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Est. Vs. Actual for Q4FY25: NII – MISS; PPOP – MISS; PAT – MISS

Changes in Estimates post Q4FY25

FY26E/FY27E (in %): NII: -5.1/-5.6; PPOP: -10.5/-9.6; PAT: -11.7/-6.5

Recommendation Rationale

Gold loan growth to remain robust; Impact of RBI guidelines manageable: Amidst continued challenges in the MFI segment, Manappuram will focus on strengthening its core gold loan business alongside pursuing growth in the secured non-gold businesses. The management indicated that the impact of the RBI guidelines for gold lending is likely to have a limited and manageable impact on business operations and growth. In FY26, the gold loan portfolio is expected to deliver a strong 20% YoY growth. The company has consciously pruned growth in the 2-Wheeler and Tractor segment, citing asset quality challenges, and has tightened credit filters. Similarly, the MFI portfolio will continue to de-grow and is expected to settle at ~10% of the consolidated portfolio in FY25. Thus, apart from continued momentum in the gold business, AUM growth in FY26 will be further supported by the secured non-gold businesses – Affordable Housing and secured MSME, enabling Manappuram to deliver an AUM growth of 20% on a consolidated basis.

MFI stress to taper, though gradually: In Q4FY25, asset quality deterioration was visible across segments. Manappuram has implemented stringent guardrails over and above those imposed by MFIN, which resulted in a lower sourcing-to-sanction rate of 34% in Feb’25 from 64% in Sep’24. The pace of disbursements has been trimmed, and disbursements are enabled only through centres that have a PAR of <2%. Disbursements are fully enabled at the branch level based on portfolio quality. The company has also beefed up its collection efforts by assigning a separate team for hard buckets. The management has indicated that Manappuram has seen forward flows stabilising and expects them to trend down in the coming quarters. Thus, near-term credit costs would continue to remain elevated.

Gold Loan yield revision and MFI woes to weigh on near-term NIMs: Manappuram has seen a 55bps yield compression in the gold loan portfolio, as a part of its yield adjustment for newer products and to attract higher ticket size (ATS) customers, wherein it intends to maintain competitive rates. Additionally, slower disbursements in MFI and higher interest reversals have also weighed on margins. Manappuram’s borrowing profile remains fairly diversified. The company has seen some benefit accrue in Apr’25 from banks adjusting MCLR rates. Moreover, CP rates have also seen a decline, and management expects CoF to trend downwards in Q1FY26. Thus, the benefit in CoF is likely to partially offset the pressure on yields. We expect NIMs to remain range-bound between 13.4% and 13.6% over FY26-27E.

Sector Outlook: Positive

Company Outlook: Manappuram will continue to focus on the gold loan portfolio, with the recent RBI guidelines having a negligible impact on the operational processes and growth prospects of the company, as other segments, particularly MFI and 2-Wheelers/Tractors, continue to remain stressed. Going forward, the company intends to maintain 90% of its portfolio as secured assets. The capital infusion from the Bain Capital deal (expected to close by year-end) should help Manappuram steer its next leg of growth while also strengthening and fine-tuning its operational procedures, efficiencies and positioning across its product lines. Near-term challenges on asset quality in the MFI segment would continue to keep credit costs elevated, weighing on earnings. However, we Manappuram to deliver AUM/NII/Earnings growth of 16/12/54% CAGR over FY25-27E.

Current Valuation: 1.4x FY27E ABV;  Earlier Valuation: 1.1x FY27E ABV

Current TP: Rs 255/share; Earlier TP: Rs 220/share

Recommendation: We maintain our BUY recommendation on the stock.

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SEBI Registration number is INZ000161633