Manappuram Finance Shares Plummet Following RBI’s Restrictive Measures on Subsidiary Asirvad

Shares of Manappuram Finance Ltd., a prominent gold financing company, experienced a significant decline of 10% following the Reserve Bank of India‘s (RBI) decision to impose restrictions on its subsidiary, Asirvad Micro Finance. The RBI’s directive requires Asirvad to halt the sanctioning and disbursal of loans as part of a wider action affecting three other non-banking financial companies (NBFCs), citing non-compliance with assessments of household income and repayment obligations on microfinance loans.

Several brokerage firms promptly downgraded Manappuram Finance’s stock while adjusting their price targets. CLSA maintained an “outperform” rating but reduced the price target from ₹240 to ₹200. “Asirvad represents approximately 25% of Manappuram’s Assets Under Management (AUM),” stated CLSA in its analysis, noting a reduction in profitability estimates for the subsidiary.

Morgan Stanley shifted its rating from “Overweight” to “Equalweight” and lowered the price target to ₹170. The firm forecasts a 20% decrease in consolidated earnings for the fiscal year 2025 and a further 30% decrease for 2026 and 2027, given the expected impact on profits due to the RBI’s embargo.

Jefferies also downgraded Manappuram Finance to “hold” with a revised price target of ₹167, noting potential needs for capital infusion should Asirvad’s microfinance division face increased defaults. Jefferies cut the company’s EPS estimates by 11% to 19% across the fiscal years 2025 to 2027.

The regulatory action stems from concerns about the NBFCs’ transparency and fairness in pricing small-value loans. With the ongoing embargo, Asirvad Micro Finance, along with Navi Finserv, Arohan Financial Services, and DMI Finance, has been instructed to cease disbursing loans until further notice.

Despite the downgrades, a majority of analysts continue to recommend a “buy” rating for Manappuram Finance, with Bloomberg data revealing that 12 out of 16 experts maintain this stance, while four advise “hold” and two suggest “sell.”