IIFL Finance’s stock price is in freefall for the second day in a row, dropping a staggering 20% on Wednesday. This follows a double whammy: a ban on gold loans imposed by the Reserve Bank of India (RBI) and a downgrade by global brokerage firm Jefferies.
The RBI’s ban, stemming from a recent inspection, restricts IIFL Finance from issuing new gold loans or even managing their existing ones. This move sent shockwaves through the market, raising concerns about the company’s future profitability.
Adding fuel to the fire, Jefferies downgraded IIFL Finance’s stock from “buy” to “hold” and slashed their target price by a significant margin. Analysts at Jefferies believe the gold loan ban will significantly impact the company’s earnings, especially considering that gold loans make up a substantial portion of IIFL Finance’s business.
The uncertainty surrounding the duration of the ban is further spooking investors. Jefferies predicts a potential cut of 26-27% in IIFL Finance’s earnings per share (EPS) over the next two financial years if the ban remains in place for nine months.
With its stock price hitting a 52-week low, IIFL Finance faces an uphill battle. The company will need to navigate this crisis by addressing the RBI’s concerns and regaining investor confidence
