IIFL Finance share price rises over a per cent in a weak market; HSBC sees 35% upside in stock
IIFL Finance share price rose over a per cent in morning trade defying weak market sentiment after global financial firm HSBC initiated coverage on the stock with a buy recommendation, pegging the target price of ₹790, implying an upside of as much as 35 per cent from the stock's previous session's close of ₹586.35 on BSE. The stock opened at ₹589.45 against the previous close of ₹586.35 and soon rose over a per cent to the level of ₹592.75. The stock hit its 52-week high of ₹648 on September 11 this year.
It has clocked a whopping gain of nearly 65 per cent in the last one year while the equity benchmark Sensex has gained about 12 per cent in the same period. In a report on September 18, HSBC pointed out that IIFL has strengthened its business by making the following four strategic pivots: (1) Improved liability management:Over FY14-19, 16-34 per cent of IIFL’s borrowings were through short-term papers, leading to a negative gap between assets and liabilities (maturity less than 12 months) in FY18. IIFL has reduced its dependence on short-term borrowings and maintains a liquid balance sheet, HSBC said.
(2) Stronger risk management: The global financial firm observed that IIFL has run-down loans to commercial real estate, capital markets and commercial vehicles and built granular, largely secured, retail AUM (assets under management). (3) Aggressive investments in distribution, technology, and partnerships to drive growth. (4) IIFL was one of the first NBFCs to use the co-lending model, which sells down a proportion of loans to banks.
This frees up capital, is RoE (return on equity) accretive, and reduces risk, HSBC said. "IIFL has strengthened its business by making four strategic pivots. We think these steps will lead
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