Manappuram Finance shares surge 5% as RBI lifts restrictions on subsidiary Asirvad Micro Finance

Shares of Manappuram Finance Limited surged 5% on January 9, 2025, following the Reserve Bank of India (RBI)’s decision to lift restrictions on loan sanctioning and disbursal by its subsidiary, Asirvad Micro Finance Limited. The removal of these restrictions is seen as a positive development for the company, which had faced regulatory challenges since October 2024.

As of 9:15 am the shares were trading 5% higher at Rs 189.30 on NSE.

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Key Highlights:

  • RBI Directive: The restrictions, imposed on October 21, 2024, due to compliance concerns, have now been lifted as of January 8, 2025, after Asirvad implemented corrective measures.
  • Business Resumption: Asirvad Micro Finance Limited, which constitutes 27% of Manappuram’s AUM, can now resume its regular loan sanctioning and disbursal operations, supporting Manappuram’s growth strategy and operational efficiency.

Brokerage Views:

Jefferies

  • Rating: Hold
  • Target Price: ₹190
  • Commentary:
    • The removal of the ban is a positive step, but disbursement growth in the segment is expected to remain muted due to stress in the microfinance industry.
    • Manappuram’s valuation remains attractive, though near-term earnings may face challenges.

Morgan Stanley (MS)

  • Rating: Equal Weight (EW)
  • Target Price: ₹175
  • Commentary:
    • While the removal of restrictions is encouraging, MS had already excluded Asirvad’s valuation in its SOTP model due to assumed provisions for the MFI loan book.
    • Awaiting management’s revised disbursement strategy and adjusted underwriting norms.

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