NEW DELHI: After crashing nearly 20 per cent on Tuesday largely on concerns of large loan losses, Manappuram Finance came under selling pressure on Wednesday and was down 14 per cent in early trade.
At 12:20 pm, Manappuram Finance LtdBSE -15.16 % was trading 14 per cent lower at Rs 24. It has hit a low of Rs 23.70 and a high of Rs 27.25 in trade today on the Bombay Stock Exchange.
The stock has plunged close to 30 per cent in a matter of two days as expectations of huge losses in fourth quarter results and regulatory overhang spooked investors.
The company issued a statement to stock exchange on Tuesday evening, saying: "We expect an under-recovery of revenue on certain gold loan portfolios due to correction in the gold price. This may result in reduction in profit numbers for the fourth quarter ending March 31, 2013."
BofA-ML downgraded the stock to 'underperform' from 'buy' with a target price of Rs 20. The global investment banks attributed the sudden move to support a steep 30 per cent EPS cut for both FY13/14 due to higher than anticipated under recoveries in Q4.
The company's guidance has been inconsistent and the risk to future earnings is high, as company still needs to auction Rs9-10 billion of gold loans in 1QFY14, which can be impacted by gold prices.
"Change in regulations and rising competition has affected MGFLs growth prospects and has increased its chances of getting de-rated," according to analysts.
While valuation comfort is high and capital adequacy remains amongst the best, Bofa-ML remains negative on the stock as near term growth challenges and lack of re-rating triggers.
On Tuesday, domestic brokerage Ambit put its ratings of the company under review as the interest lost on loans disbursed before February 2012 was expected to be higher than earlier estimates.
"We put our earnings estimates and valuation under review as we try to get further colour from the management on the extent of possible income reversal going forward and the steps taken by the management to improve its risk management practices," Ambit said in a report.
ABDUL WAHEED
PGDM 2nd SEM.
IIMT COLLEGE OF MANGEMENT
At 12:20 pm, Manappuram Finance LtdBSE -15.16 % was trading 14 per cent lower at Rs 24. It has hit a low of Rs 23.70 and a high of Rs 27.25 in trade today on the Bombay Stock Exchange.
The stock has plunged close to 30 per cent in a matter of two days as expectations of huge losses in fourth quarter results and regulatory overhang spooked investors.
The company issued a statement to stock exchange on Tuesday evening, saying: "We expect an under-recovery of revenue on certain gold loan portfolios due to correction in the gold price. This may result in reduction in profit numbers for the fourth quarter ending March 31, 2013."
BSE
23.45
-4.25 (-15.34%)
Vol:2562279 shares traded
NSE
23.60
-4.10 (-14.80%)
Vol:13841035 shares traded
BofA-ML downgraded the stock to 'underperform' from 'buy' with a target price of Rs 20. The global investment banks attributed the sudden move to support a steep 30 per cent EPS cut for both FY13/14 due to higher than anticipated under recoveries in Q4.
The company's guidance has been inconsistent and the risk to future earnings is high, as company still needs to auction Rs9-10 billion of gold loans in 1QFY14, which can be impacted by gold prices.
"Change in regulations and rising competition has affected MGFLs growth prospects and has increased its chances of getting de-rated," according to analysts.
While valuation comfort is high and capital adequacy remains amongst the best, Bofa-ML remains negative on the stock as near term growth challenges and lack of re-rating triggers.
On Tuesday, domestic brokerage Ambit put its ratings of the company under review as the interest lost on loans disbursed before February 2012 was expected to be higher than earlier estimates.
"We put our earnings estimates and valuation under review as we try to get further colour from the management on the extent of possible income reversal going forward and the steps taken by the management to improve its risk management practices," Ambit said in a report.
ABDUL WAHEED
PGDM 2nd SEM.
IIMT COLLEGE OF MANGEMENT
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