Muthoot, Manappuram Finance tank up to 9% on RBI's cash disbursal advisory

According to reports, the RBI has said no gold loan NBFC should disburse loan amount in excess of Rs 20,000 in cash

Shares of gold financing companies -- Muthoot Finance, and Manappuram Finance -- came under heavy selling pressure on Thursday, May 9, after the Reserve Bank of India (RBI)  cautioned them against breaching the Rs 20,000-cap on cash loan disbursal.

Muthoot Finance tumbled 8.8 per cent (Rs 1510), while Manappuram Finance shed 8.3 per cent (Rs 165.15) on the BSE in the intraday trade. By comparison, the benchmark S&P BSE Sensex was down 488 points (0.66 per cent) at 10:25 AM. 

On Wednesday, the central bank referred to the provisions of the Section 269 SS of Income Tax Act, 1961, that stipulates no individual can receive more than Rs 20,000 as loan amount in cash.

 

Gold loan NBFCs have been advised to strictly adhere to the provisions of the IT Act, the regulator said in a communication, Business Standard reported. READ MORE

According to reports, global brokerage Morgan Stanley believes the non-bank finance companies (NBFCs) will need to make operational changes, leading to "transient financial impact".

"Gold loans were 84 per cent of Muthoot Finance's asset under management (AUM), and 51 per cent of Manappuram Finance at the end of December 2023. For Manappuram Finance, 40 per cent of the disbursement is in cash. Thus, there is a logical case that Manappuram stock will fare better than Muthoot Finance in the near-term," the brokerage reportedly said.

At the end of the December quarter, Muthoot Finance, India's largest gold-loan NBFC, reported 14 per cent jump in standalone net profit at Rs 1,027 crore on 19 per cent increase in total income to Rs 3,176 crore on a year-on-year (Y-o-Y) basis.

Loan AUM stood at Rs 71,182 crore as compared to Rs 57,731 crore in the same quarter last year, registering a growth of 23 per cent Y-o-Y.

Manappuram Finance's net profit, meanwhile, rose roughly by 46 per cent to Rs 573 crore ($69 million) in the quarter, beating analysts' expectation of Rs 535 crore.

Manappuram's total AUM was Rs 40,400 crore as of December 31, increasing from Rs 39,000 crore during the previous quarter, boosted mainly by its microfinance and vehicle finance business.