Gold Top Pick Of This American Company, Likely To Buy Majority Stake Of Manappuram; Should You Buy/Sell/Hold?

Manappuram Finance Share Price: Gold financier ended lower near its day's low on Wednesday, November 13, 2024, after reports stated that American private investment company, BAIN Capital is likely in discussion with Manappuram to buy its controlling stake. This comes amid consolidation in gold prices from record highs, and also buzz of the Kerala-based promoters of Manappuram who are looking to exit fully or partially from the NBFC. Amidst such, should you buy, sell or hold Manappuram?

Manappuram Finance Share Price:

The mid-cap NBFC stock started on a higher note to hit an intraday high of Rs 163.95 apiece on November 13th, however, pulled back with a bearish market trend. The stock closed at Rs 157.80 apiece, in red but broadly flat. The stock is near its day's low of 155.90.

The stock's 52-week high and low are at Rs 230.25 apiece and Rs 138.40 apiece respectively.

YTD, Manappuram shares are down by nearly 8%.

BAIN Capital Mulls Buying Manappuram:

People knowledge with of the matter told the Economic Times that Bain Capital is in talks to acquire a controlling stake in Manappuram Finance, betting on the country's gold loan sector. They said that this comes as the founding family of the Kerala-based non-bank lender and leading gold loan provider is revisiting plans to exit partially or fully.

Currently, CEO and MD VP Nandakumar holds a majority stake in Manappuram to the tune of 24,58,54,221 equity shares or 29.05% as of September 30, 2024. Together with his family, he holds about 29,83,51,014 equity shares or 35.25%.

However, when ET asked about the development, Nandakumar reportedly denied plans to sell the stake. GoodReturns cannot confirm the same.

Should You BUY/SELL/Hold Manappuram Shares?

Axis Securities said, "We believe near-term headwinds on growth and overall profitability will continue given the restrictions on Asirvad MFI's disbursements. However, the company will look to continue its growth journey in the core gold and secured non-gold portfolios. The management indicated that repayments from the Vehicle/MSME/Housing portfolio are expected to improve from Q4FY25 onwards, with green shoots visible in early Q3FY25. We expect Manappuram's RoA to be capped at 4.3% over FY25-26E factoring in higher credit costs, lower NIMs and increased Opex given aggressive collection efforts, before improving to ~4.6% by FY27 as conditions normalise."

Hence, Axis Securities has suggested HOLD with a target price of Rs 170 in Manappuram.

Similarly, IDBI Capital has recommended HOLD but for a target price of Rs 176 in Manappuram.

IDBI Capital's note said, "We revised estimate downwards to 12% vs 15% AUM CAGR (FY2426) earlier due to non-gold portfolio. MFI arm reported lower profitability led by an increase in provisions. MFI asset quality deteriorated further with GNPA at 4.3% vs 3.0% QoQ led by higher slippages. Cons. NII grew by 5% QoQ led by stable NIMs; PPoP grew by 5% QoQ led by lower operating expenses (up 2% QoQ). PAT grew slowly by 3% QoQ led by higher provisions (up 14% QoQ). We have revised estimates downwards and maintain a 'HOLD' rating with a TP of Rs176 (earlier Rs.225), valuing it at 1.0x P/ABV FY26E (earlier 1.2x as regulatory concerns)."

Incorporated in 1992, Manappuram Finance Ltd. has grown at a rapid pace. At present, it has 5073 (Includes branches of subsidiary companies) branches across 28 states/UTs with assets under management (AUM) of Rs. 302.6 billion and a workforce of more than 41,000.