Prem Watsa-backed Fairfax India Holdings Corporation is investing up to $200 million, about Rs 1,650 crore, in IIFL Finance after an embargo by the Reserve Bank of India (RBI) raised liquidity concerns in the non-bank lender among its investors.
Earlier this week, the central bank barred IIFL Finance from sanctioning or disbursing gold loans with immediate effect after it observed certain material supervisory concerns in the gold loan portfolio.
IIFL Finance said in a statement that the RBI’s restrictions have raised liquidity concerns among its investors and lenders and in response to these concerns, Fairfax India has agreed to extend up to $200 million of liquidity support. This will be on mutually agreeable terms and subject to applicable laws, including regulatory approvals (if any).
For the quarter ended December 31, 2023, Fairfax via FIH Mauritius Investments held a stake of 15.12 per cent in IIFL Finance.
“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,” Fairfax India chairman Prem Watsa said.
Commenting on the development, IIFL Finance managing director Nirmal Jain said Fairfax India’s decision to provide liquidity support is very timely and motivating at this crucial juncture.
The RBI’s action continued to adversely hit the stock, which plummeted for the second consecutive session by another
20 per cent. It fell Rs 95.70 to settle at Rs 382.80 — its lower circuit limit as well as a 52-week low — on the BSE.
JM clarity
JM Financial on Wednesday said it had a “careful and detailed review” of the Reserve Bank’s order imposing restrictions on the company’s financing business and asserted that there were “no material deficiencies” in its loan sanctioning process.
The Reserve Bank on Tuesday imposed restrictions on JM Financial Products Ltd after it found the company indulged in various manipulations, including repeatedly helping a group of its customers to bid for various IPOs.
