Manappuram Finance earnings beat on gold loan growth and stronger margins

Investment View and Valuation

Motilal Oswal Financial Services maintained its Neutral rating on Manappuram Finance in its November 13, 2026, 2QFY27 results update. The broker said sustained gold loan growth and improved yields drove an earnings beat, while the sharp increase in Gold Loan Stage 2 assets and sector competition remain important monitorables.

The target price of Rs 360 is based on 1.5 times September 2028E consolidated book value per share. The stock trades at 1.4 times FY28E price to book, but the broker retained its Neutral rating given the Stage 2 trend and competitive risks.

2QFY27 Financial Performance

Manappuram Finance reported consolidated PAT of about Rs 7 billion in 2QFY27, up about 220 per cent YoY and 20 per cent QoQ. PAT was about 6 per cent above Motilal Oswal's estimate.

Gold Loan Franchise and AUM Growth

The core gold loan franchise continued to expand. Consolidated gold AUM rose 6.4 per cent QoQ and 92.5 per cent YoY to about Rs 606 billion, while gold tonnage increased about 4 per cent QoQ to around 70 tonnes. Consolidated AUM increased around 5 per cent QoQ and 60 per cent YoY to about Rs 735 billion.

Gold loans represented 83 per cent of consolidated AUM, compared with 69 per cent in 2QFY26. The gold loan customer base grew about 3 per cent QoQ to around 3 million, including 315,000 customer additions during the quarter. Average LTV declined to 64.5 per cent from 65.6 per cent in 1QFY27, while average ticket size increased to Rs 138,000 from Rs 133,000. Online sourcing accounted for about 91 per cent of the gold loan portfolio.

Margins, Pricing and Expansion Plans

Margins improved as consolidated NIM increased by about 60 bp QoQ to around 11 per cent. Gold loan yields rose to about 18 per cent from 17.7 per cent in the prior quarter, while standalone cost of borrowings was broadly stable QoQ at about 8.75 per cent.

Management expects gold loan yields to settle at 17-18 per cent over the medium term and expects borrowing costs to rise 25-30 bp by the end of 4QFY27 to around 9 per cent. It reiterated its FY27 gold loan AUM growth guidance of 25-30 per cent, supported by branch additions, digital sourcing, customer acquisition and higher collateral values.

The company plans to add about 500 branches in FY27, with work on another 250 branches under way. It is shifting customers from three-month products towards six-month and one-year tenures while maintaining disciplined pricing rather than pursuing a price war.

Asset Quality and Key Monitorables

Asset quality is the key risk highlighted in the report. Gold Loan Stage 2 increased to around 5 per cent in September 2026 from around 0.5 per cent in June 2026. This reflected behavioural adjustments after revised April 2026 regulations and the launch of EMI-based, monthly-interest and shorter-tenor products.

Management expects Stage 2 to normalise over the next couple of quarters as borrowers adapt, although fresh Stage 2 inflows make the eventual normalised level uncertain. Motilal Oswal also flagged competitive intensity as a monitorable. Around 70-80 bp of reported credit cost represented overlay provisions.

Performance of Subsidiary and Other Businesses

Asirvad MFI

Asirvad MFI reported a recovery, with PAT of Rs 320 million against Rs 210 million in 1QFY27 and a loss of Rs 1.7 billion in 2QFY26. Its AUM, including gold loans, grew about 10 per cent QoQ to Rs 79 billion. MFI GNPA declined 20 bp QoQ to 4.6 per cent, while net NPA improved to about 1.1 per cent.

Vehicle Finance, MSME and Allied Businesses

Other businesses remain under pressure. Vehicle finance AUM declined 15.3 per cent QoQ and 46.5 per cent YoY to Rs 21.7 billion, with GNPA rising to 16.9 per cent. MSME and allied business GNPA increased to 6.4 per cent.

Estimates and Outlook

Motilal Oswal raised FY27E and FY28E EPS estimates by about 10 per cent and 5 per cent, respectively, to reflect higher NIM and slightly lower operating cost ratios.

• Gold loan AUM CAGR is forecast at 27 per cent over FY26-FY28E.
• Consolidated AUM CAGR is forecast at 23 per cent over FY26-FY28E.
• Consolidated PAT CAGR is estimated at about 81 per cent over FY26-FY28E.
• FY28E consolidated RoA is estimated at about 3.3 per cent.
• FY28E consolidated RoE is estimated at about 15 per cent.

The broker's Neutral view reflects the positive earnings momentum and gold loan growth alongside the risks from the Stage 2 trend and competitive intensity.