Gold loan NBFC

15 Feb

Economic activity and business expected to pick up – Muthoot Finance

 

 

 

 

 

 

 

 

Update on the Indian Equity Market:

On Tuesday, NIFTY ended at 17,352 (+3%), near its high of 17,372. Among the sectoral indices, AUTO(+4%), PSU BANK (+4%), MEDIA (+3.7%) were the top gainers and there were no losers today. Among NIFTY 50 constituents, TATAMOTORS (+6.7%), BAJFINANCE (+5.6%), and EICHERMOT (+5.5%) were the top gainers while CIPLA (-3.6%) and ONGC (-1%) were the only losers today.

MUTHOOTFIN declared 3QFY22 quarterly results. Following are the excerpts from an interview with Mr. George Alexander Muthoot, MD, Muthoot Finance (MUTHOOTFIN) with The Economic Times on 14th February 2022:

  • Despite getting hit by back-to-back covid waves, MUTHOOTFIN was able to increase its disbursals. The company’s focus was mainly on collections because the loans that they had given earlier were becoming stage three assets. These had to be taken back by the customers and those who did not take back had to be auctioned.
  • Disbursals saw an increase but there were repayments as well so the overall growth has been flat. MUTHOOTFIN was able to maintain its profit for the year.
  • As for the road ahead, the Company expects the economic activity to pick up. MSME, small traders, and businessmen are their main customers. As things start opening up in Kerala, more business is expected.
  • Muthoot expects the cost of funds to go up by 50 bps over the next 5-6 months. He is sure about costs remaining low and not going back to higher rates that were prevalent two years back. MUTHOOTFIN has been able to solve a good percentage of its borrowing cost to their customers to keep them satisfied because their businesses are also not doing that well.
  • MUTHOOTFIN will continue to support its customers and expects to see some growth in the business environment over the next few quarters.
  • As a result of MUTHOOTFIN’s work over the past few decades, it has become customers’ first choice for gold loans. They are seeing more and more players entering this sector which only shows that it is a good growth sector.
  • The gold loan market is expanding as customers have started considering gold loans for their business needs and this is expected to widen the market.
  • Once the economic activities pick up, Mr. Muthoot has observed that the new players in this sector lose interest as other forms of lending also go up. MUTHOOTFIN will continue to focus entirely on gold loans unlike other players as they believe this sector to be good in good as well as bad times.
  • As gold prices inch up, customers, as well as MUTHOOTFIN, get benefitted from these increased prices. The customer becomes eligible for more loans on the same gold and if and when, the customer abandons the gold, MUTHOOTFIN’s realizations from auctions of abandoned gold are improved as prices are higher.
  • MUTHOOTFIN can maintain its book as they factor in for steady-state or even a small fall in the gold price.
  • The only digital strategy that MUTHOOTFIN uses is digital interest payments, making top-ups or repaying the money. Customers are acquired digitally but they are required to give the collateral physically and then obtain loans or physically go to the branch to take back their gold.

Asset Multiplier Comments

  • Despite NPAs increasing since the last few quarters, MUTHOOTFIN is currently in a position to auction this gold and recover much better as gold prices have started going up.
  • With economic activity picking up, we expect steady growth in MUTHOOTFIN’s loan book.
  • Given the increase in competition in the gold loan sector, how MUTHOOTFIN maintains its position of being the customer’s first choice remains to be seen.

Consensus Estimate (Source: Marketscreener & investing.com websites)

  • The closing price of MUTHOOTFIN was Rs. 1,354/- as of 15-February-2022. It traded at 2.9x/2.4x/2x the consensus BVPS estimates of ₹ 455/551/663 for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,844/- implies a P/BV Multiple of 2.7x on FY24E BVPS estimate of ₹ 663/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Gold loan NBFC, Muthoot Finance , 0 Comments Read more...
12 Aug

Taking a conservative approach while phasing out NPAs – Manappuram Finance

Update on the Indian Equity Market:

On Thursday, NIFTY ended higher at 16,364 (+0.5%) as it closed near the intraday high level of 16,375. Among the sectoral indices, MEDIA (+2.3%), IT (+1.8%), and PSU BANK (+1.3%) ended higher, whereas PHARMA (-1.1%) and HEALTHCARE (-0.4%) ended lower. Among the stocks, POWERGRID (+6.0%), TECHM (+4.7%), and TATAMOTORS (+3.9%) led the gainers while EICHERMOT (-4.1%), DRREDDY (-0.8%), and CIPLA (-0.6%) led the losers.

