Manappuram Finance Ltd. received downgrades from multiple top brokerages as the Reserve Bank of India’s restriction on its subsidiary could hurt earnings with at least six months of restrictions.
The non-banking financial company was downgraded by Morgan Stanley, JPMorgan and Jefferies a day after the banking regulator barred four NBFCs from sanctioning and disbursing loans from Oct. 21. This was done as the regulator found material supervisory concerns in relation to high lending rates.
Jefferies downgraded Manappuram Finance to ‘hold’ with a target price of Rs 167 apiece, implying a downside of 5.8% from the previous close.
RBI’s restrictions on subsidiary Asirvad Microfinance should hurt earnings, as it accounts for 27% of consolidated assets under management, Jefferies said in a note on Oct. 17.
The parent may have to infuse capital if the subsidiary’s net worth is eroded, it said, adding that the remedial measures and removal of restrictions could take six months.
Morgan Stanley downgraded the NBFC to ‘equal weight’ and revised target price to Rs 170 versus Rs 262 apiece earlier. This implies a downside of 4% from the previous close.
RBI embargo is likely to hurt profit materially as longer and short-tenured loan book could shrink rapidly, the brokerage said. Credit costs are already elevated and funding costs could rise, it said.
Morgan Stanley cut its consolidated earnings forecasts by 20% for fiscal 2025 and 30% across fiscal 2026-27.
