Manappuram Finance plunges 12%, hits 2-year low on weak Q4 results

Asset quality worsened during the quarter as gross non-performing asset (NPA) and net NPA ratio increased by 160 basis points (bps) and 170 bps quarter on quarter (QoQ) to 3 per cent and 2.7 per cent.

Shares of Manappuram Finance plunged 12 per cent to hit two-year low of Rs 91.95 on the BSE in Thursday’s intra-day trade after the company reported 44 per cent year on year (YoY) decline in its consolidated net profit at Rs 261 crore for the March quarter (Q4FY22), due to higher operating expenses.

The non banking financial company (NBFC), engaged in gold loan business, had posted profit of Rs 468 crore in the year-ago quarter (Q4FY21). Its net interest income (NII), meanwhile, fell 10.2 per cent YoY to Rs 986 crore from Rs 1,098 crore and consolidated asset under management (AUM) declined sequentially to Rs 30,300 crore from Rs 30,400 crore in Q3FY22.

Meanwhile, on a standalone basis, the company’s assets quality worsened during the quarter as gross non-performing asset (NPA) and net NPA ratio increased by 160 basis points (bps) and 170 bps quarter on quarter (QoQ) to 3 per cent and 2.7 per cent, respectively.

The company said that the net profit was affected temporarily due to shift from high yield to lower yield gold loans. "We would prioritize profitability over the relentless pursuit of loan growth in FY23. The demand environment in gold loans is not very buoyant. Howeever, we do not wish to pursue growth at the cost of a further compression in spreads," the management added.

Analysts at Motilal Oswal Financial Services believe that muted gold loan growth and potiential margin compression is already priced in current valuation of the stock. "The company's gold loan demand remains muted, particularly in the low-ticket size segments, leaving little alternative for gold loan NBFCs but to compete in the higher-ticket size segments. In the current demand environment, loan growth will be a casualty, if priority shifts to spreads and margins," the brokerage firm added.

At 11:16 am, Manappuram Finance traded 9 per cent lower at Rs 94.85 on the back of over three-fold jump in trading volumes. Around 22 million equity shares had changed hands on the NSE and BSE till the time of writing of this report. In the past one month, the stock has declined 21 per cent, as compared to a 6 per cent fall in the S&P BSE Sensex.