IIFL Finance shares surge 4% in bearish trade; here’s why

Shares of IIFL Finance rose over 4% in early trade on Monday, in an otherwise weak broader market, amid a report that Middle East-based sovereign wealth fund ADIA (Abu Dhabi Investment Authority) has emerged as the front-runner to acquire a minority stake in its housing finance subsidiary, IIFL Home Finance. In contrast, the BSE Sensex was trading 274 points lower at 55,494 levels at the time of reporting.

IIFL Finance shares opened a tad lower at ₹324, in sync with the broader market, against Friday’s closing price of ₹325.75 on the BSE. The stock soon reversed losses and gained 4.5% to hit an intraday high of ₹340.35 apiece, driven by a spurt in volume trade. Around 0.44 lakh shares worth ₹1.44 crore changed hands over the counter on the BSE, as compared to the two-week average volume of 0.57 lakh stocks. The market capitalisation of the midcap stock stood at ₹5,002.4 crore.

Mumbai-headquartered IIFL Finance (erstwhile IIFL Holdings) is one of the leading diversified financial services companies in India. Together with its subsidiaries - IIFL Home Finance and Samasta Microfinance – it provides a wide range of financial services such as home loans and mortgages. The company is backed by Canadian billionaire Prem Watsa’s Fairfax Group and the UK government’s development finance institution CDC Group plc, which hold 22.3% and 7.7% stake, respectively, in IIFL Finance.

IIFL Finance plans to sell a minority stake in its housing finance arm, IIFL Home Finance, as part of a value unlocking exercise. As per report, ADIA is in advanced talks to acquire a 20% share in IIFL Home Finance. A stake sale process was conducted by investment bank Avendus and ADIA had edged ahead of other suitors, Moneycontrol quoted sources close to the development as saying.

IIFL Home Finance is a wholly owned subsidiary of India Infoline Finance and is registered with National Housing Bank (NHB) as a housing finance company (HFC). The company primarily offers low ticket home loans, LAP and corporate mortgage loans (lower ticket developer funding). As on December 31, 2021, IIFL Home had an AUM of ₹22,207 crore, largely toward home loans (74%), followed by loan against property (LAP) (24%) and construction finance (2%). It had networth of ₹2,581 crore. Tier-I and overall CAR stood at 22.1% and 31.7%, respectively. Networth coverage for net NPAs was around 12 times.