Manappuram Finance Q2 results: Income soars by 21%, profit growth slows

Manappuram Finance announced its second-quarter results after market hours on November 5, showcasing notable revenue growth but facing challenges in profit margins. The company’s consolidated total revenue saw a significant 21.3% increase year-on-year, rising to ₹2,637 crore from ₹2,174 crore. On a sequential basis, revenue grew by 4.98%. Despite this strong topline performance, net profit growth was relatively subdued.

Net profit for the quarter showed only a modest increase of 2.04% year-on-year, reaching ₹572 crore. This was largely attributed to higher provisions (funds set aside to cover potential loan losses) in its microfinance subsidiary, Asirvad Microfinance, coupled with rising finance costs. Finance costs increased by 31.37% on an annual basis, outpacing the 23.71% growth in interest income, highlighting the challenges faced in the current interest rate environment.

Asirvad Microfinance and regulatory hurdles

A notable event that will impact Manappuram’s microfinance operations going forward is the regulatory action taken against Asirvad Microfinance. In October, the Reserve Bank of India (RBI) barred Asirvad and three other financial institutions from disbursing new loans due to high interest rates charged and other regulatory concerns.

As of the end of the second quarter, Manappuram’s consolidated AUM stood at ₹45,716 crore. Gold loans, the company’s primary business segment, represented 53% of total AUM, while microfinance loans made up 24%. With microfinance disbursals halted, a decrease in this segment’s contribution is expected, impacting the company’s financials in the coming quarters.

The board of directors approved a Re 1 interim dividend for shareholders. 

Stock Performance

Following RBI’s action, shares of Manappuram Finance had experienced a significant drop, falling nearly 22% from ₹177 to ₹138. However, the stock has managed to regain some ground, closing at ₹158.7 today, up 3.79% for the day. As the results were announced after market hours, the investor response is expected to unfold in tomorrow’s trading session.