IIFL Finance shares jump 5% as DAM Capital gives thumbs up to Blackstone stake buy

IIFL Finance Ltd shares rose 5% on Wednesday after DAM Capital initiated a 'Buy' recommendation on the stock with a target price of Rs 880. The brokerage said the much-awaited capital infusion into the non-banking financial company (NBFC) had been completed, adding that the investment could support operational efficiency, strengthen lender confidence and improve the company's growth prospects.

DAM Capital said the participation of a single large investor, Blackstone, in the capital raise was a key positive for IIFL Finance. The brokerage expects the investment to gradually improve operational efficiency and boost investor confidence. It also believes the infusion could provide additional comfort to lenders, particularly as the company's cost of funds (CoF) had already been improving following the Reserve Bank of India's lifting of restrictions.

IIFL Finance shares touched a high of Rs 657 on Wednesday, rising 4.5% from their previous close of Rs 626.65. The stock opened at Rs 646 and also touched a low of Rs 638 during the session.

DAM Capital on IIFL Finance: The brokerage expects IIFL Finance to maintain its outperformance in the gold loan business, supported by its relatively granular presence across the country. It believes the company is well-positioned to benefit from the shift towards organised lending in the gold loan segment.

DAM Capital also noted that IIFL Finance's housing finance subsidiary was showing signs of recovery following recent consolidation. The brokerage said the stock was trading at 1.2 times its September 2028 book value and eight times its estimated earnings.

It expects the company to deliver a 20% compound annual growth rate (CAGR) in growth, a return on assets (RoA) of 3% and return on equity (RoE) in the mid-teens, even after the capital raise. Based on these expectations, DAM Capital sees the stock's valuation converging towards 1.6 times its September 2028 book value over the next 12 months and has set a target price of Rs 880.

Blackstone to acquire around 16% stake in IIFL Finance

IIFL Finance announced on November 10 that it would raise Rs 6,414 crore through a primary capital infusion led by Blackstone and the company's promoters. Funds managed by Blackstone Private Equity will invest Rs 5,000 crore for an approximately 16% stake on a fully diluted basis through a preferential allotment of compulsorily convertible preference shares.

The preference shares will convert into equity at Rs 602 per share within 18 months of allotment. The company's promoters, Nirmal Jain and R Venkataraman, will invest Rs 1,264 crore through warrants, while Anchorage Capital will participate with a primary investment of Rs 150 crore.

IIFL Finance said the entire investment would come in as primary capital. Based on the September 2026 pro forma position, the capital infusion is expected to increase its capital adequacy ratio from around 17% to approximately 30%.