India's IIFL Finance jumps 13% after cenbank lifts gold loan ban (updated)

IIFL Finance

20/09/2024 07:34

(Adds analyst commentary in paragraph 5,6,10 and 11, financials
in paragraph 7)
    By Dimpal Gulwani and Siddhi Nayak
       BENGALURU/MUMBAI, Sept 20 (Reuters) - Shares of India's
IIFL Finance  IIFL.NS  surged 13% on Friday, after the country's
central bank revoked an earlier ban on the non-bank lender's
gold loan business.
    Shares rose as much as 13% to 560.60 rupees, their highest
since late February, before paring some gains to trade 8.5%
higher, as of 11:34 am IST. It had fallen about 14% as of last
close, after the Reserve Bank of India's ban in March.
    The RBI had ordered IIFL Finance to stop disbursing gold
loans with immediate effect, citing "material supervisory
concerns".
    Following the curbs, the company started a special audit in
April as directed by the RBI.
    "We expect IIFL to now make a strong comeback in the gold
lending business to regain its market share in the segment,"
analysts at brokerage Motilal Oswal said in a note on Thursday.
    "We believe that IIFL could even take pricing actions and
compete aggressively (if needed) to accelerate its gold loan
growth."
    IIFL reported a net loss of 226.6 million rupees ($2.71
million) for the quarter ended June 30, compared with a profit
of 1.51 billion rupees a year earlier, hurt by the RBI's
embargo.
    Gold loans accounted for 21% of the company's total loan
assets, as of June 30, down from 30% as of March-end.
    On Friday, peers Muthoot Finance dropped 3% and Manappuram
Finance fell as much as about 4%, before paring losses to trade
flat.
    Investors are assured that IIFL Finance has taken corrective
measures and is working towards strengthening compliance, said
Kranthi Bathini, director of equity strategy at WealthMills
Securities.
    "Now that the restrictions are lifted, the company will take
about 6-8 months to bounce back and shred the lag effect coupled
with rise in gold prices which could help the stock."

($1 = 83.5340 Indian rupees)

 (Reporting by Dimpal Gulwani in Bengaluru and Siddhi Nayak in
Mumbai; Editing by Rashmi Aich)
 ((Dimpal.Gulwani@thomsonreuters.com;))