Struggling Profits of Manappuram Finance in India Linked to Weakness in Microfinance Sector
Manappuram Finance's Q1 Profit Drops Amidst Rising Bad Loans in Microfinance Segment
Manappuram Finance, a leading Indian non-banking financial company, experienced a significant drop in profit for the quarter ended June 30, 2026. The consolidated net profit fell 75.05% year-over-year to ₹138 crore, primarily due to an increase in bad-loan provisions in the microfinance segment [1][2].
The microfinance portfolio saw deteriorating asset quality, leading to elevated bad-loan provisions (credit costs). Though consolidated credit costs declined QoQ to 5.2% annualized from 8.4%, this still significantly impacted profitability in the quarter [1][4].
The decline in revenue and margins was also a key reason for the profit drop. Overall revenue fell 9% to ₹22.62 billion, and EBITDA reduced considerably due to lower income from non-gold loans and higher provisions [1][2][4].
However, the gold loan segment, which contributes 84% of total revenue to Manappuram Finance, grew 13% QoQ and remained profitable with a healthy capital adequacy ratio [3]. Despite this growth, yields declined by about 150 basis points sequentially, compressing spreads and opposing growth in profitability [3][4].
The company is increasing its gold loan portfolio share, expected to reach 75% of consolidated assets, but the deterioration in non-gold segments, especially microfinance, is weighing on overall performance [3].
The microfinance loans provided by Manappuram Finance are collateral-free small loans to borrowers. A large portion of the total provisions of ₹5.59 billion was due to bad loans and provisions in the microfinance unit [5].
The total assets under management of Manappuram Finance decreased by 1.4% to ₹443.04 billion [6]. In other news, the company approved the appointment of V. P. Nandakumar as the chairman of the company [7].
Analysts have revised earnings forecasts downward and maintained cautious ratings on the stock, given the current situation [1][2][3][4].
[1] Manappuram Finance Q1 Results
[2] Business Standard: Manappuram Finance net profit down 75% to ₹138 crore
[3] Moneycontrol: Manappuram Finance Q1 Results: Here's what analysts have to say
[4] ETMarkets: Manappuram Finance Q1 Results: Key Highlights
[5] Business Standard: Manappuram Finance's total provisions at ₹5.59 billion
[6] Moneycontrol: Manappuram Finance Q1 Results: Total assets under management down 1.4%
[7] Manappuram Finance announces appointment of V. P. Nandakumar as chairman
- The decline in profit for Manappuram Finance was influenced by the rise in bad loans and provisioning expenses in the microfinance segment, which led to an increase in credit costs.
- Despite the growth in the gold loan segment, contributing 84% of total revenue to Manappuram Finance, the deterioration in the non-gold segments, particularly the microfinance segment, is adversely affecting the company's overall performance.
- The total bad loans and provisions in the microfinance unit of Manappuram Finance accounted for a significant portion of the total provisions of ₹5.59 billion, demonstrating the financial impact on this segment.
