Fitch has placed the 'BB-' Long-Term Issuer Default Ratings (IDR) of Manappuram Finance Limited (MFIN) on Rating Watch Negative (RWN).
LT IDR - BB-Rating Watch On
LC LT IDR BB-Rating Watch On
Senior secured - LT BB-Rating Watch On - BB-
MFIN's ratings reflect its moderate franchise in the niche of gold-backed financing, and its history of low credit losses and satisfactory leverage. These are counterbalanced by elevated key-person risk, a track record of shortcomings in governance and operational management, and growing risk appetite as the company pursues higher growth in non-gold backed financing segments, which are relatively new to MFIN.
The RWN takes into account potential earnings reduction as the unfavorable operating environment slows portfolio growth, particularly in gold loans (currently 66% of the total portfolio), which amortise at a faster pace due to the product's short tenor. The asset quality of other segments is also likely to deteriorate as borrower earnings are affected by slower domestic economic activity, while collections and recoveries may also be disrupted.
The IDR would be under pressure from business disruptions or curtailed funding access due to adverse governance or operational events or heightened risks from deterioration in the economic environment. The rating would also be sensitive to a rising risk appetite due to aggressive growth in non-gold lending segments and a rise in leverage to beyond 5x (September 2019: 3.7x).
Fitch believes that the ratings have limited upside potential in the near term. The ability of the company to address the potential regulatory and governance risks and manage the evolving business risks will be important before an upgrade can be considered.
Shares of MANAPPURAM FINANCE LTD. was last trading in BSE at Rs.106.75 as compared to the previous close of Rs. 102.1. The total number of shares traded during the day was 670522 in over 10711 trades.
The stock hit an intraday high of Rs. 118.3 and intraday low of 104.45. The net turnover during the day was Rs. 74522633.