RBI ban-hit IIFL Finance to get $200 million liquidity support from Fairfax, shares hit 20% lower circuit
Upstox
2 min read • Updated: March 6, 2024, 1:17 PM
Summary
Shares of IIFL Finance Ltd continued to slide for the second day, hitting the lower circuit of 20% at ₹382.20 which is also its 52-week low on NSE. The market capitalisation of the company has dropped to ₹14,580 crore in two days.
Troubled IIFL Finance Ltd on Wednesday said that its longstanding investor Fairfax India Holdings Corp has agreed to invest up to $200 million in the company to tide over the liquidity crunch faced by the company following the restrictions imposed by the Reserve Bank of India (RBI) on its gold loan disbursals.
The company, in a stock exchange filing, stated that Fairfax India Holdings has committed to provide liquidity support to IIFL Finance in the face of RBI’s embargo from March 5,2024, on gold loan disbursals.
Shares of IIFL Finance Ltd continued to slide for the second day, hitting the lower circuit of 20% at ₹382.20 which is also its 52-week low, on NSE. More than 65 lakh shares changed hands on NSE with large selling orders weighing on the stock value. The market capitalisation of the company has dropped to ₹14,580 crore in two days.
IIFL Finance shares have tanked around 36% in the two trading sessions to hit a year’s low after the RBI’s action against the non-banking finance company.
The company on Wednesday informed bourses that Fairfax India has agreed to infuse up to $200 million as liquidity support on mutually agreed terms and as per applicable laws. The funding has been proposed to assuage the liquidity concerns of lenders and investors, the company said.
Moreover, Fairfax India chairman Prem Watsa has exuded “full trust and confidence” in the Nirmal Jain and R Venkataraman-led management team of IIFL Finance.
Vatsa said that he is confident that Nirmal and Venkat will take corrective steps and measures to “meet and exceed” the central bank’s compliance norms.
IIFL Finance Founder and Managing Director Nirmal Jain said Fairfax India’s offer to infuse liquidity is “very timely and motivating”.
Jain said that the company will comply fully with the banking regulator’s directives and will expand business under the RBI’s guidance on the strong compliance, risk management, and fair practices.
The RBI on March 4 imposed restrictions on IIFL Finance barring it from gold loan disbursals from March 5, 2024. The action has been taken due to supervisory concerns and serious deviations in assaying and certifying the purity of gold, as per the RBI’s notice.