Share Price of Manappuram Finance Witnesses Sharpest Fall Since 2020: Here’s Why

Introduction 

The share price of Manappuram Finance Ltd saw a significant plunge of over 12% on Friday, marking its sharpest decline since 2020. At around 11:14 AM, the stock was trading at Rs 148.75 on the NSE, down by 12.6%. This sharp drop was triggered by regulatory actions and subsequent downgrades from multiple brokerages. Let’s delve into the details of this downturn.

Why Did the Share Price Nosedive? 

The Reserve Bank of India (RBI) directed Manappuram’s microfinance subsidiary, Asirvad Micro Finance, to halt the sanctioning and disbursement of loans. This was a major blow, not just for Manappuram, but also for three other Non-Banking Financial Companies (NBFCs), all cited for failing to properly assess household incomes and repayment obligations tied to their microfinance loans.

The RBI’s concerns extended to issues related to excessive interest rates and non-compliance with regulations. Specifically, the central bank found the companies’ Pricing Policies, particularly their Weighted Average Lending Rate (WALR) and the Interest Spread charged, to be “excessive and non-adherent to regulations.”

The RBI’s Clampdown 

On Thursday, the RBI ordered Asirvad Micro Finance, along with Navi Finserv (backed by Sachin Bansal), Arohan Financial Services, and DMI Finance Private, to cease loan sanctioning and disbursal. This order was effective from the close of business on October 21 and was rooted in supervisory concerns, including “usurious pricing.” The central bank expressed that these entities were charging interest rates beyond acceptable limits, raising red flags.

Manappuram Finance’s Response 

Manappuram Finance responded promptly to the RBI’s actions, stating that it acknowledges the concerns raised by the banking regulator. The company has committed to implementing the required corrective measures in a timely manner. In its regulatory filing, Manappuram reiterated its dedication to adhering to compliance and stated that the company’s Board would monitor the situation closely. The company also assured investors that its “compliance-first” approach would guide all actions moving forward.

Market Reaction and Share Price Impact 

Manappuram Finance’s share price has faced considerable pressure since the RBI’s order. In October alone, the share price has dropped by 23.59%, marking one of the steepest monthly declines. Year-to-date (YTD), the stock has slumped by 10.75%. The sharp fall has raised concerns among investors, particularly in light of the company’s exposure to the microfinance sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.