IIFL Finance To Get Liquidity Support Of Up To USD 200 Million From Fairfax India

Fairfax India Holdings Corporation a steadfast investor in IIFL Finance Limited, has stepped forward to provide crucial liquidity support in response to the recent Reserve Bank of India embargo on the company’s gold loan disbursements, effective March 5, 2024.

About the agreement

The RBI’s imposition of restrictions has prompted concerns among investors and lenders about the liquidity position of IIFL Finance. In a significant move, Fairfax India has pledged to invest up to USD 200 million in liquidity support, subject to mutual agreement and regulatory approvals.

The commitment from Fairfax India comes as a strategic move to address the liquidity concerns that have arisen following the RBI’s embargo. The USD 200 million liquidity support is intended to bolster IIFL Finance’s financial position, providing a safety net during this challenging period.

The terms of this investment will be determined through mutual agreement between Fairfax India and IIFL Finance, and it will be subject to applicable laws and regulatory approvals.

Prem Watsa, Chairman of Fairfax India, expressed confidence in IIFL Finance’s management team, led by Nirmal Jain and R Venkataraman. Watsa stated, “We have been long-term investors in the IIFL group of companies and have full trust and confidence in the company’s strong management team. We are confident that Nirmal and Venkat will take corrective actions to meet and exceed RBI’s compliance standards.”

Nirmal Jain, Managing Director and Founder of IIFL Finance, acknowledged the timely and motivating offer from Fairfax India. He emphasised the company’s commitment to complying fully with the RBI’s directives and growing the business under the regulator’s guidance.

Jain stated, “At this crucial juncture, Fairfax India’s and Prem’s generous offer to provide liquidity support is very timely and motivating. We are committed to complying fully with RBI’s directives and growing the business under the regulator’s guidance on the strong foundation of compliance, risk management, and fair practices.”

Share Performance

At the beginning of the day, the company’s stock opened at Rs 382.80 per share on the BSE, hitting intraday highs and lows of Rs 383 and Rs 328.80 per share, respectively. Currently, the stock is locked into a lower circuit of 20%. We hope this positive step from Fairfax India will boost investor trust and confidence and help the stock regain its momentum.

The company’s current market capitalisation stands at Rs 14,603 crore, and the stock has delivered a negative return of 16% in the past year and a positive return of 31% in the past three years.

Company Overview

IIFL Finance is a diversified NBFC in India engaged in the business of loans and mortgages, along with its subsidiaries. It offers a wide spectrum of products such as home loans, gold loans, business loans, microfinance, capital market finance, and developer & construction finance, etc.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.