IIFL Finance is back in the game, but clawing back market share to be slow
Subscribe to enjoy similar stories. Shares of IIFL Finance Ltd surged nearly 9% in Friday’s early trade after the Reserve Bank of India (RBI) revoked the ban on the company’s gold loan business. As a result, IIFL can now resume disbursing and selling gold loans.
Note that the stock is still about 10% lower than ₹597.15 apiece seen on 4 March when the RBI decided to ban the company from disbursing gold loans. Remember, IIFL’s shares had tanked as much as 20% in a single day on 5 March. Its gold loan assets under management (AUM) stood at around ₹26,000 crore as of 4 March.
It dropped to about ₹14,700 crore as of June and to about ₹12,200 crore as of 5 August, said analysts from Motilal Oswal Financial Services in a report. Assuming that about 10% of the outstanding gold loans run down every month, the analysts expect IIFL’s gold loan AUM to be about ₹10,500 crore as of 19 September, when the ban was revoked. Nonetheless, with gold price near record highs, the lifting of the gold loan ban would help IIFL steadily ramp up its disbursals and normalize the pace in a couple of quarters.
Typically, elevated gold prices bode well for gold loan demand. That said, market share gains hereon for the company would be gradual. Also Read: Will gold prices spike higher if a full-fledged war breaks out? A couple of factors are at play here.
Incremental growth for IIFL Finance will be less aggressive and in line with most peers, as the company is obliged to follow best practices and norms to avoid any future problems from the regulator, said an Incred Research Services report. In the June quarter (Q1FY25) earnings call, the IIFL’s management said it is complying with all observations made by the RBI, which led to the ban on gold loans. As
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