Manappuram Finance Limited — Q3 FY25 earnings call

Call held 13 Feb 2025

Management summary

Manappuram Finance reported a challenging Q3 FY25 as significant losses in its microfinance subsidiary, Asirvad, weighed heavily on consolidated profitability. While the standalone gold loan business showed resilience with 18.8% YoY growth and improved guidance, the MFI segment faced severe collection headwinds and climatic disruptions. The lifting of RBI restrictions on Asirvad provides a path for recovery, though management is now pivoting toward a more conservative growth strategy for unsecured lending.

Highlights

  • Consolidated PAT fell 51.6% YoY to ₹278 crores, primarily due to a ₹188 crore loss in the Asirvad Microfinance subsidiary.

  • Consolidated AUM reached ₹44,217 crores, representing 9.5% YoY growth but a 3.3% sequential decline.

  • Standalone Gold Loan AUM grew 18.8% YoY to ₹24,504 crores, with management raising future growth guidance to 15-20%.

  • RBI lifted supervisory restrictions on Asirvad Microfinance in early 2025 following remedial actions.

  • Vehicle Finance AUM grew 41.4% YoY to ₹5,085 crores, though GNPA in this segment rose to 5.2%.

  • Capital position remains robust with a CRAR of 29.88% and a net worth of ₹12,776 crores.

  • Gold loan LTV remains conservative at 60%, with 79% of the book now online.

Concerns

  • Microfinance Sector Stress

Key financials

  1. Consolidated PAT ₹278 Cr -51.6%YoY
  2. Consolidated AUM ₹44,217 Cr +9.5%YoY
  3. Standalone PAT ₹453 Cr +5.8%YoY
  4. Standalone GNPA 2.5% +1.6%QoQ
  5. CRAR 29.9%
  6. Book Value per Share ₹150.94

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

Share of AUM
₹41,380 Cr Total
  • Gold Loan (Consolidated) ₹24,504 Cr 59.2%
  • Asirvad Microfinance ₹10,013 Cr 24.2%
  • Vehicle Finance ₹5,085 Cr 12.3%
  • Home Finance ₹1,778 Cr 4.3%

Guidance & targets

Volume

  • Gold Loan Growth Volume · FY26 · High confidence 15%-20%

    Previously 10%-12% → 15%-20%

    We expect the gold loan to grow at a rate of 15%-20%. That is the expectation for the future. Earlier, we were telling at about 10%-12%, now we believe that around 15%-20% is possible.

    — V. P. Nandakumar, MD & CEO

  • Asirvad MFI Growth Volume · next 2 years · Medium confidence 10%-12%
    we expect the growth segment of Asirvad, the MFI will come down to around 10%-12% annually... in the next 2 years, we expect a growth of around 10%-12% for MFI.

    — V. P. Nandakumar, MD & CEO

Other

  • Asirvad Collection Efficiency Other · next 1-2 years · Medium confidence 99%
    we expect the collection efficiency to go up to around 99% because of the tighter underwriting.

    — V. P. Nandakumar, MD & CEO

  • MFI AUM Mix Other · Medium Term · High confidence 10%-15%

    Previously 18% → 10%-15%

    we plan to contain the MFI book within around 10%-15% of our total AUM going forward.

    — V. P. Nandakumar, MD & CEO

Risks & concerns

  • Microfinance Sector Stress

    high

    Climatic disruptions, dilution of JLG discipline, and external influences have severely impacted collections and profitability.

    Both acknowledged

  • Regulatory Changes in Gold Loan Practices

    medium

    RBI's September 2024 circular mandates stricter LTV monitoring and rollover policies, which may impact customer convenience and growth momentum.

    Both acknowledged

  • Vehicle Finance Asset Quality

    medium

    GNPA in Vehicle Finance rose to 5.2%, with specific stress noted in the two-wheeler and farm equipment segments.

    Analyst acknowledged

Areas of evasion (1)

  • Specific details on gross additions to Stage-3 for Asirvad (deferred to offline).

Q&A highlights

2 direct
Asirvad Provisioning and Asset Quality Direct
Stage-3 will be 59%... Standard asset provision Stage-2 will be having 14% and Stage-1 will have 1.2%.

Confirms aggressive provisioning to clean up the MFI book following the RBI's supervisory restrictions.

Asked by Shreya Shivani, CLSA

Gold Tonnage Decline vs. AUM Growth Direct
When the higher amount is available with lower quantity, people will bring only lower quantity. They borrow for meeting their requirement and not because gold value is high.

Explains the counter-intuitive trend where AUM grows due to gold price appreciation while physical tonnage collateral declines.

Asked by Shweta, Elara

Competitive Intensity in Gold Loans Partial
The pricing there is an advantage as far as the customer is concerned. So there is a pricing difference. We are trying to gradually match that.

Highlights that Manappuram is facing pricing pressure from peers and is forced to narrow its yields to maintain market share.

Asked by Gaurav, Capital Farming Consultants

2 min read 5 chapters

Detailed narrative

Asirvad Microfinance: Navigating a Crisis

The quarter was dominated by the performance of Asirvad Microfinance, which reported a loss of ₹188 crores. Management attributed this to systemic challenges in the MFI sector, including climatic disruptions and a breakdown in Joint Liability Group (JLG) discipline. Despite the loss, the lifting of RBI supervisory restrictions in early 2025 is a major positive, allowing the company to restart disbursements with revamped processes. Management has increased Stage-3 provision coverage to 59% and plans to contain the MFI book to 10-15% of total consolidated AUM over the medium term.

Gold Loan Resilience and Growth Pivot

The standalone gold loan business remains the company's core strength, with AUM growing 18.8% YoY to ₹24,504 crores. Interestingly, management raised its growth guidance for this segment from 10-12% to 15-20%, citing increased ticket sizes and new customer additions (3.3 lakh in Q3). While physical gold tonnage declined as customers borrowed less quantity against higher-valued gold, the LTV remains conservative at 60%. The company is also adapting to the RBI's September 2024 circular by implementing stricter LTV monitoring and partial interest servicing for rollovers.

Diversified Segments: Mixed Results

Vehicle Finance and Home Finance showed strong AUM growth of 41.4% and 25.7% YoY, respectively. However, asset quality in Vehicle Finance is a concern, with GNPA rising to 5.2% due to stress in the two-wheeler and farm equipment segments. Home Finance remains a small but profitable contributor, posting a ₹7 crore profit for the quarter with a GNPA of 3.86%. Management continues to prioritize secured lending, having largely exited unsecured digital personal loans and MSME lending in the standalone entity.

Regulatory Landscape and Operational Changes

Management spent significant time discussing the regulatory environment, particularly the RBI's focus on gold loan practices. Manappuram has implemented automated SMS alerts for customers when LTV ratios hit 85% and auction notices at 90%. They are also engaging with the regulator to seek permission for opening new gold loan branches, which has been a point of restriction. The CEO expressed optimism that the regulator understands the challenges of the NBFC sector and that standard industry practices are being developed.

Financial Position and Liquidity

Despite the earnings hit, Manappuram maintains a very strong capital position with a CRAR of 29.88%. The company has comfortable liquidity, with ₹4,592 crores in cash and equivalents and ₹2,524 crores in undrawn bank lines. Borrowing costs increased marginally by 6 bps during the quarter, primarily due to MCLR repricing. The company's leverage remains low at 2.9 times, providing significant headroom for growth in its secured portfolios as the MFI segment stabilizes.

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