Why Manappuram Finance Share Price is Falling

In the stock market, a company's performance often hinges on sentiment. It's like a carefully balanced stack of cards-one piece of negative news can send the entire structure tumbling down. Even a small disruption can reverse months of steady growth, shaking investor confidence.

Manappuram Finance is presently in such a situation, with its share price coming under immense pressure following recent developments.

Manappuram Finance is a leading non-banking financial company (NBFC) in India, primarily known for its gold loan services.

Over the years, it has expanded into microfinance, housing finance, and vehicle loans, gaining a foothold in semi-urban and rural markets. The company plays a crucial role in providing quick credit to customers by leveraging gold assets, making it a preferred choice for many.

The stock nosedived 15% in a single day after its latest announcement. Let's explore the details to understand why Manappuram Finance's share price is plummeting.

Regulatory Setback

On 17 October 2024, the Reserve Bank of India (RBI) directed Asirvad Micro Finance, Manappuram's key subsidiary, to stop sanctioning and disbursing new loans from the close of business on 21 October 2024.

The RBI's order, came after concerns about Asirvad's pricing policy. It was found that Asirvad's weighted average lending rate (WALR) and interest spread exceeded regulatory limits set under RBI's microfinance framework and scale-based regulation guidelines.

Although Asirvad can continue servicing existing customers and manage collections, it cannot issue new loans until it addresses the RBI's concerns. The restrictions will remain in place until Asirvad demonstrates full compliance with RBI regulations, including fair pricing policies, better risk management, customer service improvements, and grievance redressal measures.

Following the announcement, Manappuram Finance's share price plummeted 15% in a single day.

Investors are now worried that the RBI's order could significantly impact profits and lead to rising funding costs. Manappuram might also need to provide financial support to Asirvad to maintain its operations.

Slower loan growth is also expected, though tighter credit practices and increased provisioning may offer some comfort to stakeholders.

The stock's sharp drop reflects the market's anxiety about these risks, as regulatory challenges could limit the company's growth in the near term.

What Next?

Manappuram Finance aims to stabilise operations and focus on long-term growth despite the recent regulatory challenges. It plans to continue expanding both its gold and non-gold loan portfolios.

The company expects that the gold segment will remain a key driver, especially as domestic gold holdings increase. The reduction in gold import duty is likely to boost gold availability, which could benefit the company since gold loans remain a popular option for meeting financial emergencies.

In its non-gold business, the company will prioritise secured lending to reduce risks. Although collection challenges have emerged due to climate issues in specific regions, Manappuram is taking steps to improve efficiency in recoveries.

The affordable housing segment is another area of interest for future growth. With supportive government initiatives in place, Manappuram sees potential in tapping this market.

The company is also focused on maintaining a well-capitalised position, keeping asset quality under control, and ensuring its return on assets (ROA) remains strong.

Manappuram's long-term strategy involves diversifying its portfolio further. The company remains optimistic about its vehicle finance segment, which is showing the highest growth, followed by housing loans.

How Manappuram Finance Share Price has Performed Recently

In the past five days, Manappuram Finance share price has tumbled 17.2%. In the last month, it is down 27.1%.

In 2024, so far its share price has slipped 10.6% and it is up 7.8% in the last one year.

The stock touched its 52-week high of Rs 229.8 on 15 July 2024 and a 52-week low of Rs 122.7 on 14 July 2023.

About Manappuram Finance

Manappuram Finance, previously known as MAGFIL, is an Indian non-banking financial company (NBFC) based in Valapad, Thrissur, Kerala.

MAGFIL, the flagship company of Manappuram Group, was established in the wake of economic reforms launched by the government of India mainly to take advantage of the importance assigned to leasing as a vehicle to promote a decentralized pattern of economic growth through small and medium enterprises.

Fund-based and fee-based services are offered by the company including secured loans, gold loans, personal loans, instant money transfers, foreign exchange, bonds, non-convertible debentures, life insurance, general insurance, hire purchase and leasing schemes.

The company, through its subsidiary, Manappurm Insurance Brokers Pvt also provides life insurance products, and general insurance products, such as motor, health, travel, and property and liability insurance. Further, it acts as an agent for housing loans and car loan of banks.

For more details about the company, you can have a look at the Manappuram Finance factsheet and quarterly results on our website.

For a sector overview, read our finance sector report.

You can also compare Manappuram Finance with its peers.

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And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing

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