Manappuram Finance shares crash 15% as RBI whips subsidiary Asirvad Microfinance

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At 10.10 am, shares of Manappuram Finance saw only sellers, crashing 15 percent to Rs 150.73 per share.

International brokerage Jefferies downgraded the player to ‘hold’, saying the RBI restrictions are going to hurt earnings. There are risks of Asirvad needing to raise capital, the parent company might have to infuse it with capital if the net worth erodes.

On the other hand, Bank of America decided to reiterate its ‘buy’ call, but cut its target price to Rs 220 per share. The brokerage cut its consolidated earnings forecast by 3-6 percent as its factored in AUM growth moderation in Asirvad.

“Manappuram stock has de-rated 25 percent over the last 3M which we believe already factors in the growth weakness and asset quality deterioration to a great extent,” said the brokerage. As a result, it retained its buy call, on undemanding valuations which come at a discount to historical valuations and strong outlook for the gold financing business.

Morgan Stanley downgraded the gold financier to ‘equal-weight’, with a target price of Rs 170 per share, as it slashes its consolidated earnings forecast by 30 percent across FY26-27.  Additionally, the firm could also face loan growth moderation, tighter credit practices, and higher provisioning to give comfort to all stakeholders. As a result, investor interest could take long to return, despite cheap valuations.

JP Morgan also downgraded its outlook on Manappuram Finance bonds. The key risk from the RBI action is likely to be the impact on funding access or borrowing costs for Manappuram, it said.

Additionally, any capital infusion needs arising from asset quality pressures within the microfinance segment would be a key risk to watch out for. As a result, the firm could see a negative impact on credit ratings as well.

Currently, CRISIL has a long-term rating of 'AA-/Stable' on Asirvad Microfinance.

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Commenting on the development, Asirvad Microfinance said, “We value the feedback provided by the honourable Reserve Bank of India and take on record the improvement areas suggested for Asirvad Microfinance. This matter has been immediately brought to the notice of our board and a meeting has been convened urgently to take immediate action.”

Manappuram Finance is no stranger to pressure from the central bank. Earlier this year, in May, the RBI sent the gold financier, along with Muthoot Finance, an advisory letter limiting cash disbursal of loans.

The central bank has reportedly asked both NBFCs to strictly adhere to the Income Tax Act (IT) provision on cash disbursement, and said that no NBFC should disburse loan amount in excess of Rs 20,000 in cash.

In Septmeber, the Reserve Bank of India directed gold financiers to review processes, identify lapses and take remedial measures within three months, which according to brokerages may weigh on their growth.

This comes after the RBI flagged irregular practices at certain gold finance companies in relation to loans issued against pledged gold ornaments and jewellery.

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