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Informist, Monday, Feb. 10, 2025

By Priyasmita Dutta

NEW DELHI – Manappuram Finance Ltd.'s net profit for the quarter ended December is expected to take a hit from the contraction in the microfinance sector, leading to a slowdown in growth in advances. The gold financier is expected to post a net profit of INR 5.05 billion for Oct-Dec, according to an average of estimates from four brokerages. At INR 5.05 billion, the net profit will be lower by 11.9% from a year ago and 11.5% from a quarter ago. 

The estimates for net profit for the quarter range from INR 4.95 billion by Axis Securities to INR 5.18 billion by Nirmal Bang Equities.

The gold financier is expected to report muted asset under management growth due to the slowdown in the microfinance industry, Axis Securities said in a report. The non-banking financial company's consolidated assets under management rose 17.4% on year to INR 457.16 billion as of Sept. 30 with the non-gold loan business accounting for 46.7%.

According to the average of the estimates, the gold financier's net interest income is seen rising 3.2% year-on-year to INR 15.02 billion in Oct-Dec. Sequentially, however, it is seen falling over 8%. 

The company will detail the December quarter's financial results on Thursday. On Monday, shares of the company closed at INR 204.72 on the National Stock Exchange, down 1.9% from the previous close. 

The tepid outlook for the microfinance business is also owing to the Reserve Bank of India's regulatory action against Manappuram's arm Asirvad Microfinance Ltd. in October. The RBI had barred Asirvad Microfinance along with three other shadow banks from making new loans due to concerns regarding their pricing of loans, which the central bank found to be "excessive" and in breach of regulations. Asirvad Microfinance is a key part of Manappuram Finance. Asirvad saw a 33.2% on-year fall in its profit before tax to INR 1.02 billion in the quarter ended September.

Brokerages also flagged that delinquencies and asset quality in the microfinance segment deteriorated during the quarter, putting stress on credit costs. "Expect credit costs to increase 80 basis points sequentially to 3.1%," said Motilal Oswal Financial Services.

"Asset quality in the microfinance segment (Asirvad) is likely to deteriorate and thus credit costs could be elevated during the quarter," Axis Securities added. Asirvad's asset quality had seen a sharp decline during the September quarter, with its gross non-performing asset ratio rising to 4.3% from 3.0% a quarter ago. The net non-performing asset ratio rose by 60 basis points to 2.0% in Jul-Sept.

Additionally, brokerages also said that while gold loan book asset quality was not a concern, non-gold portfolio asset quality could result in higher provisioning in the December quarter. In Jul-Sept, the gross non-performing asset ratio and the net non-performing asset ratio rose 40 bps on quarter each to 2.4% and 2.1%, respectively.  

The costs of funds have been rising for the Kerala-based gold lender since last January. It rose from 8.1% in FY23 to 9% in FY24. At the end of September, it was at 9.2%. 

The brokerages said the key monitorables would be the non-bank financing companies' update on the microfinance arm, guidance on growth and credit cost. 

Following are the Oct-Dec earnings estimates of Manappuram Finance Ltd based on reports from four brokerage houses:

End

Edited by Saji George Titus

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