Manappuram Finance has been in the spotlight after its share price took a steep dive, dropping by 15% to ₹150.80 on October 18, 2024. This plunge was triggered by the Reserve Bank of India’s (RBI) directive to its subsidiary, Asirvad Micro Finance, to halt loan disbursements effective October 21, 2024. The decision was made due to concerns regarding Asirvad’s pricing policies, particularly the high interest rates that were deemed non-compliant with regulatory standards.
Asirvad, a significant contributor to Manappuram’s asset portfolio, accounts for almost one-fourth of the company’s consolidated assets under management (AUM). The ban is expected to impact the company’s growth and profitability, especially as the subsidiary will only be allowed to service existing loans without approving new ones. This has raised concerns about the company’s near-term financial health and growth trajectory.
Analysts have responded by downgrading Manappuram Finance, cutting their profit estimates and predicting a tough road ahead for the company’s valuation. As the situation unfolds, the company’s management and investors will be closely monitoring any corrective actions taken to address RBI’s concerns.
