Investors in IIFL Finance, a prominent NBFC specializing in retail credit, have experienced a significant decline in their wealth as the company’s shares have plummeted sharply after the RBI imposed restrictions on its gold loan disbursements, raising concerns about liquidity among investors and lenders.
Over the past 12 trading sessions, the company has witnessed a substantial decline in its share price, plummeting from ₹597 per share to the current trading price of ₹336, marking a steep decrease of 44%.
Despite broader market gains, the stock hit another 52-week low of ₹329.50 in today’s trading session. With the current trading price, the stock has now reached levels not seen since August 2022.
The company’s market capitalization has shrunk significantly from ₹22,686 crore to ₹12,831 crore, reflecting a loss of ₹9,855 crore over the past 12 trading sessions.
Meanwhile, the stock’s performance was further influenced by target cuts from brokerage firms. On the other hand, credit rating agency Fitch placed India’s IIFL Finance’s ‘B+’ long-term issuer default rating and medium-term note program rating on negative watch, adding to the downward pressure.
Despite efforts to restore investor and lender confidence, including a commitment of up to $200 million in liquidity support from the company’s top shareholder, Fairfax India, sentiment remains subdued.
In a bid to bolster its financial position, the company announced on Wednesday that it successfully raised ₹500 crore through the issuance of non-convertible bonds in a private placement as part of its larger plan to raise ₹2,000 crore. These debentures carry an interest rate of 9.50% per annum and are set to mature on March 20, 2027.
Additionally, the company intends to raise the remaining ₹1,500 crore through a right issue, offering equity shares to its existing eligible shareholders.
IIFL Finance stands out as a prominent RBI-regulated non-banking financial company (NBFC) specializing in retail credit. Alongside its subsidiaries, IIFL plays a significant role in providing small-ticket gold, home, and business loans, boasting loan assets amounting to approximately ₹78,000 crores and a net worth exceeding ₹10,000 crores, as outlined in the company’s recent exchange filing.
As of December 31, 2023, the gold loan assets under management (AUM) reached ₹24,692 crore, constituting 32% of the total loan assets. In the third quarter of FY24, the gold loan AUM surged by an impressive 35% year-on-year (YoY). Notably, the company extends gold loans to various segments, including salaried individuals, self-employed professionals, and micro, small, and medium enterprises (MSMEs).
The article originally appeared on Livemint.