Manappuram Finance Ltd.

Manappuram Finance is riding the ongoing gold rush and delivering an impressive 44 per cent YTD return. With 65 per cent of AUM in gold loans, strategic Bain Capital backing, and disciplined risk management, the stock blends the stability of gold with long-term growth potential. Rising digital loan adoption and a resilient rural franchise further strengthen its outlook [EasyDNNnews:PaidContentStart]

Gold’s Enduring Role as a Store of Value
For thousands of years, gold has maintained its status as a universal medium of exchange and a trusted store of value. Its appeal as a ‘safe-haven’ asset has endured across civilisations and is likely to persist for generations. Historically, gold has delivered a long-term compounded annual growth rate (CAGR) of around 10–11 per cent.

Gold, which delivered relatively steady returns for decades, has seen a sharp acceleration post-Covid, often even outpacing equities. This surge is driven by a mix of global and domestic factors: heightened geopolitical tensions, record central Bank buying by countries like China and India, persistent inflation and economic uncertainty, and expectations of softer interest rates alongside dollar weakness. In India, the rupee’s depreciation, import duties, festive demand, and rising retail participation through ETFs, sovereign bonds, and digital gold have added momentum. Together, these forces have pushed gold to record highs globally and domestically, with continued central bank accumulation suggesting limited chances of a sharp correction in the near term.

Opportunity for Gold-Backed Lenders
This structural strength in gold creates a favourable backdrop for companies engaged in gold-backed lending. Non-banking financial companies (NBFCs) such as Manappuram Finance Ltd. (MAFIL) provide short-term loans against household gold holdings.

MAFIL stock price has mirrored gold’s strong performance. As gold prices rallied 15 per cent in 2023 and 22 per cent in 2024, and have already risen about 40 per cent on a year-to-date (YTD) basis in 2025, Manappuram’s stock has also delivered outsized returns. On a YTD basis, its shares are up roughly 44 per cent; over the past two years, about 96 per cent; and over three years, an impressive 200 per cent.

About the Company
Manappuram Finance Ltd. (MAFIL) is among India’s leading non-banking financial companies (NBFCs), with a legacy that stretches back over seven decades. The group traces its origins to 1949, when late Mr. V.C. Padmanabhan began a small pawn-broking and money-lending business in the coastal village of Valapad, Thrissur district, Kerala. His son, Shri V.P. Nandakumar, the current Chairman and Managing Director, assumed leadership in 1986 and spearheaded the company’s transformation from a modest family enterprise into a nationally recognised financial services institution.

Incorporated in 1992, it operates over 5,000 branches (including subsidiaries) across 28 states and Union Territories, manages assets under management (AUM) of about ₹44,304 crore and employs more than 50,000 people on a consolidated basis. Manappuram’s core business model is built on shorttenor, low-ticket gold loans, a segment where it holds the position of India’s second-largest lender. Over the years, the company has systematically diversified into complementary financial services aimed at semi-urban and rural customers.

Business Segments
MAFIL operates through a well-diversified portfolio of lending and allied financial services. While gold loans remain the flagship business, the company has steadily expanded into microfinance, housing finance, vehicle and equipment finance, MSME loans, and ancillary services through a network of wholly-owned subsidiaries.

1. Gold Loans – Gold loans remain MAFIL’s principal business and largest profit contributor. The company is the secondlargest gold loan NBFC in India, with a strong brand and nationwide presence. It pioneered Online Gold Loans (OGL), a fully digital lending platform which now contributes about 82 per cent of the gold loan portfolio (FY25). As of Q1 FY26, MAFIL held about 57 metric tonnes of household gold jewellery on behalf of roughly 2.6 million active customers. Consolidated gold loan AUM stood at ₹28,802 crore, reflecting a 21.8 per cent year-on-year increase and 12.6 per cent sequential growth. The robust demand highlights both sustained high gold prices and the company’s technologydriven reach.

2. Microfinance (Asirvad Micro Finance Limited ) – Microfinance operations are conducted through Asirvad Micro Finance Ltd., in which MAFIL holds a 97.6 per cent equity stake. Asirvad provides small-ticket loans to low-income women under products such as Income Generating Programme (IGP) loans, MSME loans, and gold loans. In Q1 FY26, Asirvad’s total AUM stood at ₹8,605 crore, comprising: Microfinance (core business) – ₹5,542 crore (down 50.7 per cent YoY, reflecting a high base and tighter credit discipline); and Gold loans – ₹1,111 crore (+9.3 per cent YoY, +19.7 per cent QoQ).

