Fitch Ratings Upgrades IIFL Finance's Long-Term IDR to 'BB-' with Stable Outlook

MUMBAI — Fitch Ratings has upgraded the Long-Term Issuer Default Rating (IDR) of IIFL Finance Limited to 'BB-' from 'B+' with a stable outlook. The international rating agency also upgraded the company's senior secured debt and global medium-note programme (GMTN) ratings to 'BB-' from 'B+.'

According to Fitch, the rating action reflects a sustained improvement in IIFL Finance's credit profile, particularly its business and risk profiles, and asset quality. Loan growth rebounded following the lifting of regulatory restrictions on the company's gold-backed lending business in September 2024. This recovery was further supported by broadened funding flows enabling new disbursements across key product lines.

Vikas Jain, Chief Financial Officer at IIFL Finance, said the upgrade recognises the sustained improvement in the company's business and risk profile, asset quality, profitability, and funding access. He noted that the firm remains focused on disciplined growth, a predominantly secured lending portfolio, strong risk management, and prudent capital and liquidity management.

Fitch highlighted that IIFL Finance has steadily regained market share in gold-backed loans over the past two years among major lenders. The company's pan-India franchise helps retain customers, and its loan pricing remains in line with that of large peers. Successful tie-ups with banks for co-lending and direct assignments have additionally supported growth in assets under management. Gold-backed lending is expected to remain the largest lending segment, accounting for above 50% of the consolidated portfolio over the medium term.

The rating agency noted that IIFL Finance's portfolio remains focused on secured loans as the company has exited unsecured business and personal lending while maintaining a cautious stance on microfinance expansion. Loans rose by 27% in the financial year ending March 2026 (FY26), led mainly by secured categories, following a slower 8% rise in FY25. Secured loans, including gold-backed and mortgage products, rose to 90% of total loans by FYE26, compared to 80% at FYE25.

Fitch expects non-performing loan (NPL) formation to moderate over the medium term, driven by the portfolio shift toward secured loans, the resolution of stressed microfinance portfolios, and the exit from riskier unsecured products. Credit costs are projected to remain contained, aided by improving portfolio credit quality and a 90% provision coverage. IIFL's NPL ratio eased to 1.5% in FY26 from 2.2% in FY24.

Profitability has also shown recovery, supported by loan volume growth, stable net interest margins, and contained operating and credit costs. Annualised pretax profit improved to 4.1% of average assets in the first quarter of FY27, recovering from a decline to 1.1% in FY25 and 3.1% in FY26.

"The upgrade of IIFL Finance by Fitch Ratings highlights the importance of regulatory compliance, strategic portfolio adjustments, and robust risk management for non-banking financial companies. By pivoting toward secured lending and successfully resolving legacy asset challenges, the company has strengthened its credit profile and restored investor confidence. This development demonstrates how disciplined capital management and operational adaptability can stabilize a financial institution during regulatory transitions." — Dr. Shishir Gupta, Founder & CEO, StartupLanes