After Fairfax investment, IIFL Finance to raise ₹2,000 crore via rights issue, NCDs

The board of IIFL Finance has approved raising up to ₹1,500 crore by way of issue of equity shares on a rights basis, the lender notified the exchanges.

In addition to the rights issue, the NBFC will also look to raise up to ₹500 crore through the issue of non-convertible debentures (NCDs) on a private placement basis.

Prior to this, Fairfax India Holdings Corporation, a longstanding investor in IIFL Finance, had announced its commitment to invest up to $200 million as liquidity support to assuage stakeholder concerns amid the regulatory action.

• Also read: IIFL effect: NBFCs slam brakes on disbursing gold loans in cash

Need for funds

The need for capital raising by the company has risen after the RBI, on March 4, barred the NBFC from sanctioning or disbursing gold loans, and assigning, securitising or selling any of its gold loans. The lender was allowed to continue to service its existing gold loan portfolio through usual collection and recovery processes.

The central bank had cited several “material supervisory concerns” in the gold loan portfolio including serious deviations in assaying and certifying purity and net weight of the gold at the time of loan sanction and auction, breaches in Loan-to-Value (LTV) ratio, disbursal and cash collections far in excess of the statutory limit, non-adherence to the standard auction process, and lack of transparency in charges being levied to customer accounts.

IIFL Finance has since said that 67 per cent of the gold loans were found to have deviation in their LTV ratios. The regulatory action is estimated to impact the NBFC’s business by 25-30 per cent over the next few quarters.

• Also read: RBI found deficiency in 67% of IIFL gold loan accounts put up for auction

Team re-jig

The board on Wednesday also approved re-designating Chief of Staff Abhiram Bhattacharjee as the Chief Operating Officer of the company, effective immediately. Further, Shivalingam A. Pillai has been appointed the Chief Compliance Officer.

Pillai will replace Mauli Agarwal who has stepped down from the position and is being re-designated as Company Secretary and Compliance Officer. Current Company Secretary and Compliance Officer Rupal Jain has resigned from the company to pursue higher studies, the notification said.

In addition, Bijou Kurien and Nihar Niranjan Jambusaria have been appointed as Additional (Independent) Directors, effective immediately.