Shares of Manappuram Finance fell over 9 percent to Rs 165.35 on Thursday after the company's non-gold business reported weak numbers with MFI business reporting net loss in Q1. The net profit also declined for the second consecutive quarter on a sequential basis.

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Compared to the same period the previous year, the company posted a nearly 38 percent jump in its consolidated net profit at Rs 367.97 crore in Q1. It had registered a net profit of Rs 266.78 crore in the same period of the previous fiscal year.

Non-gold AUM of the NBFC was up 10.4 percent YOY but down 7.9 percent QoQ. Also, the NIM was at an all-time low of 14.9 percent due to weak collections. On asset quality front, gross NPAs (non-performing assets) stood at 1.25 percent and net NPAs at 0.70 percent at the end of June 2020.

"This was a quarter when the overall business environment was severely affected by the lockdowns. However, we were able to maintain growth in our core business of gold loans, thanks to our digital infrastructure, particularly our robust online gold loan platform," Manappuram Finance MD & CEO V P Nandakumar said.

In a review report, Yes Securities remained bullish on the stock post Q1 and said that Q1 FY21 was a mixed bag for Manappuram wherein the dismal performance by non-gold loan businesses was covered-up by improved profitability in the mainstay gold loan business.

"Earnings in the gold loan business were strong, driven by healthy value-led AUM growth, the substantial shift towards on-line gold loans, and sustained cost reduction. However, a 4 percent QoQ decline in gold holdings and an active customer base was disappointing. In MFI business, loan portfolio contracted 8 percent QoQ with improved collections in June and no disbursements," the brokerage stated in a report.

Yes Securities maintained a 'buy' call on the stock and sees the firm reporting strong profitability in coming quarters despite elevated provisioning, driven by tailwinds in gold loan business. It added that notwithstanding stock’s recent outperformance, valuation is still inexpensive in the context of high profitability and capitalization. It has a target price of Rs 225 for the stock indicating a 23.5 percent upside.

First Published:Jul 30, 2020 1:03 PM IST