The share price of this NBFC plunged 15 percent on Friday after the Reserve Bank of India directed its subsidiary, Asirvad Micro Finance, to halt loan sanctions and disbursals. Following this, several brokerages have also reduced their price targets for the NBFC.
Share Price Movement
In Friday’s trading session, the share price of Manappuram Finance Ltd fell 15 percent to Rs.150.22 per share, down from its previous close of Rs.177.33 per share. Over the past month, the stock has dropped by more than 28 percent.
What Happened
Manappuram Finance Ltd., a gold financing company, has faced multiple downgrades and price target reductions from brokerages following the Reserve Bank of India’s directive to its subsidiary, Asirvad Micro Finance, to halt loan sanctions and disbursals.
The RBI took action against Asirvad and three other NBFCs for non-compliance related to the assessment of household income and repayment obligations on their microfinance loans.
CLSA noted that Asirvad accounts for 25 percent of Manappuram’s total Assets Under Management (AUM) and has lowered Asirvad’s profitability estimates and the target multiple in Manappuram’s valuation.
Target Recommendations
Brokerage firm CLSA has maintained its “outperform” rating on Manappuram Finance but lowered its price target to Rs.200 per share from Rs.240.
Morgan Stanley downgraded the stock to “EqualWeight” from “Overweight” and reduced its price target to Rs.170 each, citing potential profit impacts from the recent RBI embargo.
Jefferies also downgraded Manappuram to “hold” and cut its price target to Rs.167 apiece, suggesting the company may need to inject capital into its subsidiary if microfinance loans unwind and defaults increase, affecting earnings.
Among the 18 analysts covering Manappuram, 12 maintain a “buy” rating, four suggest a “hold,” and two recommend a “sell.”
Asset Under Management
The stand-alone Assets Under Management (AUM) is Rs.31,035 crores, reflecting a year-on-year growth of 20.6 percent. The consolidated AUM stands at Rs.44,932 crores, an increase of 21 percent compared to the same quarter last year.
The gold AUM has reached Rs.23,647 crores, marking a 14.8 percent improvement year-on-year and a 10 percent increase sequentially.
Financial Overview
In its latest financial update, the company reported remarkable net sales of Rs.2,488 crore for Q1 FY25, reflecting a 23 percent increase from Rs.2,030 crore in Q1 FY24. Moreover, net profits surged by 12 percent to Rs.557 crore in Q1 FY25, compared to Rs.498 crore in Q1 FY24, highlighting significant growth during this period.
About the company
Manappuram Finance Ltd is a prominent Indian non-banking financial company (NBFC) headquartered in Thrissur, Kerala. The company primarily offers gold loans but has diversified its services to include microfinance, vehicle loans, home finance, and SME lending. As of March 2024, it reported assets under management (AUM) of approximately Rs.420.69 billion
Written by – Siddesh S Raskar
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