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Strong quarter with healthy gold loan growth and NIM expansion Ticking the boxes on gold tonnage, customer additions, and expansion in profits

* Manappuram Finance’s (MGFL) consol. PAT in 1QFY27 rose 340% YoY and 44% QoQ to ~INR5.9b in 1QFY27 (~26% beat). NII in 1QFY27 grew ~25% YoY to ~INR17.2b (~6% beat). Operating expenses grew 1% YoY to ~INR7.6b (in line).

* PPoP grew ~52% YoY to ~INR10.1b (~8% beat). Consol. credit costs stood at ~INR2.3b (vs. est. of ~INR3.1b). Annualized credit costs for the quarter declined ~15bp QoQ to 1.35% (PQ: ~1.5%). In 1QFY27, MGFL and Manappuram Home Finance revised their ECL models by updating PD, LGD, EAD, and forward-looking macroeconomic assumptions, which resulted in an additional ECL provision of INR1.25b during the quarter.

* MGFL appointed Mr. Ashish Singh as the MD and CEO of the company for a five-year term effective Jan'27. He brings 25+ years of experience in retail banking, with expertise in rural lending, retail liabilities, and branch banking. He has held senior roles at IDFC FIRST Bank, Fullerton India, and ICICI Bank.

* The company reported a ~12% QoQ growth in consolidated gold AUM to ~INR570b, with management indicating healthy momentum in loan growth, customer additions, and gold tonnage growth sustaining in Jul’26 and Aug’26. The company guided for ~25-30% gold loan growth in FY27. We model a gold loan CAGR of ~27% over FY26-FY28E.

* MGFL indicated that the improvement in gold loan yields during the quarter was driven by corrective pricing actions undertaken by the company, rather than any change in the product or customer mix. Management expects yields to stabilize at ~18%, despite the increasing share of higher-ticket borrowers. We model NIM of 10.3%/10.1% in FY27/FY28E (vs. ~10.4% in FY26). * MGFL delivered a strong performance in the gold loan segment, supported by higher gold prices, healthy demand, and a gradual shift in customer preference toward formalized financing. However, growth in the non-gold portfolio remained subdued as the company continues to prioritize asset quality and portfolio stabilization in these segments.

* We raise our FY27/FY28 EPS estimates by ~18%/3% to factor in higher NIM and lower credit costs. The stock trades at 1.7x FY28E P/B. Over FY26-28E, we estimate a CAGR of 27%/25% in gold/consolidated AUM and ~75% in consolidated PAT, with consolidated RoA/RoE of ~3%/14.6% in FY28. Reiterate our Neutral rating on the stock with a TP of INR390 (based on 1.8x FY28E consolidated BVPS).

Highlights from the management commentary

* MGFL plans to add ~500 gold loan branches in FY27, with ~60% of additions across South and Central India, including the five Southern states and Maharashtra. Bihar, West Bengal, and Odisha will also be key expansion markets for the company.

* Reported LTV as on Jun’26 rose to ~66% from ~57% in Mar'26, largely due to gold price movements and changes in the LTV calculation under the revised RBI framework. Management expects LTV to normalize in the range of 64-66%.

Valuation and view

* MGFL reported a strong quarter, driven by sustained growth in the gold loan portfolio. Gold loan yields improved during the quarter, supporting margin expansion. However, growth in non-gold segments remained subdued as the company continues to prioritize asset quality and portfolio stabilization in these businesses.

* The stock trades at 1.7x FY28E P/B. Over FY26-28, we estimate a CAGR of 27%/25% in gold/consolidated AUM and ~75% in consolidated PAT, with consolidated RoA/RoE of ~3%/14.6% in FY28. Reiterate our Neutral rating on the stock with a TP of INR390 (based on 1.8x FY28E consolidated BVPS).

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