BENGALURU, Sept 20 (Askume) – Shares of India’s IIFL Finance (IIFL.NS) surged nearly 13% on Friday after India’s central bank lifted a ban on gold loan operations by non-bank financial companies, bringing its financials under major pressure and triggering stock outflows.
The shares rose as much as 13.2% to Rs 560.95, its highest level since late February. The stock was last trading 9.2% higher at Rs 541 at 10:12 IST. The stock had fallen nearly 14% since its previous close after the Reserve Bank of India imposed restrictions in March.
In March this year, the Reserve Bank of IndiaIIFL Finance was ordered to immediately stop issuing gold loans, citing “significant regulatory concerns” about its gold loan portfolio .
Following the restrictions, the company began a special audit in April as directed by the Reserve Bank of India.
As of June 30, gold loans accounted for 21% of the company’s total loan assets, down from 30% at the end of March.
Some analysts had earlier expected that rival gold loan financial institutions such as Manappuram Finance (MNFL.NS) and Muthoot Finance (MUTT.NS) would benefit as the intensity of competition reduces following the regulatory ban on IIFL Finance .
However, Morgan Stanley said in a note on Thursday that Muthoot Finance may now face a higher risk of profit loss and poor performance if the restrictions are lifted.
Muthoot Finance fell 3% and Manappuram Finance 1% on Friday.
