BENGALURU/MUMBAI, Sept 20 (Askume) – Shares of India’s IIFL Finance (IIFL.NS) surged 13% on Friday after India’s central bank reversed an earlier ban on gold lending by non-bank lenders .
The stock was up 13% at Rs 560.60, its highest level since late February, as of 11:34 am IST, before giving back some gains and trading up 8.5%. The stock had fallen nearly 14% till the last close after the Reserve Bank of India issued restrictions in March.
The Reserve Bank of India ordered IIFL Finance to immediately stop disbursing gold loans, citing “critical regulatory issues”.
Following the imposition of restrictions, the company began a special audit in April as directed by the Reserve Bank of India.
“We expect IIFL to now make a strong comeback in the gold loan business and regain its market share in this segment,” analysts at brokerage firm Motilal Oswal said in a report on Thursday.
“We believe IIFL can also take pricing action and compete aggressively (if required) to accelerate its gold loan growth.
IIFL reported a net loss of 226.6 million rupees ($2.71 million) in the quarter ended June 30, compared with a profit of 1.51 billion rupees in the same period last year due to Reserve Bank of India restrictions.
Gold loans accounted for 21% of the company’s total loan assets as of June 30, down from 30% at the end of March.
On Friday, rival Muthoot Finance fell 3% and Manappuram Finance dropped nearly 4% before paring losses.
Kranthi Bathini, Director – Equity Strategy at Wealthmills Securities, said investors can rest assured that IIFL Finance has taken corrective measures and is working on strengthening compliance.
“Now that the restrictions have been lifted, it will take around 6-8 months for the company to recover and overcome the lag effect, which coupled with higher gold prices could help the stock.”
(1 USD = 83.5340 Indian Rupees)
