CA - Fairfax India's Turbulent Future: IIFL Gold Loans Crisis

2024-06-02 12:31:15 ET

Summary

• Fairfax India Holdings Corporation is facing significant challenges due to its holding in IIFL Finance and the ongoing RBI special audit.
• IIFL Finance's gold loan business has been banned by the RBI due to concerns about the assessment of the value of pledged gold and lack of transparency.
• Fairfax India has pledged up to $200 million to support IIFL Finance's liquidity, but it may not be enough.

Since my previous analysis on January 23, 2024 covering Fairfax India Holdings Corporation ( OTCPK:FFXDF )(FIH.U:CA) ("Fairfax India"), the situation around Fairfax India has changed significantly, especially on its holding in IIFL Finance. Given the uncertainty ahead for IIFL Finance and Fairfax India despite its support from the parent company, Fairfax Financial Holdings Limited ("Fairfax"), I recommend a "Hold" rating for Fairfax India at this time.

Introduction

Fairfax India is wholly controlled by Fairfax to act as the investment vehicle specifically for India....

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