Rating Overview and Context
On 23 June 2025, MarketsMOJO revised IIFL Finance Ltd's rating from 'Sell' to 'Hold', reflecting a significant improvement in the company's overall assessment. The Mojo Score increased by 24 points, moving from 41 to 65, signalling a more balanced outlook for investors. This 'Hold' rating suggests that while the stock is not currently a strong buy, it is also not recommended for selling, indicating a neutral stance based on the company's fundamentals, valuation, financial trends, and technical indicators.
Here’s How the Stock Looks Today
As of 28 December 2025, IIFL Finance Ltd exhibits a mixed but stable profile. The company operates within the Non Banking Financial Company (NBFC) sector and is classified as a smallcap stock. Despite some challenges, the stock has delivered robust returns over the past year, outperforming broader market indices.
Quality Assessment
The quality grade for IIFL Finance Ltd is rated as 'good'. This is supported by the company’s strong long-term fundamental strength, demonstrated by an average Return on Equity (ROE) of 14.17%. Such a level of ROE indicates efficient utilisation of shareholder capital to generate profits over time. However, recent quarterly results show some softness, with the Profit After Tax (PAT) for the quarter ending September 2025 falling by 12.2% to ₹376.33 crores. This decline suggests some near-term operational challenges, but the overall quality remains solid given the company’s historical performance.
Valuation Considerations
Currently, IIFL Finance Ltd is considered 'very expensive' from a valuation standpoint. The stock trades at a Price to Book Value (P/B) ratio of 2, which is a premium compared to its peers' historical averages. This elevated valuation is partly justified by the company’s market-beating returns, with a 46.15% gain over the last year, significantly outperforming the BSE500 index return of 5.76% during the same period. However, investors should be cautious as the company’s ROE has moderated to 6.6%, and profits have declined by 45.7% over the past year, indicating that the premium valuation may be pricing in expectations of future growth or recovery.
Financial Trend Analysis
The financial grade for IIFL Finance Ltd is currently 'flat', reflecting a period of relative stability but limited growth momentum. The company’s debt-equity ratio stands at a high 4.53 times as of the half-year period, signalling a leveraged balance sheet that could pose risks if economic conditions deteriorate. Despite this, institutional investors hold a significant 35.9% stake in the company, with their holdings increasing by 1.19% over the previous quarter. This suggests confidence from sophisticated investors who have the resources to analyse the company’s fundamentals thoroughly.
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Technical Outlook
The technical grade for IIFL Finance Ltd is 'bullish', indicating positive momentum in the stock price. This is supported by recent price movements: the stock has gained 6.14% over the past week, 4.98% in the last month, and an impressive 42.87% over the past three months. The bullish technical signals suggest that market sentiment remains favourable, which could provide support for the stock despite some fundamental headwinds.
Stock Returns and Market Comparison
As of 28 December 2025, IIFL Finance Ltd has delivered strong returns across multiple time frames. The year-to-date (YTD) return stands at 44.75%, while the one-year return is 46.15%. These figures significantly outperform the broader market, with the BSE500 index returning just 5.76% over the same one-year period. This market-beating performance highlights the stock’s appeal to investors seeking growth within the NBFC sector, despite the challenges in profitability and valuation.
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What the Hold Rating Means for Investors
The 'Hold' rating assigned to IIFL Finance Ltd by MarketsMOJO reflects a balanced view of the stock’s prospects. For investors, this suggests that the stock is fairly valued given its current fundamentals and market conditions. While the company shows strong quality metrics and positive technical momentum, the expensive valuation and flat financial trend advise caution. Investors should consider maintaining their existing positions rather than initiating new ones or exiting holdings, monitoring closely for any changes in profitability or market conditions that could alter the outlook.
Summary
In summary, IIFL Finance Ltd’s current 'Hold' rating is supported by a combination of good quality fundamentals, a very expensive valuation, flat financial trends, and bullish technical indicators. The stock’s strong returns relative to the market and high institutional ownership add to its appeal, but investors should remain mindful of the elevated debt levels and recent profit declines. This nuanced view helps investors make informed decisions based on the company’s present-day performance as of 28 December 2025, rather than solely on the rating update date of 23 June 2025.
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