Manappuram Finance has been downgraded by several major brokerages due to the Reserve Bank of India’s restrictions on its subsidiaries, which said the restriction for at least six months could have a negative impact on its earnings.
A day after the banking regulator imposed sanctions on four NBFCs and banned them from disbursing loans from October 21, the non-banking financial company was downgraded by Morgan Stanley, JPMorgan and Jefferies. This was done as regulators found significant supervisory concerns related to high lending rates. .
Jefferies downgraded Manappuram Finance to ‘hold’ at Rs 167 per deal, implying a 5.8% decline from the previous closing price.
Jeffries said in an Oct. 17 note that the RBI’s restrictions on subsidiary Asirvad Microfinance should have a negative impact on earnings as the company accounts for 27% of consolidated assets under management.
If a subsidiary’s net assets decline, the parent company may have to inject capital, it said, adding that corrective action and lifting of restrictions could take six months.
Morgan Stanley had earlier downgraded the NBFC’s rating to ‘equal weight’ and revised its price target to Rs 170 per piece from Rs 262. This means a decline of 4% from the previous closing price.
The brokerage said the RBI embargo is likely to take a big hit to profits as long-term and short-term loan balances are likely to shrink rapidly. He said credit costs were already rising and funding costs could rise.
Morgan Stanley has revised down its consolidated profit forecast for fiscal 2025 by 20% and by 30% for fiscal 2026-2027 as a whole.
