IIFL Finance saw a notable recovery on March 7, surging over 8 percent in morning trading. This rebound follows a 35 percent decline over the last two sessions, triggered by the RBI’s decision to prohibit the company from issuing gold loans.
The stock’s sharp turnaround came after IIFL Finance announced that Canadian billionaire Prem Watsa has agreed to extend $200 million in liquidity support to the company in case it faces any funding challenges following the regulatory restrictions on its gold loan business. Watsa, backed by Fairfax India Holdings Corporation, holds stakes in IIFL Finance and other IIFL group entities. Fairfax India stated, “The RBI’s embargo has raised concerns among the company’s investors and lenders. In response, Fairfax India has committed to providing up to $200 million in liquidity support under mutually agreed terms and subject to applicable laws, including regulatory approvals.”
As of 9:22 am, IIFL Finance shares were trading at Rs 409.80 on the National Stock Exchange (NSE), marking a 7.2 percent increase from the previous close. Over the past year, the stock has declined by 9 percent, underperforming the benchmark Nifty 50, which has risen by approximately 26 percent during the same period.
On March 6, the stock exchanges revised the circuit limit for IIFL Finance downward to 10 percent from the previous 20 percent.
Following the RBI’s ban, brokerage firm Jefferies downgraded IIFL Finance from ‘buy’ to ‘hold’ and reduced the target price to Rs 435 per share from Rs 765. Analysts anticipate further challenges for the stock in the near term.
Jefferies highlighted that the gold loan ban is likely to impact IIFL’s profitability. “The RBI’s directive may affect earnings due to the rapid unwinding of the profitable gold loan book. Assuming the ban remains in place for 9 months, we expect a 1 percent year-on-year decline in assets under management (AUM) and a 51 percent year-on-year decrease in gold AUM in FY25.”
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