Excerpts of an interview with Mr. VP Nandakumar, MD and CEO of Mannapuram Finance (MANAPPURAM) with Economic Times on 11th August 2021:

  • The two-third of the company’s primary business is lending against jewellery. The company has seen a sharp correction in the price fluctuation of metal used in jewellery and it believes that it has managed those prices well.
  • The company had to phase out its high loan to value (LTV) loans off the book, otherwise it would’ve faced a situation where the loan receivables would’ve overshot than the current price. As the company grows, it is targeting high ticket loans through differential pricing and is hopeful of a growth of around 15% on its gold loan book.
  • The gold auctions have been 2% of the disbursals, instead of the expected 3-4%. The expected credit loss (ECL) provisioning reported is low due to that. The company has provided adequately in microfinance and has been very conservative with the write off after 180 days.
  • The company has maintained a very high capital adequacy ratio of 35% and it wants to limit its capital allocation for unsecured business to around 15% of the net worth. The company does not have any plan on bringing in capital in at least next 1 year. The right time would be when the company is able to demonstrate that it can manage the MFI book well, better than the market.

Asset Multiplier Comments

  • To fight the gold price volatility Manappuram is taking the right steps like decreasing the LTV and has also come up with products/schemes to attract high ticket size customers. Despite the weak performance in quarter one, the company is confident of delivering 15% YoY Gold AUM growth in FY22E and stable NIMs.
  • Involvement of less paperwork, availability of flexible schemes and quick disbursements of the loan amount remains the strong points for gold loan companies. Due to the recent gold price decline, the gold loan company is experiencing a rough patch, but given the nature of the business we remain confident on the business model.

Consensus Estimate: (Source: market screener website)

  • The closing price of MANAPPURAM was ₹ 167/- as on 12-Aug-2021. It traded at 1.64x/1.32x the consensus book value estimate of ₹ 103/128 for FY22E/FY23E respectively.
  • The consensus target price of ₹ 169/- implies a PB multiple of 1.32x on FY23E BVPS of ₹ 128/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Manappuram Finance 0 Comments Read more...
06 Oct

70% rise in footfalls in Q2 – Muthoot Finance

Update on the Indian Equity Market:
On Monday Nifty closed 0.8% higher at 11,503. Among the sectoral indices IT (+3.5%), Metal (+2.6%), and Pharma(+1.7%) closed higher. Fin Services (-0.2%), Media (-0.2%), and PSU Bank (-0.1%) closed lower. Bajaj Finserv (-2.79%), Shree Cement (-2.8%), and Bharti Airtel (-2.0%) closed on a negative note. TCS (+7.6%), Wipro (+7.0%), and Tata Steel (+4.9%) were among the top gainers.
70% rise in footfalls in Q2 – Muthoot Finance
Excerpts from an interview of Mr.George Alexander Muthoot, MD, Muthoot Finance with CNBC-TV18 dated 1st October 2020:
● There is an increase in average daily footfall. The increase is by 70% as compared to Q1.
● Q2 is much better as more customers are coming to the branch as lockdown is lifted and travel is becoming possible.
● Customer transactions are also increasing. There is a 40% increase in customer transactions.
● There is a 10% increase in online transactions. Q1 also saw a rise in online transactions. The company did 3mn transactions in Q1.
● Muthoot Finance has started a new loan scheme with a free COVID-19 insurance policy.
● This scheme was started late in Q2 and in the southern branches. The company offered 46k COVID-19 policies to customers free of cost.
● The customers have a small ticket size. The average loan size is Rs 50,000.
● The company expects Q2 to be much better as there is a new loan disbursal as well.
● The company continues to maintain the guidance of 15% growth in the gold loans.
● On the home loans business, he said there was no new lending in Q1 and Q2. The company will start new lending going ahead. The recovery is 85-90% in the home loan business.
● People who took moratorium earlier have not utilized it fully and already paid installments.
● The customers are coming back for payments but the company will start lending in Q3 and Q4.
● On the change in LTV for banks, he said there is always a high competition in the gold loan sector. There is no decrease in business for the company.
Consensus Estimate: (Source: market screener website)
● The closing price of Muthoot Finance was ₹ 1,164/- as of 04-October-2020. It traded at 3.2x/ 2.6x/ 2.3x the consensus Book value per share estimate of ₹ 363/445/510 for FY21E/ FY22E/ FY23E respectively.
● The consensus average target price for Muthoot Finance is ₹ 1,300/- which implies a Pb multiple of 2.4 times on FY23E BVPS of ₹ 510/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Gold loan NBFC, Muthoot Finance 0 Comments Read more...
14 Sep

