Select NBFCs rally up to 20% after RBI action on IIFL Finance

Capri Global Capital (CGCL), CSB Bank, Muthoot Finance and Manappuram Finance are up between 7% and 20%

Shares of select financials, mainly those engaged in gold loan business, have rallied by up to 20 per cent on the BSE in Tuesday’s intra-day trade in an otherwise weak market.

Capri Global Capital (CGCL), CSB Bank, Muthoot Finance and Manappuram Finance are up between 7 per cent and 20 per cent. In comparison, the S&P BSE Sensex was down 0.25 per cent at 73,684 at Tuesday's intra day deals.

The rally in these stocks was seen after the Reserve Bank of India (RBI) in its order dated March 04, 2024 directed IIFL Finance to stop sanctioning or disbursing gold loans, with immediate effect (including ban on any assignment/securitization/down-selling transactions). RBI has, however, allowed IIFL to service its existing gold loan portfolio through the usual collection and recovery processes.

Among the individual stocks, CGCL zoomed 20 per cent to Rs 289.40, also hitting its 52-week high on the BSE. Today, the stock of CGCL turned ex-date for stock split and bonus. The company’s sub-divide face value of its equity shares from Rs 2 into Rs 1 to improve the liquidity of the company's shares and also increase the shareholders base in the stock market. CGCL issued bonus shares in the ratio of 1:1, that is, one bonus share for every one share held by the shareholders.

The group focuses on five major business segments namely MSME, wholesale construction finance, housing finance, indirect lending to fintech and other NBFCs and gold loans.

During FY23, with a view to foray and expand the gold loan vertical, the company has hired professionals with experience in gold loans financing. Within the asset under management (AUM) mix, the MSME segment constituted 37.4 per cent of the total AUM [PY: 48.1 per cent], housing constituted 25.4 per cent [PY:26.3 per cent] and gold loan segment constituted 10.9 per cent of total AUM.

CGCL maintained AUM momentum with the consolidated AUM including co-lending AUM increasing 54 per cent YoY and 8 per cent QoQ to touch Rs 13,362 crore in the December quarter of FY24. The company has continued to build upon its co-lending partnerships in all three products with strong prospects building up in Gold Loan co-lending. The loss in Gold Loan business has more than halved in Q3 vs Q2 of FY24. It is now moving towards break-even in Q4, the management has said.

Meanwhile, shares of Manappuram Finance hit a 52-week high of Rs 199, as they rallied 8 per cent on the back of a seven-fold jump in trading volumes. A combined 36.81 million shares representing 4.4 per cent of total equity of the company have changed hands on the NSE and BSE.

The company’s gold loan business constitutes 51.4 per cent of consolidated AUM, while the remaining 48.6 per cent comprises Microfinance, Vehicle, Housing and MSME Finance.

CRISIL Ratings believes that the gold loan AUM will continue to account for around two-third of the consolidated AUM and over 75.6 per cent of consolidated profit over the medium term. Consequently, the consolidated credit profile has the ability to absorb asset quality and earnings risks in the microfinance, vehicle or housing finance businesses in the near term.

Shares of Muthoot Finance, the gold loan provider, surged 11 per cent to Rs 1,479. Analysts at Religare Broking remain positive on Muthoot Finance as the company saw healthy growth in AUM which was driven majorly by its gold loan AUM along with other subsidiaries.

The company continues to maintain its operational efficiencies along with controlling opex. It expects to grow at a healthy pace despite facing competition from banks and other entities in the gold lending business. It continues to be the market leader in the organised gold lending business, the brokerage firm said in the result update. It maintains a ‘buy’ rating on the stock with target price of Rs 1,627 per share.

Further, shares of CSB Bank soared 7 per cent to Rs 374 in intra-day trade. The retail assets portfolio of the Bank comprises Gold loans and other retail loans namely Personal Loans, Auto Loans and Credit Cards.