IIFL Finance shares hit 10% upper circuit after Fairfax offers liquidity support

Snapping a three-day losing streak after the restrictions imposed by the Reserve Bank of India, shares of IIFL Finance Ltd bounced back on Thursday following the financial support from its longstanding investor Fairfax India Holdings Corp.

The IIFL Finance stock was locked in a 10% upper circuit at ₹420.4 apiece on NSE after opening the session at ₹393, up 2.82% from its previous close.

Heavy trading volumes were also witnessed on the stock counter, with the number of shares exchanging hands jumping by nearly 26 times by 1 pm on BSE.

The IIFL stock had plunged in the past three consecutive sessions, losing a cumulative of 38.6% of its value, after the Reserve Bank of India (RBI) banned the company from disbursing gold loans with effect from March 5.

However, IIFL Finance on Wednesday, March 6, announced that Fairfax India has agreed to invest up to $200 million in the company to address the immediate liquidity concerns amid investors after the RBI action.

Fairfax India said that the liquidity support would be offered on mutually-agreed terms and would be subject to applicable laws, including regulatory approvals (if any).

In a press release, Fairfax India chairman Prem Watsa said, “We have been long-term investors in the IIFL group of companies and have full trust and confidence in the company’s strong management team led by Nirmal Jain and R. Venkataraman. We are confident that Nirmal and Venkat will take corrective actions to meet and exceed RBI’s compliance standards.”

IIFL Finance is an RBI-regulated non-banking finance company (NBFC) engaged in retail credit. Along with its subsidiaries, IIFL is a key player in small ticket gold, home, and business loans, with loan assets of about ₹78,000 crore.