IIFL Finance shares gain 4% on mega Blackstone deal; Board approves ₹6,414 crore fund raise

Shares of IIFL Finance gained 4% on Wednesday, November 11, after the company's board approved the proposal to raise funds to the tune of ₹6,414.2 crore after the conclusion of its board meeting on Tuesday.

The fund raise amounts to 24% of its current market cap of ₹26,746 crore.

The board has approved the issuance of — 8.55 crore compulsorily convertible preference shares (CCPs) of face value ₹602 each and 2.1 crore warrants on private placement basis.

Blackstone affiliate Ingot SG is set to invest ₹5,000 crore in CCPs, while Anchorage Capital will invest ₹150 crore in CCPs.

The company's promoters will infuse ₹1,264 crore via warrants.

Investor

CCPS Nos

Amount (₹ Crore)

The fund infusion will raise the capital adequacy ratio from 17% to 30%. The funds will support the next phase of growth across its secured lending. The infusion can improve credit rating and lower borrowing costs over time.

Here's a look at IIFL Finance's shareholding change post the issue:

Shareholder

Pre-Issue

Post-Issue

In September, CNBC-TV18 had reported citing sources, that Blackstone was looking at acquiring stake in IIFL Finance. Sources said Blackstone may acquire Fairfax's entire stake in IIFL Finance.

There is also a possibility that Fairfax's unit FIH Mauritius could sell its stake in the company to fund its purchase of IDBI Bank. Post the fund raise, Fairfax's stake may have slipped to nearly 11% from 13.6% earlier.

Blackstone is also a shareholder in two other banking and financial services (BFS) companies Federal Bank and Aadhaar Housing Finance. It owns 9.99% stake in Federal Bank and 65% in the latter.

DAM Capital has maintained its "buy" rating on IIFL Finance, and has raised its price target to ₹880, stating that the much awaited capital infusion is now done.

The firm highlighted that a key positive of this is that a single investor has done a large ticket infusion and that too of Blackstone's quality. DAM Capital expects this investment to gradually bring operational efficiency and enhanced investor confidence.

Expect IIFL Finance to continue its outperformance on the gold book basis its relatively much granular presence across the country, to capture the shift towards the organized sector, DAM Capital wrote in its note.

With a 20% growth CAGR, a 3% RoA, and above mid-teens RoE, DAM Capital expects the stock to converge to its 1.6 times September 2028 price-to-book-value multiple over the next 12 months.

Stock reaction

Shares of IIFL Finance were trading 3.8% up at ₹650.7 apiece at 9.37 am on Wednesday. The stock has gained 7.3% in the past month and 40.7% in the last six months.

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