MFI borrowers who have more than four lenders?
Yeah. I mean, if you look at it, we had less than 15% of our customers with more than four lenders.
Okay. Got it, sir. Secondly, can you share what was the leakage for the quarter in the microfinance business?
Leakage for the quarter in the microfinance business? One second. INR 110 crore provision in this quarter. Yeah.
You're asking about the NPA, no?
Correct. Yeah.
One second.
Sorry.
Yeah, 2.32%. 2.32%, actually.
This is the slippage or the stage three that you're talking about?
Stage three.
I wanted the slippage number if you have it.
We did a close to INR 100 crore write-off in the. I think he wants to know the. Gross NPA was 1.33% this quarter vs previous quarter. I think we don't have the data just.
That's interesting.
You're asking the increase for the INR 13 crore.
Got it. The write-off you said was INR 100 crore in MFI this quarter.
Yeah.
Got it. Okay. And sir, just lastly, a qualitative question. In the recent few quarters, three, four quarters, have you seen an increase in cases of employee frauds or borrower frauds in the microfinance business?
Yeah, but I mean, for us, we have seen it with competition, and which is impacted us, but it's also restricted to a few states again. But I mean, it is there. We have seen some impact.
Got it, sir. Perfect. Thanks a lot.
Thank you.
Dear Ladies and Gentlemen, this 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. Yeah, thanks to all of you. Please do reach out to our IR team in case you need any further clarification. Thank you so much. Have a good day.
On behalf of IIFL Finance, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.