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

Update on Indian equity market:
In the absence of economic news flow, markets traded with caution as Nifty closed the day mere 5 points higher at 11,455. Among the index, WIPRO (2.8%), SBIN (2.7%), and TECHM (1.9%) were the top performing stocks while ZEEL (-2.4%), INDUSINDBK (-1.7%), and POWERGRID (-1.5%) were the laggards. Within the sectoral indices, IT (1.3%), REALTY (1.3%), and PSUBANK (0.8%) were the top performing sectors whereas MEDIA (-0.9%), PVTBANK (-0.2%), and FIN SERVICES (-0.01%) were the only the sectors closed the day in red.
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/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Gold loan NBFC, Manappuram Finance 0 Comments Read more...
24 Aug

More than Rs 80 bn cash ready to take care of loan demand – Muthoot Finance

Update on the Indian Equity Market:
On Friday, Nifty50 ended higher at 11372 (+0.5%). Among the stocks, NTPC (+5.1%), POWERGRID (+4.6%), and ASIANPAINT (+4.4%) led the gainers. ZEEL (-3.7%), HINDALCO (-1.6%), and BHARTIARTL (-1.3%) led the losers. Among the sectoral indices, PSU BANK (+1.8%), BANK (+1.4%), and PRIVATE BANK (+1.3%) led the gainers. MEDIA (-1.4%), METAL (-0.6%), and IT (-0.3%) were the only losers.

Excerpts from an interview with Mr George Alexander Muthoot, MD, Muthoot Finance with ET Now on 20th August 2020:
• The past two months have been good and the going is great now as well. They are on track to reach or surpass the AUM estimate of about 15% growth. They are seeing good demand for gold loans since gold has been the buzzword recently. People are interested to associate with gold and gold financing is a part of it.
• Mr Muthoot believes it might be a little difficult for people to get credit via personal or housing loan, as lenders and NBFCs are not comfortable with fresh lending. Hence, for the next three-four quarters, there will be a good demand for gold loans.
• All their branches are open and people are able to come to the branches. The past two months has been a good growth period for their business and the momentum is likely to sustain. People are using gold to finance their requirements. Small businesses, small traders, and business people and individuals are using this.
• Gold price has also helped as people with lesser quantities of gold can have more gold loans in their hands. Unfortunately, the tonnage has not grown in line with the growth in AUM because newer loans need to bring only lesser quantities of gold.
• About 89-90% of the portfolio consists of gold loans which don’t have NPAs. NPAs are just loans which have crossed the threshold time limit. Auctioning the gold which is in NPAs is not beneficial as they have to refund money to the customer. Instead, they would give more time to the customer and pay it back and hold it as NPA in the books. None of the NPAs result in loan loss as the full interest and principal is recovered in time. This also keeps customers happy that their gold is not being auctioned off.
• For about 10% of the loan book which is in vehicle finance, housing finance, they have given moratorium to customers.
• Standard provisioning and loan loss provisioning is applicable to them just as to NBFCs. There are about Rs 10 bn provisions in terms of standard assets or loan loss provisions. This is just a technical provision and he never sees it converting into loan loss.
• There is no plan of acquiring any gold loan company since the average tenure is four months only. By the time negotiation with the company is done the loan would have gone off their books.
• The regular growth through 5,000 branches is sufficient for them because the average branch business is about Rs 10 crore and any branch can cater to double that. So an average of Rs 20 crore per branch is easily sustainable for them.
• In South India, both the public and private sector banks are advertising about giving gold loans. Banks coming into this space is good as it gives more credibility and visibility to this business. There are about 25,000 tons of gold in the market with the public and only about 3,000 tons is in the organised gold loan sector. Since there is a lot of gold which has not come into the gold loan market, there is a place for everybody.
Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of Muthoot Finance was ₹1,181/- as of 21-August-2020. It traded at 3.4x/ 2.7x the consensus book value estimate of ₹ 352/438 for FY21E/ FY22E respectively.
• The consensus target price of ₹ 1,195/- implies a PB multiple of 2.8x on FY22E BV of ₹ 428/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Gold loan NBFC, Muthoot Finance , 0 Comments Read more...
19 May