3. Housing Finance (Manappuram Home Finance Ltd.) – Manappuram Home Finance, a wholly-owned subsidiary, focuses on affordable housing loans, primarily targeting self-employed borrowers in Tier 2–4 towns. Q1 FY26 AUM: ₹1,901 crore (+19.8 per cent YoY, +4.3 per cent QoQ). This segment offers strong long-term growth potential given the government’s thrust on affordable housing.

4. Vehicle and Equipment Finance (VEF) – MAFIL provides financing for commercial vehicles (CVs), two-wheelers (2W) and Construction equipment, with a growing emphasis on used-vehicle financing and small contractors. Q1 FY26 AUM: ₹4,492 crore (-1.1 per cent YoY, -5.9 per cent QoQ). The moderation reflects cautious disbursements and softer demand in the CV segment.

5. MSME and Personal Loans – This segment offers a mix of secured lending products such as loans against property (LAP) and micro home finance, and unsecured digital personal loans targeted at digitally savvy salaried professionals and repeat customers. Q1 FY26 AUM: ₹3,105 crore (+5.4 per cent YoY, +0.8 per cent QoQ). Growth remains measured as the company calibrates risk in unsecured portfolios.

6. Other Services and Subsidiaries –
■ Insurance Distribution – Manappuram Insurance Brokers Ltd., an IRDAI-licensed broker, distributes life and general insurance products through an omnichannel model.
■ IT Services – Manappuram Comptech and Consultants Ltd. (MACOM), with a 99.81 per cent equity stake, provides in-house digital transformation, IT support, and application development to drive technology-led operations.

Key Competitors
MAFIL is India’s second largest pure-play gold loan NBFC, operating in a market dominated by Muthoot Finance, which commands a market cap. of about ₹1.22 lakh crore, over five times MAFIL’s ₹23,600 crore, and a vast branch network across South India.

Other large NBFCs such as Bajaj Finance (₹6.2 lakh crore), Cholamandalam Investment & Finance (₹1.33 lakh crore), and Shriram Finance (₹1.14 lakh crore) have diversified lending portfolios, including gold loans, but their scale and multiple revenue streams give them a competitive edge.

Commercial banks HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, Kotak Mahindra Bank, and IndusInd Bank also maintain sizable gold-loan books. Their low-cost deposits, national presence, and digital platforms allow them to compete aggressively on rates and convenience. IIFL Finance is another growing NBFC challenger with customised gold-loan products.

Manappuram differentiates itself through a strong rural franchise, quick loan disbursement, and an expanding presence in microfinance and vehicle finance. However, its valuation and market share remain significantly below the largest peers, making sustained growth and yield protection key to maintaining competitiveness against both specialist NBFCs and large banks.

Business Updates – Last Five Years
Over the past five years, MAFIL has transformed from a resilient gold loan NBFC into a technologically advanced, strategically diversified financial institution. Revenue grew from ₹6,061 crore in FY21 to surpass ₹10,000 crore for the first time in FY25, reaching ₹10,007 crore. Net profit increased from ₹1,725 crore in FY21 and crossed ₹2,000 crore in FY24 for the first time. However, it moderated to ₹1,204 crore in FY25, declining from ₹2,197 crore in FY24. This was primarily due to a sharp rise in finance costs, operating expenses, and provisions. Finance expenses surged 24.7 per cent YoY to ₹3,575 crore (from ₹2,866 crore), employee costs rose 15.3 per cent YoY, and provisions/ bad debts jumped 239.4 per cent YoY to ₹1,963 crore (from ₹578 crore). As a result, financing margins also contracted sharply, falling from 35 per cent in FY24 to 19 per cent in FY25 and further to 13 per cent on a TTM basis. These factors collectively weighed on profitability despite steady revenue growth. Over the past three years, the company’s topline grew at a healthy CAGR of 18.2 per cent, while net profit moderated, declining at a CAGR of 2.9 per cent.

The company’s flagship gold loan business remains core, with the Online Gold Loan (OGL) platform accounting for 82 per cent of the portfolio. Digital initiatives including OCR-based KYC, AI-powered chatbots, and modernisation of core systems by IT subsidiary MACOM enhanced efficiency and customer experience.

