IIFL Finance Ltd. will need to unwind alternative investment funds exposure worth Rs 182.4 crore.
The announcement comes after the Reserve Bank of India directed banks and non-banking financial companies to liquidate their holdings in AIFs, which have downstream investments in debtor companies. The move is aimed at addressing concerns related to a possible evergreening of loans through this route.
IIFL Finance's investment of Rs 21.4 crore in IIFL Fintech Fund will be impacted. It has an outstanding debt exposure of Rs 3.28 crore in one of the downstream investments of the fund, according to an exchange filing on Thursday.
Subsidiary IIFL Home Finance Ltd. holds investments of Rs 161.1 crore under the priority-distribution model, which will require 100% deduction from capital if not liquidated. However, the unit is adequately capitalised with a capital to risk weighted assets ratio of 47.55% as on Sept. 30, according to the NBFC. "The impact of this deduction shall reduce the CRAR to 46.39%, if reinstated as of September 30, 2023, reflecting a marginal impact of 1.16%."
IIFL Finance also has AIF investments worth Rs 910 crore that do not include any downstream. Hence, these investments won't have any impact and will not require additional provisioning or capital adequacy.
Shares of IIFL Finance were trading 3.64% lower at Rs 596.70 apiece on the BSE compared to a 0.43% advance in the benchmark Nifty 50 as of 2.26 p.m.
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