IIFL Finance Plans More Debt: Panel to OK NCDs for Funding

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AuthorAkshat Lakshkar|Published at:
IIFL Finance Plans More Debt: Panel to OK NCDs for Funding
Overview

IIFL Finance Limited's Finance Committee is set to meet on February 24, 2026. The key agenda item is to finalize the terms for issuing Non-Convertible Debentures (NCDs) through private placement. This move is part of the company's larger ₹10,000 crore fundraising strategy, previously announced in May 2025. The company recently concluded a ₹2,000 crore public issue of NCDs, signaling its active management of debt capital to fuel its lending operations and growth.

Financial Deep Dive

IIFL Finance Limited has announced that its Finance Committee of the Board of Directors will convene on February 24, 2026. The primary purpose of this meeting is to consider and approve the specific terms and conditions for issuing Non-Convertible Debentures (NCDs) on a private placement basis. This upcoming meeting is a crucial step in the company's broader financial strategy, following up on an earlier intimation from May 8, 2025, where the company had outlined a significant fundraising plan of up to ₹10,000 crores through NCDs.

This move comes shortly after the successful conclusion of its Tranche I public issue of secured, listed, redeemable NCDs, which aggregated up to ₹2,000 crore. This public offering, which opened on February 17, 2026, and closed on March 4, 2026, provided investors with various tenors (24, 36, and 60 months) and coupon rates ranging from approximately 8.37% to 9.00% per annum. The NCDs received strong credit ratings, including 'AA/Stable' from CRISIL Ratings and 'AA+/Stable' from Brickwork Ratings, indicating a high degree of safety regarding timely servicing of financial obligations.

What are Non-Convertible Debentures (NCDs)?

NCDs are debt instruments that companies issue to raise money. Unlike convertible debentures, these cannot be converted into shares and are essentially loans taken by the company from investors. They typically offer a fixed interest rate (coupon) and have a maturity date. IIFL Finance is utilizing these instruments to strengthen its capital base and fund its operations, including onward lending, financing/refinancing existing debt, debt servicing, and for general corporate purposes.

IIFL Finance operates with a significant debt-to-equity ratio, which stood at approximately 4.17 times as of March 2025. However, the company maintains adequate capitalization, with a reported standalone Tier 1 ratio of 12.8% as of December 2025. The company's assets under management (AUM) have shown robust growth, reaching ₹98,336 crore by December 2025. While the company reported a net loss of ₹410 crore for the fiscal year ending March 2025, it posted a consolidated profit after tax (PAT) of ₹501.35 crore for the third quarter of FY26, indicating a recovery in profitability.

Risks & Outlook

While IIFL Finance is actively managing its capital needs, certain factors warrant investor attention.

  • Negative History/Red Flags:

    • In February 2026, the Reserve Bank of India (RBI) imposed a penalty of ₹5.30 lakh on IIFL Finance for failing to properly classify certain loan accounts as non-performing assets (NPAs) during restructuring processes. The company stated this penalty has no material impact.
    • Separately, SEBI had previously fined IIFL Securities (an entity within the IIFL group) ₹11 lakh in August 2024 for violations of stockbroker regulations.
    • Credit rating agencies have provided mixed signals. While 'AA' ratings indicate low credit risk, ICRA's current rating for IIFL Finance's NCDs is 'AA (Negative)', and the agency had previously placed the company's long-term ratings on 'Rating Watch with Negative Implications' in March 2024.
    • The company has noted "sizeable net vulnerable assets" relative to its Tier 1 capital.
    • Investor scrutiny may also fall on the promoter's relatively low shareholding (around 24.85%) and the company's "low interest coverage ratio".

  • The Forward View:
    The ongoing NCD issuances are crucial for IIFL Finance to sustain its growth trajectory and meet its lending targets. Investors will closely monitor the specific terms and interest rates finalized for the private placement NCDs, as well as the company's ability to manage its high debt levels and service its obligations effectively. Continued improvement in profitability and asset quality will be key to watch in the coming quarters.

Peer Comparison

IIFL Finance's strategy of raising substantial debt capital through NCDs is common among Non-Banking Financial Companies (NBFCs) in India, which rely heavily on market borrowings to fund their loan books. Competitors are also actively tapping debt markets:

  • Bajaj Finance, a leading player, raised ₹2,500 crore through bond sales in February 2026 and also issued bonds worth ₹1,835 crore in November 2025.
  • LIC Housing Finance raised ₹1,050 crore via a 5-year bond.
  • HDFC Bank averages around ₹19,500 crore annually in long-term debt issuances.

While peers like HDFC Bank and Bajaj Finance are also issuing bonds, IIFL Finance's focus on NCDs aligns with its strategy to tap retail and institutional investors for funding growth. The interest rates offered by IIFL Finance on its NCDs (up to 9.00%-10.25%) are competitive within the current market environment for similarly rated debt instruments.

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