Shares of IIFL Finance soared 11% on Friday after the Reserve Bank of India reversed the restrictions on the company's gold loan business. 

What Happened: IIFL Finance in an exchange filing said RBI lifted the restrictions imposed on the gold loan business of the company. The decision will allow the company to resume sanctioning, disbursing and selling gold loans. 

RBI had imposed restrictions on the gold loans business of the company on March 4 citing "material supervisory concerns". The top bank found regulatory violations in the company's financial position as of FY23 during an inspection.

Brokerage Views: Jefferies upgraded the stock to "buy" from "hold" and raised the target price to ₹595. The brokerage said the gold loan book will take some time to rebuild. According to the research firm, the ramp-up of co-lending AUM will be key to return on equity recovery.

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The company has improved earnings visibility with higher gold prices helping the company, the brokerage added. Jefferies said the profit should recover from FY25 lows and grow at 50% CAGR over FY25-27. Better earnings visibility should lift the valuations, the research firm added. 

Incred said the incremental market share gain after the restriction lift will be slower for the company despite the positive development. The brokerage’s channel check indicates good demand for gold loans as gold prices are rising.

Price Action: Shares of IIFL Finance rose 11.42% to ₹552.60 on Friday morning. 

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