HSBC has upgraded its rating on IIFL Finance to ‘Hold’ and raised the target price to Rs 540 from Rs 350, following the Reserve Bank of India’s (RBI) decision to lift restrictions on IIFL’s gold loan business. The normalization of this segment is expected to act as a significant tailwind for the company’s overall performance.
As a result of the positive developments, HSBC has increased its earnings per share (EPS) estimates for FY25-27 by 6-16%. However, the stock has already surged by approximately 65-70% since its March 2024 lows, leading HSBC to believe that current valuations are already factoring in most of the positives.
The brokerage remains cautious, suggesting that while the removal of restrictions boosts growth prospects, the recent stock rally leaves limited room for further upside.