Why Manappuram Finance Share Price is Falling

Gold prices in India recently surged to an all-time high. This rise was driven by multiple factors, including global economic uncertainties, strong investment demand, and central banks increasing their gold reserves.

Investors often see gold as a safe-haven asset during uncertain times. This rally in gold prices has created significant interest among traders and financial institutions.

At first glance, this looks like good news for Manappuram Finance, a leading non-banking financial company (NBFC) specialising in gold loans. The company earns a significant portion of its revenue from lending against gold.

When gold prices rise, the value of pledged gold increases, allowing customers to borrow higher amounts. This usually boosts loan disbursements and supports the company's profitability. However, things did not go as expected.

Manappuram Finance declared its Q3 results yesterday after market hours. Instead of benefiting from rising gold prices, the company's performance raised concerns among investors. As a result, the stock fell 10% today after the earnings announcement.

This sharp decline raises an important question-why is the stock falling despite higher gold prices?

Let's analyse the company's Q3 results to understand what went wrong.

Weak Quarterly Performance

Manappuram Finance reported a significant decline in its financial performance for the third quarter of FY25.

The company's consolidated net profit decreased 50% to Rs 2.8 billion (bn) from Rs 5.7 bn in the same quarter the previous year. This decrease is primarily due to challenges in its microfinance segment and higher provisions for loan losses.

The Reserve Bank of India (RBI) had imposed a ban on Manappuram's microfinance subsidiary, Asirvad Micro Finance, preventing it from sanctioning and disbursing loans during the quarter. The ban was due to concerns over high pricing and significant mark-ups over funding costs.

Although the RBI lifted the ban last month, the restrictions led to a four-fold increase in bad loans and provisions in the microfinance unit, reaching Rs 4.7 bn. This accounted for a substantial portion of the total provisions of Rs 5.5 bn for the quarter.

Total revenue for the quarter rose to Rs 25.9 bn compared to Rs 23.1 bn in the corresponding period last year. This increase was driven by higher interest income from gold loans, reflecting the rise in gold prices.

Revenue from the microfinance business declined 6% to Rs 6.7 bn. In contrast, the gold loan portfolio, which constitutes 75% of the company's total revenue, experienced a 17.2% increase in revenue, benefiting from record-high gold prices.

Despite the growth in the gold loan portfolio, the significant rise in operating expenses and loan loss provisions adversely affected profitability. These factors have contributed to the decline in Manappuram Finance share price following the announcement of its quarterly results.

What Next?

Manappuram Finance is now focused on stabilising profitability and driving growth after a challenging quarter.

The lifting of RBI's restrictions on Asirvad Microfinance is a step in the right direction, but the company still faces the aftermath of weak collections and elevated provisions in the microfinance business.

To address this, it has introduced stricter underwriting, cost control measures, and operational improvements to restore stability.

Despite short-term pressures, the gold loan business remains the core growth driver. The company expects 15-20% annual growth in this segment, supported by rising gold prices and higher customer demand.

While gold prices have increased, loan demand fluctuates based on seasonal and economic factors. Expanding the customer base and maintaining disciplined loan-to-value (LTV) ratios will be critical to sustaining growth.

Manappuram is also expanding its secured lending portfolio, particularly in vehicle and home loans. The vehicle loan book grew 4.9% sequentially, and home loans increased 5.1% quarter-on-quarter. These segments are expected to deliver steady, long-term growth while diversifying the company's risk exposure.

A major focus area is branch expansion for gold loans. The company has actively engaged with RBI on this issue and recently received positive signals from the regulator. If branch expansion approvals come through, this could accelerate customer acquisition and fuel faster gold loan growth.

Additionally, digital transformation is playing a crucial role. Over 79% of gold loans are now disbursed online, reducing operational costs and improving efficiency. Manappuram is investing in IT infrastructure, automation, and data-driven underwriting to further enhance digital lending capabilities.

With a capital adequacy ratio of 29.9%, a strong liquidity position, and a commitment to cost discipline, the company is positioned for long-term expansion.

However, near-term challenges remain, particularly in restoring profitability in the microfinance business and rebuilding investor confidence.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

How Manappuram Finance Share Price has Performed Recently

In the past five days, Manappuram Finance share price has tumbled 14.7%. In the last month, it is down 2.1%.

In 2025, so far its share price has slipped 7.7% and its down 3.3% in the last one year.

The stock touched its 52-week high of Rs 230.3 on 19 July 2024 and a 52-week low of Rs 138.4 on 23 October 2024.

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, Manapurram Insurance Brokers 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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