Manappuram Fin share price tanks 15% as RBI bans loan disbursement by arm

Manappuram Finance share price: Manappuram Finance share price tanked 15 per cent to Rs 150.80, hitting an 11-month low on the BSE after the RBI put restrictions on Asirvad Micro Finance

Manappuram Finance news, RBI: Manappuram Finance share price tanked 15 per cent to Rs 150.80, hitting an 11-month low on the BSE in Friday's intraday trade, after the Reserve Bank of India (RBI) instructed Asirvad Micro Finance, a subsidiary of the company, to halt the sanctioning and disbursement of loans, effective October 21, 2024. 

The stock of the non-banking finance company (NBFC) was trading at its lowest level since November 16, 2023. Till 09:38 AM, a combined 2.2 million shares had changed hands and there were pending sell orders for a combined nearly 8.3 million shares on the NSE and BSE. In comparison, the BSE Sensex was down 0.53 per cent at 80,577.

The RBI said that the decision to ban the lending operations of Asirvad stemmed from major supervisory concerns about its pricing practices, particularly the weighted average lending rate and the interest spread over its cost of funds, which was deemed excessively high and not in compliance with the regulations and the Fair Practices Code issued by the RBI.

The RBI, vide its order and press release dated October 17,2024, has directed Asirvad Micro Finance Limited (AMFL), a material subsidiary of the company, to cease and desist from sanction or disbursal of loans effective from close of business of October 21, 2024, Manappuram said in a stock exchange filing. CLICK HERE FOR STATEMENT

In addition to Asirvad, the RBI has imposed a similar ban on Arohan Financial Services, DMI Finance, and Navi Finserv.

While these companies can continue servicing existing loans, restriction on new lending is expected to impact business growth, earnings momentum, and asset quality. Asirvad Finance, subsidiary of Manappuram Finance, contributes nearly one fourth of consolidated asset under management (AUM), thus expected to impact valuations, ICICI Securities said in a note.

Asirvad's board has reiterated its unwavering commitment to implementing the RBI's direction and monitoring the corrective actions in a time-bound plan. In addition, Asirvad's board will do a comprehensive review of the enterprise-wide governance, risk management and regulatory compliance, Motilal Oswal Financial Services said in a company update.

"We look forward to engaging with the company management to understand what transpired in RBI audits of Asirvad MFI, what observations have been made by the RBI and what corrective actions the company plans to take. Meanwhile, we believe that this ban could remain in force for six to nine months. We factor in lower loan growth and lower spreads in Asirvad's MFI business and cut our FY25/FY26 PAT estimates by ~9 per cent/17 per cent," the brokerage firm said. They have downgrade the stock to 'Neutral' with a revised target price of Rs 160 (based on 0.8x Sep’26E P/BV).