Manappuram Finance Navigates Q3 FY26 with Gold Loan Momentum and Strategic Recalibration

Manappuram Finance Limited, a prominent non-banking financial company (NBFC) in India, reported a quarter of strategic adjustments and robust performance in its core gold loan business for Q3 FY26. While the consolidated Assets Under Management (AUM) saw a healthy increase, the company also acknowledged and addressed challenges within its non-gold segments, particularly microfinance. The management's commentary highlighted a clear focus on strengthening operational rigor, leveraging technology, and ensuring sustainable growth across its diverse portfolio.

The consolidated AUM for Q3 FY26 stood at INR 52,125 crore, marking a 13.8% quarter-on-quarter and 17.9% year-on-year growth. This expansion was predominantly fueled by the gold loan business, which demonstrated exceptional strength. Consolidated gold loan AUM surged by 23% QoQ and 58.2% YoY, reaching INR 38,754 crore, supported by favorable gold prices and strong customer demand. The gold tonnage also increased by 3.2% QoQ to 58.96 MT. However, the consolidated Net Interest Income remained flat QoQ at INR 1,408 crore, and the Profit After Tax (PAT) before Other Comprehensive Income (OCI) was INR 239 crore, reflecting a 9.8% QoQ increase but a 14.3% YoY decline. For the nine-month period, consolidated PAT saw a significant 58.2% YoY decrease, indicating broader profitability pressures.

Navigating Non-Gold Headwinds

The non-gold segments presented a more challenging picture. Asirvad Microfinance, a key subsidiary, continued to operate in a difficult environment. Its total revenue from operations for Q3 FY26 was INR 351 crore, a substantial 47.2% YoY decline. The segment reported a PAT before OCI loss of INR 156 crore, indicating significant profitability issues. The Non-Gold AUM on a consolidated basis decreased by 6.4% QoQ and 32.2% YoY to INR 13,371 crore. The company's management explicitly acknowledged the need to improve credit performance and profitability in these non-gold businesses.

In response to these challenges, Manappuram Finance has undertaken a strategic recalibration. The company has significantly scaled down its MSME and vehicle loan businesses and temporarily paused car loans, used vehicle loans, and farm equipment loans. This decisive action aims to tighten underwriting norms and enhance collection infrastructure. Management expects these non-gold businesses to return to a growth mode from Q1 FY27, following a period of strengthening systems, processes, controls, and teams.

Strategic Initiatives and Future Outlook

Manappuram Finance is actively pursuing several strategic initiatives to drive future growth and enhance operational efficiency. The company is investing in transforming its branch infrastructure, with a new design ready for implementation next year. A significant push towards digital transformation aims to achieve paperless customer acquisition within the next one to two quarters and integrate advanced AI security systems from the current month.

Furthermore, the company has gone live with co-lending, an initiative expected to provide a significant return profile for its subsidiaries. A major long-term project involves developing a new age digital technology stack, a 2-3 year migration effort to modernize its technological backbone. Management is also focused on infusing top talent, with new group heads for technology, risk, internal audit, operations, and HR being onboarded to strengthen leadership and drive transformation.

Despite the mixed performance, the management expressed confidence in the company's resilience and its ability to capitalize on future opportunities. The Indian economy's projected growth of 7.2% and favorable government policies for NBFCs provide a conducive environment. Manappuram Finance aims to maintain and improve its standalone ROA, targeting 4.25% to 4.5%, by leveraging volume growth in branches and optimizing operating expenses. The company's robust liquidity buffers, strong capital adequacy, and diversified funding sources underpin its ability to navigate near-term uncertainties and pursue its long-term vision of becoming the financial partner of choice for under-banked customers.