Manappuram, Muthoot Finance extend fall on growth concerns

Both are down more than 6% each on the Bombay Stock Exchange.

Shares of companies engaged in gold finance business, such as Manappuram Finance and Muthoot Finance, have extended their yesterday’s fall and are trading lower by over 6% after the management of a leading gold financier Manappuram Finance issued a profit warning for the March quarter in an investor call.

Manappuram Finance has dipped 10% to Rs 24.90 on BSE on back of heavy volumes. A combined 3.08 million shares have already changed hands on the counter till 0923 hours against an average around five million shares that were traded daily in past two weeks on BSE and NSE. The stock was fell 20% yesterday. Muthoot Finance has slipped 6.2% at Rs 182, extending its previous day’s around 6% fall on BSE.

The management of Manappuram Finance expects to report a net loss (its first ever quarterly net loss) of Rs 50 crore in the March quarter as it is likely to reverse interest of around Rs 250 crore, about five times the amount indicated by the management in February. Notably, gold prices have fallen by 5% over the past two months. Any further deterioration in the same will be a key risk for the company.

"We expect an under recovery of revenue on certain gold loan port folios due to correction in the gold price. This may result in reduction in profit numbers for the 4th quarter ending March 31, 2013,” Manappuram Finance said in a regulatory filing.