'Reduce' Manappuram Finance Shares Maintains Dolat Capital Post Q1 Results — Check Target Price

With Bain's joint control, the NBFC stands to benefit from professional management and increased agility in the gold loan business (lost market share to NBFCs in recent years). Near-term pain from higher provisions, both led by improvement in PCR (much lower vs peers) and possible stress recognition, could continue.

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IDBI Capital Report

Manappuram Finance Ltd. reported a strong pick-up in gold loan growth to 12% QoQ accompanied by 150 bps sequential decline in yields and sharp rise in share of >5L loans (to 19% of gold book). Standalone book grew at 5% QoQ as non-GL segments de-grew, with growth in consolidated assets under management at 3%.

Asset quality in non-gold portfolios continues to deteriorate (partly driven by portfolio decline). New customer additions at 0.35 million were muted.

Management expects higher growth to compensate for the loss in yields. While reduced pricing may aid growth in the near term, we remain unsure if this can continue without impacting profitability esp as reduced non-gold books limit overall growth.

NBFC's share of >2L loans at 42% is comparable now to Muthoot Finance. Share of gold in consolidated AUM mix is expected to further strengthen to 75% (65% in Q1), a positive.

We factor lower standalone yields and improved loan growth, with a downward revision in FY26/27E earnings of 16%/5%. However, with rising GL mix, we value the standalone business at a higher multiple (1.4x).

Maintain ‘Reduce' rating with target price of Rs 240, valuing standalone book at 1.4x FY27E and adding subsidiary value.

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