IIFL Finance Ltd said on March 6 that shareholder Fairfax India has agreed to provide up to $200-million liquidity support to the company, days after Reserve Bank of India barred the NBFC from disbursing gold loans.
Fairfax India Holdings Corp, a longstanding investor in IIFL Finance Ltd, has announced its commitment to provide liquidity support amidst the recent Reserve Bank of India (RBI) embargo effective March 5, 2024, on
the company's gold loan disbursements, said IIFL Finance in a stock exchange filing.
"The RBI's embargo has raised liquidity concerns amongst the company’s investors and lenders. In response to these concerns, Fairfax India has agreed to invest up to $200 million of liquidity support on terms to be mutually agreed and subject to applicable laws, including regulatory approvals (if any)," added IIFL Finance.
RBI, on Monday, barred IIFL Finance Ltd from disbursing gold loans, with immediate effect following multiple supervisory concerns, including serious deviations in assaying and certifying the purity of the yellow metal.
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IIFL Finance's scrip fell a whopping 36% in last two trading sessions after RBI's action against the NBFC. On Wednesday at 1130 hours, IIFL Finance's scrip on BSE was trading 20% lower at Rs 382.8.
"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 led by Nirmal Jain and R Venkataraman. We are confident that Nirmal and Venkat will take corrective actions to meet and exceed RBI's compliance standards,” said Prem Watsa, Chairman of Fairfax India.
Nirmal Jain, Managing Director and Founder of IIFL Finance, said: “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.”
The management of the IIFL Finance on March 5 ruled out any significant impact on the profitability of the company in the near term because of RBI's action. The company will continue with the recovery process, it said at a conference call with analysts.
The management pointed out that there were no corporate governance issues in the RBI observations. "These (the points raised by the regulator) are operational issues which will be addressed with utmost sincerity by the company," it said.
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