Expect AUM growth of 12-15% in FY21E – Manappuram Finance

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Excerpts of an interview with B.N. Raveendrababu, Director, Manappuram Finance (Manappuram) published on ET Now dated 9th September 2020:
The business is robust in the gold loan sector but the NBFC would stick to conservative lending and focus on consolidation of the company.
The overall demand for credit has not reached the pre-COVID state. The existing customers have taken more loans and compensated for the slowdown seen in new customer acquisition. He added that customers have also leveraged on higher gold prices.
He mentioned that around 25% of the customers in microfinance, housing finance, and vehicle leasing have availed the moratorium. Collection in microfinance business will cross 85% whereas collections in vehicle finance and housing finance division is expected to touch 90% in September. The company expects some credit loss in the coming quarter in this sector but the company has already provided for that.
New loan disbursals are lower in the non-gold portfolio and seen around 50% when compared to last year, he said. The company’s non-gold loan businesses now account for a 28-30% share of its consolidated AUM.
Regarding the cost of funds, the average borrowing cost for the stand-alone entity went down marginally by 7 bps during the first quarter to 9.39 %. The company expects the cost of funds is likely to come down further by 10-15 bps in the current quarter.
Consensus Estimate: (Source: marketscreener website)
The closing price of Manappuram was ₹ 156/- as of 11-Sept-2020. It traded at 1.9x/ 1.6x/ 1.4x the consensus BV estimate of ₹ 80.2/ 97.7/ 108 for FY21E/ FY22E/ FY23E respectively.
Consensus target price of ₹ 183/- implies a P/BV multiple of 1.7x on FY23E BV of ₹ 108/-.
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