Dalal Street Investment Journal — July 10-23, 2017

54 DALAL STREET INVESTMENT JOURNAL I JULY 10 - 23 , 2017 DSIJ.in^

Cover Story

Rajashree NambiarCEO, IIFL

For FY18 what is the outlook

for NBFCs and what are the

growth expectation at IIFL for

its NBFC business?

We are operating in exciting times and

the country is well-poised for long term

economic growth. When compared to

other economies, we are still at a low

penetration of credit, and NBFCs have a

large role to play in credit growth on the

back of their widespread distribution

reach in sub Tier I locations and

contemporary solution offering.

The outlook is to sustain the pace of

growth through FY18 and beyond. Our

key volume drivers would be affordable

housing, CV and SME - these products

will enable us to participate in the most

promising growth areas of the economy.

At the same time, initiatives on

digitisation and technology will reduce

opex and drive profitability.

What is the outlook for SME,

gold finance and housing

finance business at IIFL? Can

you let us know the growth

rates you have witnessed in

each of these individual

segments?

We witnessed strong growth in our SME

loans segment in FY17, while mortgages

grew at ~42 per cent.

The outlook fore various segments are

as follows:

SME Loans – Riding on the favourable

macro environmental conditions and

in-house digitisation initiatives – SME

lending at IIFL is poised for exponential

growth. Recent government reforms will

further aid the lending industry:

• Due to demonetisation, adoption of
  the digital payment system has
  shown significant improvement by
  MSMEs, which opens up lending
  opportunity.


• Implementation of GST bill is
  expected to benefit MSMEs not only
  with simpler tax structure but also
  with aspects such as improved
  technology adoption in order to
  comply with GST system and provide
  lender access to the transaction data
  through GST portal.

SME loans aim at digitising the processes

to ensure seamless processing of files

with minimum manual intervention and

meeting the customers’ financial

requirements. 100 per cent of the retail

MSME loans will be sourced digitally,

ensuring faster delivery.

Housing Finance – The market potential

of affordable housing projects in the

country is expected to touch `6.25

trillion by 2022 (source – ICRA) due to

demand emanating from a growing

population and the disparity that exists

in household income and high real estate

prices. In addition, the government has

provided various incentives to home

buyers, targeted at the affordable housing

segment, which is expected to further

augment the demand.

How is digitisation shaping

your strategy? What is your

annual digital spend?

• We are focussed on implementing
  end-to-end digitised products and
  processes. We have been able to
  enhance our processes and improve
  our services based on the digital
  initiatives across all products and
  customer life cycle.


• We are now digitally on-boarding
  customers through web and TAB-
  based services across all our
  products. Backed by eKYC, eSign and
  robust real time appraisal process, we
  are now able to disburse loan in
  seamless and almost paperless
  manner. With eNACH being
  implemented, we are geared up to
  disburse our loans in completely
  digital and paperless mode.


• We continue to invest
  disproportionately in building our
  digital platforms and capabilities. As
  regards marketing spend, our
  conscious aim is to spend on both
  online and offline platforms, as
  appropriate.

segments, such as consumer durables and

two-wheeler loans. These segments are

high margin segments for NBFC players.

Then there are certain NBFC players

such as Motilal Oswal, IIFL and

Edelweiss that have a different growth

story. While Motilal Oswal banks on a

quality asset management company and

runs a decent (growth) housing finance

company, IIFL is making all the right

moves in the wealth management

business and is now focusing on building

its credit businesses. IIFL & Edelweiss

have a healthy product mix and have

diversified income streams.

The beauty of investing in NBFC sector

is that you will invest in businesses with

unique business models operating in

high yield, high growth, high margin

businesses which are also agile. Agile

structures and set-ups of most of the

NBFCs allows these companies to

quickly spot growth opportunities in

new related areas. You may well be

buying a different NBFC stock for an

altogether different reason. The IT

infrastructure is in place for most of

the players and the technology is