The Non-Banking Financial Company (NBFC) sector in India plays a vital role in providing financial services, including loans, asset management, and investment services, especially in areas under-served by traditional banks. The sector includes prominent players such as Bajaj Finance, Manappuram Finance, HDFC Ltd., and Shriram Transport Finance. NBFCs are also involved in trading securities, with companies like Reliance Capital, ICICI Securities, and Kotak Mahindra Capital offering such services. With India’s growing middle class, increasing demand for credit, and favorable regulatory environment, the NBFC sector is expected to experience substantial growth, particularly in retail financing, securities trading, and infrastructure funding.
Share Price
The shares of Manappuram Finance Limited are currently trading at Rs. 188 up by 4.89 % from its previous close of Rs. 179.98 as of January 09, 2025. The stock also jumped 6.38% to touch an intraday high of Rs. 191.5.
Recent Updates
India’s central bank, the Reserve Bank of India (RBI), has lifted the restrictions imposed on Asirvad Microfinance regarding loan disbursals, which were initially enforced in October of the previous year. These sanctions were introduced due to concerns over the company’s pricing policies. The restrictions were removed following Asirvad’s submission to the RBI, assuring full compliance with regulatory standards moving forward.
Asirvad was acquired by Manappuram Finance in 2015, and since then, it has played a significant role in the company’s growth. The microfinance unit now contributes around 25% to Manappuram’s total Assets Under Management (AUM), highlighting its importance within the organization’s portfolio. With the removal of sanctions, the company is poised to continue its expansion in the microfinance sector.
Brokerage Update
Jefferies Price Target Update
Jefferies has raised its price target for Manappuram to ₹190 but maintained a “Hold” rating on the stock. The firm views the RBI’s decision to lift restrictions on Asirvad as a positive development, though it expects muted disbursements in the microfinance segment in the short term due to ongoing stress in the sector. Jefferies noted that the share price rebound to pre-ban levels reflects the market’s expectation of this move. However, the brokerage cautioned that Manappuram’s valuations are attractive, but near-term earnings could be impacted by the strain in its MFI portfolio, which may affect valuations.
Morgan Stanley’s Outlook
Morgan Stanley continues to have an “Equal-weight” rating on Manappuram, with a price target of ₹175. The brokerage removed the valuation assigned to Asirvad in its SOTP (Sum of the Parts) valuation. Morgan Stanley is awaiting management’s guidance on the expected pace of disbursements, as well as updates on revised loan pricing and underwriting norms in light of recent developments.
Financial Outlook
For the quarter ending September 30, Manappuram Finance reported a 2% increase in consolidated net profit, hitting ₹571 crore (about $68 million), above analysts’ forecasts of ₹531 crore. Gold loan financiers benefited from the spike in domestic gold prices, which hit all-time highs during this time. More consumers obtained loans against their gold holdings as a result of the rising prices, which raised the value of collateral. Gold loans now account for almost 70% of the company’s entire revenue, up 21% to ₹1,856 crore.
Apart from gold loans, microfinance loans experienced a noteworthy expansion of 22.6%, reaching ₹781 crore and accounting for 29.6% of total revenue. In addition to net interest income, the company’s total assets under management (AUM) increased 17.4% to ₹457 billion.
About the Company
Manappuram Finance is a prominent Non-Banking Financial Company (NBFC) in India, offering a diverse range of fund-based and fee-based services. These include gold loans, money exchange facilities, housing finance, loans against property, and commercial vehicle finance. The company is categorized as a Systemically Important Non-Deposit Taking NBFC (NBFC-ND), emphasizing its critical role in the financial system.
As the second-largest gold finance NBFC in India, Manappuram specializes in providing loans secured by used household gold jewelry. Its gold loan segment has been a significant contributor to the company’s growth, catering to a wide customer base seeking quick and accessible financing options. With a strong market presence, Manappuram continues to expand its service offerings, addressing diverse financial needs in both urban and rural markets.
Written By: Dipangshu Kundu.
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