Manappuram Finance (NSE: MANAPPURAM) saw its shares drop by 15% to ₹150.73 as of 9:38 AM, following a stringent order from the Reserve Bank of India (RBI) impacting its microfinance subsidiary, Asirvad Micro Finance Limited. The stock opened at ₹159.59, reached a high of ₹159.59, and fell to a low of ₹150.73. The previous close was ₹177.33.
The RBI has directed Asirvad Micro Finance, along with three other Non-Banking Financial Companies (NBFCs), to stop sanctioning and disbursing loans due to non-compliance with regulatory guidelines. The directive, which goes into effect on October 21, 2024, has led to a significant decline in Manappuram’s stock price.
Here’s what the brokerages are saying:
| Brokerage | Rating | Target Price (Rs) | Key Points |
|---|---|---|---|
| Morgan Stanley | Equal-Weight | 170 | Downgraded due to RBI embargo on Asirvad Microfinance, which is expected to have a prolonged negative impact. |
| BofA | Buy | 220 | Maintains ‘Buy’ despite growth challenges, citing attractive valuation and strong gold financing business. |
| Jefferies | Hold | 167 | Downgraded to ‘Hold’ as regulatory restrictions impact earnings; potential downside from current price. |
The RBI’s action, exercised under Section 45L(1)(b) of the Reserve Bank of India Act, 1934, stems from supervisory concerns over pricing policies, particularly related to the companies’ Weighted Average Lending Rate (WALR) and interest spreads. These were found to be in violation of the regulatory framework, leading to the decision to halt new loans.
NBFCs Affected:
- Asirvad Micro Finance Limited (Chennai)
- Arohan Financial Services Limited (Kolkata)
- DMI Finance Private Limited (New Delhi)
- Navi Finserv Limited (Bengaluru)
The RBI also noted that the companies failed to comply with several guidelines, including:
- Income Recognition & Asset Classification (IR&AC) norms
- Household income assessment for microfinance loans
- Disclosure requirements on interest rates and fees
- Outsourcing of core financial services
Although these NBFCs are prohibited from issuing new loans, they are allowed to service existing customers and continue their recovery processes. The restrictions will remain in place until the RBI is satisfied that the companies have taken appropriate remedial actions to address the violations.
This move by the RBI reinforces its commitment to ensuring fair lending practices, particularly for small-value loans in the financial sector.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice. Please seek independent financial advice before making any investment decisions.
