IIFL Capital Shares Surge 4% Following Preferential Share Issue to Fairfax

IIFL Capital Share Price Jumps 6% Amid Preferential Share Issuance

IIFL Capital's share price surged as much as 6% on Thursday during trading, following the company's announcement to issue preferential shares to Fairfax India. The stock opened at ₹335 apiece, up from its previous close of ₹332.50 on Wednesday.

Preferential Allotment Details

In an exchange filing dated May 7, IIFL Capital revealed that Fairfax India will increase its shareholding in the company through its wholly owned subsidiary, FIH Mauritius Investments, by infusing ₹2,000 crore. The company's board has approved the allotment of 5.71 crore fully paid-up equity shares to FIH Mauritius through a preferential issue at ₹350 per share. This move will increase FIH Mauritius' stake in IIFL Capital from 27.18% to 38.47% on a pre-open offer basis.

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In line with SEBI's Substantial Acquisition of Shares and Takeovers Regulations, the preferential allotment will trigger a mandatory open offer to IIFL Capital's public shareholders, resulting in a change in control. After the completion of the preferential allotment and the open offer, FIH Mauritius will be designated as a promoter of IIFL Capital along with the existing promoters, including Nirmal Bhanwarlal Jain, who owns 15.08% of the pre-issue capital, and Venkataraman Rajamani, who holds 3.59%. HWIC Asia Fund (Class A Shares), an affiliate of FIH Mauritius with an existing 3.33% stake in the company, will also be reclassified as part of the promoter group.

Board Restructuring and Shareholder Approval

FIH Mauritius will gain the right to appoint two non-executive directors to the board as long as its holding remains at or above 20% of the share capital, and one director if its stake stays above 10%. The board will be restructured after the transaction is completed. The company will also revise its Articles of Association to include the special rights granted to FIH Mauritius under the Investment Agreement.

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Share Price Trend

IIFL Capital's share price trend has largely remained positive despite weak market sentiments. The stock has gained over 11% in a week and 31.54% in a month. However, the multibagger stock has descended 9% in terms of year-to-date (YTD) but has given 50% gains in a year. Looking at the broader level, the stock has delivered whopping 500% returns in three years and 438% returns in five years.