IIFL Finance dives 20% for 2nd day after RBI's gold loan ban; Jefferies downgrades to 'hold'

Jefferies cut target price to Rs 435 per share, implying 9 percent downside from current levels

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26 Aug, 2025 12:21

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Shares of IIFL Finance nosedived 20 percent for the second straight session after RBI's decision to ban the company from issuing gold loans. At 9.41 am, shares of IIFL Finance were locked in the lower circuit at Rs 382.20 on the NSE, which also happens to be its lowest level in 52-weeks.

Worried by news of the ban, global brokerage firm Jefferies downgraded IIFL Finance to 'hold' from 'buy' and slashed the target price to Rs 435 per share from Rs 765. This implies that analysts expect the stock to further fall by 9 percent after it hit a 20 percent lower circuit on March 5.

The Reserve Bank of India (RBI) directed IIFL Finance to cease and desist from sanctioning or disbursing gold loans. The decision followed an inspection of the company by the RBI as of March 31, 2023, that revealed discrepancies in the company's functioning in certain areas.

"Certain material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of gold at the time of loan sanctions, breaches of loan-to-value ratio, and significant disbursal and collection of loan amount in cash far in excess of the statutory limit," the company filing said quoting the RBI's order.

ALSO READ: Material supervisory concerns: RBI asks IIFL Finance to stop giving fresh gold loans with immediate effect

Analysts at Jefferies said that the gold loan ban is expected to hurt IIFL's profit. "The RBI's order can dent earnings due to rapid unwinding of profitable gold loan book. Given the time of lifting of the ban is uncertain and we assume that the ban would stay for 9 months, we expect assets under management (AUM) to fall 1 percent YoYand 51 percent YoY fall in gold AUM in FY25," the brokerage firm noted.

Moreover, analysts cut FY25-26 earnings per share (EPS) by 26 percent-27 percent and RoE by 460-480 basis points (bps). They forecasted muted EPS compounded annual growth rate (CAGR) of 5 percent and RoE of 15-15.8 percent over FY24-26.

ALSO READ: 'There are no governance issues,' clarifies IIFL Finance as firm's stock plunges 20% after RBI's action

Over the last few months, the RBI has been engaging with the senior management and the statutory auditors of the company on these deficiencies, however, no meaningful corrective action has been evidenced so far, the company said in its exchange filing.

That being said, the RBI has allowed the company to continue to service its existing gold loan portfolio through the usual collection and recovery processes.

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