KOCHI: Manappuram Finance Ltd has transferred stressed loan pools worth over Rs53 crore to asset reconstruction companies during the first half of FY26 as part of a broader balance-sheet clean-up, a move that helped cushion the company’s reported asset quality in the September quarter.
According to the notes to its financial statements, the company executed two separate deeds of assignment with asset reconstruction companies.
During the quarter ended September 30, 2025, Manappuram Finance sold an identified pool of loans to India SME Asset Reconstruction Company Ltd (ISARC) for a consideration of Rs15.13 crore, booking a loss of Rs17.06 crore.
In the preceding quarter, it had transferred another set of stressed loans to Asset Reconstruction Company (India) Ltd (ARCIL) for Rs37.96 crore, recognising a loss of Rs12.65 crore. The company received the entire consideration for both transactions in cash.
Manappuram also subscribed to security receipts worth Rs32.26 crore issued by Arcil-Trust-2026-002, which will be tested for impairment periodically under RBI norms and Ind AS 109.
These transactions together indicate a deliberate effort by the lender to pare down weak assets and realign its loan book towards core segments such as gold loans and microfinance. The offloading of stressed loans, even at a loss, helped clean up the balance sheet and prevented a sharper rise in reported non-performing assets.
Q2 performance
For the quarter ended September 2025, Manappuram reported a consolidated net profit of about Rs572 crore, up 2 per cent year-on-year, with a return on equity (RoE) of 18.6 per cent and return on assets (RoA) of 4.4 per cent.
However, the standalone gross NPA ratio of Manappuram Finance rose to 2.42 per cent from 1.96 per cent in the previous quarter, reflecting residual stress in parts of the portfolio. The ratio, analysts say, would likely have been higher had the company not transferred part of its stressed exposures to ARCs.
Manappuram’s proactive use of the ARC route – despite short-term losses – suggests a balance-sheet strategy focused on transparency and stability rather than short-term profitability.
The clean-up also aligns with the broader trend among non-banking finance companies that are tightening credit filters and monetising bad assets ahead of stricter provisioning norms under the Reserve Bank of India’s evolving regulatory framework.
