BENGALURU/MUMBAI, Sept 20 (Reuters) - Shares of India's IIFL Finance surged 13% on Friday, after the country's central bank revoked an earlier ban on the non-bank lender's gold loan business.
Shares rose as much as 13% to 560.60 rupees, their highest since late February, before paring some gains to trade 8.5% higher, as of 11:34 am IST. It had fallen about 14% as of last close, after the Reserve Bank of India's ban in March.
The RBI had ordered IIFL Finance to stop disbursing gold loans with immediate effect, citing "material supervisory concerns".
Following the curbs, the company started a special audit in April as directed by the RBI.
"We expect IIFL to now make a strong comeback in the gold lending business to regain its market share in the segment," analysts at brokerage Motilal Oswal said in a note on Thursday.
"We believe that IIFL could even take pricing actions and compete aggressively (if needed) to accelerate its gold loan growth."
IIFL reported a net loss of 226.6 million rupees ($2.71 million) for the quarter ended June 30, compared with a profit of 1.51 billion rupees a year earlier, hurt by the RBI's embargo.
Gold loans accounted for 21% of the company's total loan assets, as of June 30, down from 30% as of March-end.
On Friday, peers Muthoot Finance dropped 3% and Manappuram Finance fell as much as about 4%, before paring losses to trade flat.
Investors are assured that IIFL Finance has taken corrective measures and is working towards strengthening compliance, said Kranthi Bathini, director of equity strategy at WealthMills Securities.
"Now that the restrictions are lifted, the company will take about 6-8 months to bounce back and shred the lag effect coupled with rise in gold prices which could help the stock."
($1 = 83.5340 Indian rupees)
Reporting by Dimpal Gulwani in Bengaluru and Siddhi Nayak in Mumbai; Editing by Rashmi Aich
Source: Reuters