Manappuram Finance Limited — Q1 FY26 earnings call

Call held 8 Aug 2025

Management summary

Manappuram is undergoing a strategic pivot to de-risk its balance sheet by increasing its gold loan mix to 75% and reducing unsecured microfinance exposure to below 10%. While consolidated profitability returned this quarter, the company is sacrificing margins (yields down 150bps) to regain gold loan market share. Microfinance remains a drag with a ₹267 crore loss, though management signals that the worst of the credit cycle is over.

Highlights

  • Consolidated AUM stood at ₹44,304 crores, reflecting a 3% QoQ growth but a 1.4% YoY decline.

  • Consolidated PAT returned to profitability at ₹132.5 crores, compared to a loss of ₹203.2 crores in Q4 FY25.

  • Gold loan yields compressed significantly to 20.7% from 22.2% in the previous quarter as part of a conscious strategy to match competition.

  • Asirvad Microfinance reported a reduced loss of ₹267 crores (vs ₹624 crores loss in Q4 FY25) due to ongoing stress in the MFI sector.

  • Gold loan AUM now accounts for 65% of consolidated AUM, with a long-term target to increase this to 75%.

  • Standalone RoA stood at 3.8% with a conservative leverage of 2.5x.

  • Vehicle finance AUM declined 5.9% QoQ to ₹4,492 crores as the company tightened underwriting due to asset quality challenges.

  • The Board declared an interim dividend of ₹0.50 per share.

Concerns

  • Microfinance Sector Stress

Key financials

  1. Consolidated Revenue ₹2,265 Cr -2.7%QoQ
  2. Consolidated PAT ₹132.5 Cr -76%YoY
  3. Gold Loan Yield 20.7%
  4. Consolidated AUM ₹44,304 Cr -1.4%YoY
  5. Consolidated CRAR 28.7%
  6. Standalone RoA 3.8%

What they filed

Q1 FY27: revenue up 45.9%, net profit up 40.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,748 1,799 1,739 1,743 1,820 +4%1,918 +7%2,158 +24%2,543 +46%
Net profit475 453 414 392 376 −21%381 −16%376 −9%552 +41%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Gold Loans
    65% AUM Mix57% LTV₹51 Cr Auctions
  • Asirvad Microfinance
    ₹6,705 Cr AUM₹267 Cr Net Loss1.4% Net NPA-45% AUM Growth
  • Vehicle Finance
    ₹4,492 Cr AUM9.2% GNPA-5.9% AUM Growth
  • Home Finance
    ₹1,901 Cr AUM₹7 Cr Profit2.9% GNPA

Guidance & targets

Market Share

  • Gold Loan Portfolio Mix Market Share · phased manner · High confidence 75%
    We proposed to increase the gold loan portfolio at a consolidated level of 75% of total loan portfolio in a phased manner.

    — V. P. Nandakumar, MD

  • Microfinance Portfolio Mix Market Share · gradual · High confidence 10%
    Gradual decline of microfinance portfolio in the consolidated company will be reduced to 10%.

    — V. P. Nandakumar, MD

  • Secured Book Mix Market Share · FY26 · High confidence 90%
    we intend to increase our secured book to 90% and bring down the unsecured microfinance to below 10% of consol AUM.

    — V. P. Nandakumar, MD

Margin

  • Gold Loan Yield Margin · 4 to 6 quarters · Medium confidence 18%

    Previously 20.7% → 18%

    So I hope in 4 to 6 quarters, we'll bring that more or less on par with the leading player [around 18%].

    — V. P. Nandakumar, MD

Profitability

  • MFI Credit Cost Reduction Profitability · coming quarters · Medium confidence 30%
    So in the coming quarters, we will see at least 30% reduction from the credit cost to what we reported in Q1.

    — Bindu A. L., CFO

Risks & concerns

  • Microfinance Sector Stress

    high

    Borrower defaults from over-leverage led to a ₹267 crore loss in Asirvad this quarter.

    Both acknowledged

  • Regulatory Impact on Small Ticket Gold Loans

    medium

    Regulatory changes in cash transfers are pushing small borrowers (<₹1 lakh) toward unorganized pawnbrokers.

    Management acknowledged

  • Asset Quality in Vehicle Finance

    medium

    GNPA in vehicle finance has risen to 9.2%, particularly in 2-wheeler and farm segments.

    Analyst acknowledged

  • Yield Compression Impact on Income

    medium

    Analysts questioned if the 150bps yield drop can be fully offset by volume growth.

    Analyst downplayed

Areas of evasion (2)

  • Specific full-year gold loan growth targets
  • Immediate strategic changes under the new CEO

Q&A highlights

2 direct, 1 evasive
Gold Loan Yield Compression Strategy Direct
It's a conscious strategy to bring it on par with leading players in the NBFC industry slowly... Depression yield will be compensated by the growth.

Confirms the company is willing to sacrifice NIM to regain market share and compete with larger peers like Muthoot.

Asked by Digant Haria

AUM Growth vs. Tonnage and Customer Count Direct
When the gold price goes up, the security they bring the collateral, that quantity they reduce... growth is coming mainly from INR1 lakh plus.

Reveals that recent AUM growth is largely driven by gold price appreciation and higher ticket sizes, while small-ticket volume is actually under pressure.

Asked by Gaurav

New CEO's Strategic Vision Evasive
I'm going to duck the question, and I'll tell you why. This is 5 days experience in the company to state at this August forum what exact strategy going forward.

The new CEO, Deepak Reddy, declined to provide specific strategic guidance, leaving investors to rely on the MD's existing pivot plan for now.

Asked by Abhijit Tibrewal

2 min read 5 chapters

Detailed narrative

Strategic Pivot Back to Gold Loans

Management has initiated a major strategic shift to increase the gold loan share of the consolidated AUM from the current 65% to 75%. This move is intended to de-risk the balance sheet following significant losses in the unsecured microfinance segment. The company plans to leverage its 1,100 MFI branches to offer gold loans through co-lending models, aiming for a total of 5,000+ gold-offering branches by year-end.

Yield Compression as a Growth Lever

Gold loan yields dropped from 22.2% in Q4 FY25 to 20.7% in Q1 FY26. Management explicitly stated this is a calibrated strategy to match the 18-19% yields offered by top-tier NBFC competitors. They expect yields to gravitate toward 18% over the next 4-6 quarters, betting that the resulting volume growth and lower borrowing costs (down 2bps this quarter) will protect absolute budgeted income.

Microfinance Recovery and Downsizing

Asirvad Microfinance remains the primary source of consolidated stress, posting a ₹267 crore loss this quarter. However, this is a significant improvement from the ₹624 crore loss in the previous quarter. Management expects credit costs to drop by another 30% in coming quarters and plans to cap the MFI segment at 10% of the total consolidated book, down from its historical highs.

Asset Quality Challenges in Non-Gold Segments

The vehicle finance segment is facing headwinds, with AUM declining 5.9% QoQ to ₹4,492 crores and GNPA rising to 9.2%. Management has responded by exiting risky segments like farm equipment and 2-wheelers, shifting focus toward larger ticket sizes in used commercial vehicles and cars (targeting ₹10 lakh+ tickets). MSME lending is also being refocused toward secured loans to improve asset quality.

Regulatory and Macroeconomic Headwinds

Regulatory changes regarding cash transfers for gold loans have negatively impacted the small-ticket segment (<₹1 lakh), leading to a migration of these customers to unorganized pawnbrokers. Consequently, growth is currently being driven by higher-ticket customers and gold price appreciation, with tonnage growth remaining flat at 1% despite a 12% increase in AUM value.

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