IIFL Finance‘s share price sunk 20% as soon as the markets opened on Wednesday hitting a new 52-week low of ₹382.20.

What Happened: The stock has been under huge pressure ever since the RBI’s regulatory action. Following the development brokerages have also turned cautious on the stock. Jefferies downgraded the stock to “hold” from its previous rating of “buy” and revised its price target downward to ₹435 from ₹765.

According to the analysts, the RBI’s decision to prohibit the company from sanctioning or disbursing gold loans is expected to adversely affect its earnings. The brokerage highlighted that the gold loan book constitutes approximately one-third or 32% of the NBFC’s assets under management (AUM).

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The brokerage firm said that the prolonged duration of the ban could lead to a significant decline in the company’s AUM. If the ban remains in place for nine months, Jefferies estimates that the company’s AUM may decrease by 1% in the financial year 2025, with Gold Loan AUM potentially halving.

Analysts at Motilal Oswal also shared the same view. The brokerage said that a sharper run-down in the gold loan portfolio and employee attrition is likely if the ban remains in force for longer. Besides, it sees reputational damage that might necessitate renewed investments in building trust in its brand. The brokerage has maintained its “buy” rating for the stock but revised the price target to ₹560.

Price Action: IIFL Finance's share price was locked in the 20% lower circuit at ₹382.20 on Wednesday.

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