Here’s why Manappuram Finance shares tanked 15% today

Shares of non-banking finance company Manappuram Finance crashed 15 per cent to hit a new 52-week low of Rs 122 on BSE a day after the company posted a weak set of numbers for the quarter ended December 2021.
 
The company reported a nearly 46 per cent decline in its net profit at Rs 261 crore as against a net profit of Rs 483 crore in the year-ago quarter. The total income of the company declined to Rs 1,506.85 crore, as against Rs 1,650 crore in the same period of 2020-21.
 
The stock ended 10.70 per cent lower at Rs 127.70 against the previous close of Rs 143. Market cap of the comapny fell to Rs 10,808.46 crore. The shares stand lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The stock has been falling for the last three trading sessions and has plunged 20.04 per cent in the same period.
 
Yes Securities noted that Manappuram’s Q3 FY22 performance was much weaker than expected with 9/21/26 per cent NII/PPOP/PAT miss. Though consolidated AUM growth was only marginally behind expectations, the drag on profitability came from a further sharp contraction in portfolio yield/NIM and incremental surge in opex. PPOP margin and RoA fell to historical lows of 6.2 per cent and 3.1 per cent respectively.
 
The brokerage firm said that Manappuram’s dilemma of choosing between growth and profitability is structural, given its weak customer acquisition engine and borrower stickiness.
 
“However, RoA is likely to gradually recover from current low levels as growth sustains (at modest levels), advertising expenditure is calibrated, positive adjustments are made to rate structure and loan slabs (to cushion NIM), and on normalisation of credit cost. Valuation is undemanding at 1.1x FY24 P/ABV, which also underpins our ADD rating on the stock. Our revised 1.2 crore target price is Rs 185,” it added.
 
The board of directors of the company in its meeting also declared an interim dividend of Rs 0.75 per equity share having a face value of Rs 2 each.
 
According to MarketsMojo, the company has declared negative results for the last two consecutive quarters and the stock is technically in a Bearish range right now.