Thursday, 9 May 2024, Bengaluru
Here we are talking about how Muthoot Finance & Manappuram Finance faced up to a 9% crash in shares.
Reserve Bank of India (RBI) alerted gold finance companies to exercise caution against beaching the Rs 20,000 cash loan disbursal, which has put heavy selling pressure on companies like Manappuram Finance and Muthoot Finance. Many gold finance companies reported a drop in shares as of May 9. In addition, Muthoot Finance shares crashed to 8.8%, while Manappuram Finance tumbled 8.3%.
According to reports, non-bank financed companies (NBFC) will need to make operational changes, leading to momentary financial impact, as stated by global brokerage Morgan Stanely. At the end of December 2023, Gold loans were about 84% of Muthoot Finance’s AUM (Asset Under Management) and 51 % of Manappuram Finance. Manappuram Finance is projected to have better stock than Muthoot Finance in the near years due to 40% of the disbursement in cash.
The NBFC’s gold loan asset under management was about 31% of its total assets. According to RBI Data, the gold loan share in the total loan of NBFC was 59.7%, around 2% less than last year. However, NBFCs remain the top providers of gold loans, in addition to banks. This March, RBI also prohibited IIFL Finance (a non-banking finance company) from sanctioning gold loans to protect customers’ interests. While issuing the advisory, CBI mentioned that no individual can receive more than Rs 20,000 in cash as a loan amount. The IIFL management mentioned that most concerns revolve around the operational nature, not the outcome of any unethical practices by the company. This sudden drop has shocked everyone, knowing that last year, Muthoot Finance, one of India’s largest gold-loan NBFC, reported a 14% jump in standalone net profit at Rs 1,027 crore. In the same quarter last year, the total amount of loans given out by Manappuram Finance was Rs 57,731 crore. This year, it increased by 23% to reach Rs 71,182 crore, with a profit of around 46% to $69 million this quarter. Manappuram’s total assets under AUM as of December 31st were Rs 40,400 crore. This went up from Rs 39,000 crore in the previous quarter. The increase was primarily because of microfinance and vehicle financing.
Conclusion
Muthoot Finance and Manappuram Finance reported a drop in shares up to 9 percent. The cause is said to be the Reserve Bank of India’s caution against exceeding Rs 20,000 in cash loan disbursal. This announcement caused heavy selling pressure on gold financing companies. Reportedly, Muthoot Finance shares dropped by 8.8%, and Manappuram Finance tumbled by 8.3%. The central bank’s reminder about cash loan limits will require non-bank financed companies (NBFCs) to make operational changes, leading to momentary financial impact. While Muthoot Finance heavily relies on gold loans, Manappuram Finance’s diverse disbursement methods may give it an edge in the future. Despite the share drop, both companies have shown significant growth in loans and profits, indicating their resilience in the market.
