Jefferies downgrades IIFL Finance after RBI action; stock tanks 36% in two sessions
IIFL Finance tanked 20% on Wednesday to fresh 52-week low of Rs 382.20 on the NSE following a downgrade by global brokjerage Jefferies. The US brokerage has slashed its target price to Rs 435 from an earlier target of Rs 765 while recommending a ‘hold’ rating versus 'buy' it held earlier.
The downgrade comes after the Reserve Bank of India (RBI) directed the company to cease and desist from sanctioning or disbursing gold loans or assigning/securitising/selling any of its gold loans.
Jefferies in a note said that RBI's restriction should dent earnings due to rapid unwinding of profitable gold loan book even as the timing of the lifting of the ban remains uncertain. Assuming the ban stays for 9 months, it cut FY25-26 EPS by 26-27% and ROE by 460-480 bps. The profit is expected to fall 6% in FY26E, the brokerage noted.
Another brokerage, B&K Securities also saw the gold loan portfolio as the major growth driver for IIFL Finance. Around 25% of consolidated profitability stems from gold loans and this aspect is likely to be affected by the imposed RBI restrictions, B&K said.
In two sessions, the stock has witnessed a price erosion of 36% while the market cap has plunged by as much amount to Rs 14,580 crore from Rs 22,803 crore on the closing price basis on Monday, a day before the RBI action.
With today's losses, the stock has extended its losing streak for the fourth straight session.
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The RBI decision came following an
