Manappuram Finance Ltd., the gold financing company, has received multiple downgrades and price target cuts from brokerages after the Reserve Bank of India asked its subsidiary Asirvad Micro Finance to stop sanctions and disbursals of loans.

The Reserve Bank of India took action against Asirvad and three other NBFCs. The NBFCs were found to be in non-adherence on assessment of household income and consideration of repayment obligations in respect of their microfinance loans.

Brokerage firm CLSA has maintained its “outperform” rating on the stock but cut its price target to ₹200 from ₹240 earlier.

CLSA wrote in its note that Asirvad forms 25% of Manappuram’s overall Assets Under Management (AUM) and that it has cut Asirvad’s profitability estimates and its target multiple in Manappuram’s valuation multiple.

Morgan Stanley has downgraded Manappuram to “Equalweight” from its earlier rating of “Overweight” and also cut its price target to ₹170. It said that the recent RBI embargo could materially hurt profits and for a longer period of time.

The brokerage has cut Manappuram’s consolidated earnings forecast by 20% for financial year 2025 and by 30% across financial year 2026 and 2027.

Despite these earnings cuts at the standalone entity, the valuations of the standalone entity remain cheap, but investor interest may take longer to return to the stock, Morgan Stanley’s note said.

The other downgrade on Manappuram Finance has come from Jefferies, which downgraded the stock to “hold” and cut its price target to ₹167 on the stock.

Jefferies believes that Manappuram may have to infuse capital in its subsidiary in case Microfinance loans get unwound and defaults rise at Asirvad. This will also have an impact on the company’s earnings.

The brokerage has cut Manappuram’s financial year 2025 – 2027 EPS estimates by 11% to 19% but says that the downside should be limited as the valuations at 0.9 times financial year 2026 price-to-book value are cheap.

Out of the 18 analysts that have coverage on Manappuram, 12 still have a “buy” rating on the stock, four say “hold”, while two of them have a “sell” call on the stock.

Shares of Manappuram Finance had ended 1.5% lower on Thursday at ₹177.33. The stock has been flat so far in 2024 and has corrected 23% from its recent peak of ₹230.