Why are Manappuram Finance shares falling for 9 sessions?
Shares of Manappuram Finance continued to reel under selling pressure on Tuesday, extending fall for the ninth consecutive session. The Kerala-based non-banking financial company (NBFC) stock has lost over 25% since October 9, while it plummeted nearly 29% so far this month.
On Tuesday, Manappuram Finance shares declined as much as 3% to ₹142.40 after opening flat at ₹146.90 on the BSE. On Monday, the stock ended 4.27% lower.
At the time of reporting, the NBFC stock was trading 2.83% lower at ₹142.75, with a market capitalisation of ₹12,074 crore. The counter has corrected 38% from its 52-week high of ₹230.25 touched on July 19, 2024. It hit a 52-week low of ₹125.30 on October 26, 2023.
In the last one year, Manappuram Finance shares have gained over 5%, while it lost nearly 17% in the calendar year 2024. In the past six months, the stock has fallen 25%, while it plunged nearly 32% in a month.
Last Friday, Manappuram Finance shares witnessed a sharp correction of 13.5% after the Reserve Bank of India (RBI) initiated action against its subsidiary Asirvad Micro Finance Ltd, restriction from sanctioning or disbursing loans from October 21, 2024. Manappuram holds 97.6% stake in Asirvad Microfinance.
The RBI imposed restrictions on Asirvad Micro Finance after it observed "material supervisory concerns" in the lenders pricing policy in terms of its weighted average lending rate (WALR) and the interest spread charged over its cost of funds, which are found to be excessive and not in adherence with the regulations. The action was taken against four NBFCs, including former Flipkart founder Sachin Bansal-led Navi Finserv, DMI Finance, Asirvad Micro Finance, and Arohan Financial Services.
Following the RBI action, Manappuram said in a release on October 18 that the matter has been immediately brought to the notice of its board and a meeting has been convened urgently to take immediate action. "The board has reiterated its unwavering commitment to implement RBI's direction in letter and spirit and monitor the corrective action in a time-bound plan."
The company says it will do a comprehensive review of the enterprise-wide governance, risk management and regulatory compliance. "We are working on a detailed plan and will submit the same to the RBI within the stipulated timelines."
Post RBI action, Axis Securities downgraded Manappuram Finance to ‘HOLD’ and revised target price to ₹175 per share, saying that near-term pressure on the stock will continue until investor confidence is restored.
“It is difficult to gauge and ascertain the impact of these restrictions on the operational and financial performance; however, we believe Manappuram’s consolidated AUM growth and earnings momentum will take a sharp hit,” the brokerage says in a note.
“Hereon, given the asset quality stress in the sector and higher provisioning needs, any capital raise required by Asirvad would remain a challenge and a key monitorable,” it adds.
The brokerage in its report says that segment has been instrumental in driving healthy AUM growth on a consolidated basis, registering a strong 23% CAGR growth over FY21-24. The portfolio constitutes around 25% of the consolidated AUM of Manappuram.
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