Strategic capital infusion through Bain Capital’s investment strengthened financial flexibility and brought global strategic expertise. Bain Capital made a strategic capital infusion of approximately ₹4,385 crore in MAFIL in March 2025. This investment was for an 18 per cent stake via preferential allotment of equity and warrants at ₹236 per share, about a 30 per cent premium over the six-month average trading price. The deal included a mandatory open offer for an additional 26 per cent stake at the same price, with Bain Capital's total potential stake rising up to 41.7 per cent on a fully diluted basis after the open offer. This investment marked Bain Capital's joint control and significant partnership in MAFIL's growth journey. Disciplined diversification into housing finance, vehicle and equipment finance, and secured lending provided stability amidst microfinance stress. Governance and compliance were strengthened through risk-based audits, enhanced internal controls, and robust dividend payouts.

Financial Performance
MAFIL reported a challenging start to FY26, with consolidated income from operations at ₹2,262 crore, down 2.7 per cent sequentially and 9.1 per cent YoY. PAT declined sharply to ₹132 crore, down 76.2 per cent YoY from ₹557 crore, though up from a net loss of ₹203 crore in Q4 FY25. The fall in profitability was primarily driven by a 14.2 per cent YoY decline in net interest income to ₹1,407 crore, reflecting portfolio recalibration and moderation in high-yield microfinance loans, whose AUM fell 50.7 per cent YoY to ₹5,542 crore (from ₹11,236 crore in Q1 FY25). In addition, provisions and bad debts surged 144.7 per cent YoY to ₹559 crore, reflecting higher expected credit costs. Rising operating expenses and slower growth in other income further weighed on PAT, despite steady overall revenue. The AUM mix for Q1 FY26 comprised Gold 65 per cent, MFI 13 per cent, HFC 4 per cent, VEF 10 per cent, and Onlending & MSME 8 per cent.

Management highlighted that the quarter was affected by regulatory pressures in microfinance and macroeconomic volatility but emphasised that the core gold loan portfolio remained resilient. The company continues to focus on digital lending, disciplined risk management, and cost control to navigate near-term headwinds, with long-term growth underpinned by strategic capital infusion, diversification, and technology-led efficiency.

Valuation and Outlook
As of September 2025, MAFIL is valued at approximately ₹23,600 crore. The company trades at a price-to-earnings (P/E) ratio of 29.6x, which is elevated compared with the industry average of 22.9x and its own three-year median P/E of 7.6x, reflecting strong investor optimism despite near-term challenges. The price-to-book (P/B) ratio stands at 1.91x, marginally below the industry median of 1.97x, indicating a relatively fair valuation against net assets.

The PEG ratio of –10.20 signals temporary negative earnings momentum due to microfinance stress, contrasting with the industry PEG of 0.43, while the debt-to-equity ratio of 2.90x highlights higher leverage compared with the industry median of 0.75x, typical for asset-heavy NBFCs. Interest coverage is 1.29x, lower than the industry median of 1.96x, reflecting elevated financing costs. Operational efficiency remains robust, with OPEX/NIM at 53.2 per cent, slightly improved QoQ.

The company reported net interest income of ₹1,407 crore, with a cost of funds at 9.2 per cent, demonstrating disciplined margin management. Quarterly EPS trends indicate volatility: June 2024: ₹6.55, March 2025: ₹2.26, and June 2025: ₹1.6; mirroring provisioning pressures and sectoral stress. Dividend yield stands at 1.24 per cent, maintaining shareholder returns amidst a challenging macro environment.

MAFIL is strategically pivoting to position gold loans as its primary growth engine, aiming to increase their share of consolidated AUM from 65 per cent to 75 per cent by FY26. This growth will be driven by a calibrated yield reduction, focus on high-ticket customers, digital sourcing (currently 85 per cent of gold loans), and gradual branch expansion once regulatory approvals, including the Bain Capital deal, are completed.

Non-gold segments including microfinance, MSME, vehicle, and home loans are under consolidation, with management targeting higher ticket sizes, secured lending, and operational efficiency to improve asset quality and profitability.

Microfinance losses are expected to reduce progressively, with a return to profitability by Q4 FY26. With a strengthened capital base (CRAR 28.7 per cent), conservative risk practices, and new leadership under CEO Deepak Reddy, the company is focused on scalable, technology-driven growth while maintaining prudent governance and disciplined portfolio management. Manappuram Finance commands a premium valuation due to its resilient gold loan franchise, strategic capital infusion through Bain Capital, and digital transformation initiatives. While long-term growth prospects remain strong, near-term earnings face pressure from higher leverage, yield compression, and transient microfinance losses. Existing investors may continue to HOLD, whereas new entrants are advised to wait and monitor the next few quarters to assess recovery and growth execution.

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