Manappuram Finance shares tumbled 24% in 8 sessions; is the worst over or more pain ahead?

Shares of Manappuram Finance Ltd continued their downward trend for the eighth consecutive session in Monday's trade. The stock tanked 5.18 per cent to hit a day low of Rs 145.50. At this price, it has declined 23.88 per cent in eight trading days.

Manappuram Finance took a sharp beating after the Reserve Bank instructed its IPO-bound subsidiary Asirvad Micro Finance to halt the sanctioning and disbursement of loans, effective today (October 21).

Asirvad contributes 27 per cent to the consolidated Manappuram Finance's asset under management (AUM). Asirvad's AUM stood at Rs 12,300 crore as of June 30, which included Rs 1,200 crore of gold loan portfolio. In addition to microfinance, Asirvad housed 515 gold loan branches, which will be impacted because of this ban.

Manappuram, in response, said, "We take these matters with utmost seriousness, and we will remedy not only every observation made by the honourable Reserve Bank of India but will do a comprehensive review of the overall enterprise-wide governance, risk management and regulatory compliance. We are working on a detailed plan and will submit the same to the honourable Reserve Bank of India within the stipulated timelines."

MOFSL has downgraded the stock to 'Neutral' with a revised target price of Rs 160. "We look forward to engaging with the company management to understand what transpired in RBI audits of Asirvad MFI, what observations have been made by the RBI and what corrective actions the company plans to take. Meanwhile, we believe that this ban could remain in force for six to nine months. We factor in lower loan growth and lower spreads in Asirvad's MFI business and cut our FY25/FY26 PAT estimates by 9 per cent/17 per cent," the brokerage stated.

Amit Goel, co-founder and chief global strategist at Pace 360, said, "We've bought Manappuram Finance Ltd because we believe what has happened does not merit such a cut in Manappuram. We are very conscious about the P/E ratios, fundamentals and macros. If we believe that the Street is extremely pessimistic on some of these fundamentally good counters where the valuations are not rich, we will probably go ahead and buy."

Technically, the counter traded lower than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-day and 200-day simple moving averages (SMAs). The scrip's 14-day relative strength index (RSI) came at 15.72. A level below 30 is defined as oversold while a value above 70 is considered overbought.

As per BSE, the company's stock has a price-to-equity (P/E) ratio of 7.56 against a price-to-book (P/B) value of 1.26. Earnings per share (EPS) stood at 20.29 with a return on equity (RoE) of 16.59. Promoters held a 35.25 per cent stake in NBFC as of September 2024.