Shares of Manappuram Finance hit an over 4-month high at Rs 205, as they rallied 5 per cent on the BSE in Tuesday’s intra-day trade amid heavy volumes. The stock of the non banking finance company (NBFC) was quoting at its highest level since September 27, 2024. A combined 8.78 million equity shares changed hands on the NSE and BSE till 01:55 PM.
In the past three weeks, it has surged 20 per cent. In the past one month, Manappuram Finance has outperformed the market by surging 15 per cent, as compared to 0.5 per cent rise in the BSE Sensex.
The outperformance in the stock came after the Reserve Bank of India (RBI) on January 8 informed that the Central Bank lifted restrictions imposed on Manappuram Finance arm Asirvad Micro Finance.
"We are pleased to inform you that the Reserve Bank of India, vide its letter dated January 8, 2025, has lifted the restrictions imposed on Asirvad Micro Finance Limited with respect to sanction or disbursal of loans with immediate effect," the filing read.
“…having satisfied itself based on companies’ submissions, and in view of their adoption of revamped processes, systems, and the companies’ commitment to ensuring adherence to the regulatory guidelines on an ongoing basis, especially for ensuring fairness in the loan pricing, the RBI has decided to lift the afore-mentioned restrictions placed on both, Asirvad Micro Finance and DMI Finance, with immediate effect”, RBI said in a statement.
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The revocation of this ban is a positive development, especially considering it occurred in less than three months, which is significantly shorter than initial base case assumption of six months. This may have been possible due to the constructive efforts made by Asirvad to work with the regulator to have the ban lifted. Additionally, given that the microfinance institution (MFI) sector itself is going through a state of turmoil, Motilal Oswal Financial Services believe the regulator has shown empathy toward the four lenders (including Asirvad) who were previously served business bans.
For Manappuram Finance, the gold loan growth will continue to remain healthy, driven by demand-side tailwinds due to the poor availability of short-term personal and MFI loans. However, we foresee risks of spread compression in its gold loan business, as the company has started focusing on slightly higher ticket size gold loans, the brokerage firm said.
Meanwhile, on January 29, 2025, Smallcap World Fund, Inc acquired an additional 2.4 million equity shares or 0.28 per cent stake in Manappuram Finance through open market deals. Post acquisition, Smallcap World Fund, Inc holding in the company increased to 5.03 per cent from 4.75 per cent, according to stock exchange disclosure.
Manappuram Finance is a NBFC in India, primarily known for its gold loan business. It offers a range of financial services including gold loans, personal loans, microfinance, business loans, insurance, and foreign exchange services. The company provides quick loans against gold jewelry, catering to individuals and businesses in need of immediate liquidity without requiring extensive documentation. Manappuram is also involved in the retail sale of gold coins and bullion.
Manappuram Finance will look to continue its growth journey in the core gold and secured non-gold portfolios. The management indicated that repayments from the Vehicle/MSME/Housing portfolio are expected to improve from Q4FY25 onwards, with green shoots visible in early Q3FY25.
Analysts at Axis Securities expect Manappuram’s RoA to be capped at 4.3 per cent over FY25-26E factoring in higher credit costs, lower NIMs and increased Opex given aggressive collection efforts, before improving to ~4.6 per cent by FY27 as conditions normalise. The company will look to maintain MFI AUM growth between 15-20 per cent with the primary focus being on credit quality and credit discipline.