The stock of IIFL Finance, a non-banking financial company (NBFC), witnessed a steep decline of 6.71% on Friday, after a large block deal worth Rs 1,358 crore was executed on the National Stock Exchange (NSE).
A block deal is a trade of a large number of shares or a high value of securities between two parties, usually done through a separate window on the stock exchange. The minimum quantity of shares for a block deal is 5 lakh or a minimum value of Rs 5 crore. Block deals are usually done by institutional investors or large shareholders who want to buy or sell a big stake in a company.
Who sold the shares of IIFL Finance?
According to the NSE data, a total of 4.44 crore shares of IIFL Finance, representing 26.55% of the total share capital, were traded in a single block deal at an average price of Rs 306.25 per share. The seller of the shares was not disclosed, but some media reports suggested that it could be Fairfax India Holdings Corporation, a Canadian investment firm that holds a 26.5% stake in IIFL Finance. Fairfax had acquired the stake in 2018, when IIFL Holdings, the parent company of IIFL Finance, was demerged into three separate entities: IIFL Finance, IIFL Wealth Management and IIFL Securities.
How did the market react to the block deal?
The block deal had a negative impact on the market sentiment, as the shares of IIFL Finance plunged by 6.71% to close at Rs 307.95 on Friday, after touching an intraday low of Rs 303. The stock has underperformed the broader market in the past year, losing 18.5% as compared to a 25.6% gain in the Nifty 50 index. The block deal also affected the shares of other IIFL group companies, as IIFL Wealth Management fell by 3.2% and IIFL Securities dropped by 2.9% on Friday.
What are the prospects of IIFL Finance?
IIFL Finance is one of the leading NBFCs in India, offering a range of financial products and services, such as home loans, gold loans, business loans, microfinance, capital market finance and wealth management. The company has a diversified portfolio of over Rs 40,000 crore, with a presence in 2,500 locations across 500 cities in India. The company has also expanded its operations in international markets, such as the UK, the US, Singapore, Hong Kong and Dubai.
The company has reported a strong performance in the third quarter of the current fiscal year, with a 78% year-on-year growth in its consolidated net profit to Rs 248 crore. The company has also improved its asset quality, with a reduction in its gross non-performing assets (NPAs) ratio to 1.6% from 2.2% a year ago. The company has also maintained a healthy capital adequacy ratio of 23.4%, well above the regulatory requirement of 15%.
The company has also announced a strategic partnership with ICICI Bank, India’s second-largest private sector bank, to offer co-branded credit cards to its customers. The company expects to leverage its large customer base and distribution network to cross-sell the credit cards and generate fee income. The company has also launched a digital platform, called IIFL Markets, to provide online trading and investment services to its customers.
The company faces some challenges, such as the impact of the COVID-19 pandemic on the economy and the demand for credit, the competition from other NBFCs and banks, and the regulatory uncertainties in the NBFC sector. However, the company has taken several measures to mitigate the risks, such as increasing its liquidity buffer, enhancing its digital capabilities, diversifying its funding sources, and focusing on profitable and secured segments.
