Jefferies has downgraded its rating on Manappuram Finance to ‘Hold’ from its previous ‘Buy’ recommendation, while slashing the target price to Rs 167 from Rs 270, indicating a potential downside of approximately 6% from the current market price (CMP) of Rs 177.33.
The downgrade comes as the Reserve Bank of India (RBI) has imposed restrictions on Asirvad Microfinance, a subsidiary of Manappuram, along with certain other non-banking financial companies (NBFCs). These regulatory restrictions are expected to negatively impact the earnings of the company, with the brokerage cutting its FY25-26 earnings per share (EPS) estimates by 11-19%.
Jefferies highlights the risks associated with Asirvad’s need to raise additional capital, noting that Manappuram Finance, as the parent company, may need to inject capital into its subsidiary if its net worth is eroded. Despite these challenges, Jefferies believes that the current valuations of Manappuram Finance limit further downside potential.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice or a recommendation. Please seek independent financial advice before making any investment decisions.
