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Shares of NBFCs Manappuram Finance and IIFL Finance closed 6 per cent lower on Friday’s trading session, following weak Q3 results. These stocks depreciated 13 per cent and 8 per cent, respectively, in early trade.
Manappuram Finance’s consolidated net profit declined to ₹278.46 crore in December 2024 quarter as against ₹575.31 crore in the corresponding quarter previous year. However, its standalone net profit after tax rose over 5 per cent to ₹453.39 crore for the quarter under review and the net interest income (NII) grew 13 per cent y-o-y to ₹1,160 crore.
IIFL’s consolidated net profit plunged 85 per cent y-o-y to ₹81.71 crore in the quarter ended December 2024 as against ₹545.19 crore in the corresponding quarter previous year. Its NII also declined 14 per cent y-o-y to ₹947 crore.
Their performance missed street estimates, due to increased stress in microfinance segment, elevated credit costs and deteriorated asset quality.
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Domestic brokerage Motilal Oswal observed that Manappuram’s asset quality deteroiated across all segments, while recording a sequential flat gold loan growth.
According to the brokerage, IIFL Finance faced asset quality stress in its microfinance (MFI), unsecured personal/business loans, and small-ticket loan against property (LAP) segments during the quarter, reflecting weak macro trends.
Motilal cited that the credit cost rose primarily due to stress in MFI and MSME segments. According to the management, secured loans are expected to grow at a faster pace within the MSME segment.
Learning that the embargo on gold lending business has been lifted, Motilal Oswal believes that IIFL Finance is “well-positioned for the next phase of high-quality growth in secured products like gold loans and LAP.” The brokerage has assigned a buy rating at a target price of ₹415.
For Manappuram Finance, Motilal reiterated neutral call at a target price of ₹215, emphasising that there could be a near-term impact on profitability and growth due to the stress in the microfinance institution (MFI) and overall weakness in macroeconomic activity.
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The brokerage stressed that the company’s microfinance portfolio was hurt due to customer overleveraging and macroeconomic stress. It noted that Asirvad Microfinance reported a net loss for the quarter, driven by elevated credit costs, while AUM declined sequentially. In December 2024, the RBI revoked the ban on operations of Asirvad MFI. “Resumption of MFI operations will support better collections,” Motilal report read.
Axis Securities analysts expect Manappuram to deliver a strong gold loan growth of 15-20 per cent over the foreseeable future. They added that Manappuram will look to resume growth in MFI segment in calibrated manner. The brokerage has revised its rating from hold to buy at an increased target price of ₹220 from ₹170 earlier. Global brokerage Jefferies maintained its hold call at a target price of ₹205, while CLSA has retained an accumulate rating at ₹225.
Manappuram Finance stock closed 6.21 per cent lower on the NSE at ₹182 after hitting an intraday low of ₹168.83, and IIFL Finance stock tumbled 5.88 per cent to end at ₹312 after a low of ₹306.25.
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