No asset quality challenges in gold loans- Manappuram Finance

Update on the Indian Equity Market:

On Monday, Nifty closed 3.4% lower at 8,823. Among the sectoral indices PVT Bank (-6.9%), Bank (-6.7%), Fin Services (-6.6%) closed lower. ITand Pharma closed marginally higher. Cipla (+5.5%),TCS (+2.5%), and INFRATEL (+2.3%) closed on a positive note. Indusind bank (-9.6%), Zee (-9.5%) and Eicher Motor(-7.9%) were among the top losers.

Excerpts from an interview of MrVP Nandakumar,MD & CEO, Manappuram Finance with ET Now 15thMay 2020:

  • Speaking about 4QFY20 profit jump, Mr.Nandakumar said the main gold business has grown well sequentially and in other businesses the growth is steady.
  • Speaking about provisions he said it is rather as a caution and that is the only reason for the higher provisioning.
  • Collections use to be higher in March-April period in non-gold portfolio, vehicle finance and home finance. But this time, March has been rather dull.From the very beginning, there were signs of lockdown in many places, particularly in places like Kerala. So from the second-third week of March, the collections slowed down. This also led to some increase in the provisioning.
  • Around 70% of branches are operational now and there is good demand for gold loans. At the same time there are lot of redemptions, people want to monetize the gold.
  • The demand for gold is at sub normal levels, as entire demand has not picked up.
  • Guiding for FY21 he said the first one or two quarters the company may not be able to grow gold loans, but there is expectation to grow in third and fourth quarter by 7-8%.
  • Speaking about non gold business share which declined from 34% to 33% on QoQ basis, he saidlast year there were advantages of price as well as demand, and the gold loan growth was much more than what was expected.The company have turned a little more conservative on non-gold business.Also there is some sluggishness in various economic activities.
  • Speaking about asset quality, he saidgold loan currently is around 69% and the company does not see any challenges in asset quality in gold loans. Gold loan tenure is three months and online gold loan is around 60%, even now regular transactions are taking place to the extent of Rs 700-800 crores, the interest collection is also taking place.
  • In other segments like vehicle finance, many of our customers have opted for moratorium. The collections are coming now through the online mode to the extent of 40-45%. Lending is primarily to the lower end that is light commercial vehicles and small commercial vehicles.
  • Another major part of portfolio is two-wheelers and the customer profile is self employed as well as salaried people and the collections are better there.

Consensus Estimate: (Source: market screener and Investing.com websites)

  • The closing price of Manappuram Financewas ₹ 122/- as of 18-May-2020.  It traded at 1.5x/ 1.25x the consensus Book value estimate of ₹ 80/97 for FY21E/ FY22E respectively.
  • The consensus average target price forManappuram Finance is ₹ 153/- which implies a PB multiple of 1.5x on FY22E BV of ₹97/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

 

 

 

 

 

 

By Gold loan NBFC, Manappuram Finance 0 Comments Read more...
27 Apr

Few customers opting for a moratorium: VP Nandkumar, Manappuram Finance

Update on Indian Equity Market:

After two days of rally, Nifty closed the week 1.7% lower at 9,154. Among the sectoral indices, only PHARMA (1.4%) sector managed to close the day higher whereas all other sectors closed negatively with REALTY (-4.2%), FIN SERVICES (-3.8%) and PSU BANK (-3.7%) being the biggest losers. Within the index, 10 out of 50 stocks managed to close in green led by RELIANCE (4%), BRITANNIA (3.5%) and SUNPHARMA (1.7%) while BAJFINANCE (-8.7%), INFRATEL (-7.9%) and ZEEL (-7.5%) were the laggards

Edited excerpts of an interview with Mr VP Nandkumar, MD & CEO, Manappuram Finance published on CNBC TV18 on 23rd April 2020:

 

  • Mr Nanadkumar said that 85% of the total Assets under Management (AUM) are related to gold loans. In this segment, very few customers have opted for the moratorium given by the company. The collections are happening at a normal rate. The company is able to do collections through different digital payment solutions.
  • In the gold loan business, the company is expecting reasonable growth in the coming few quarters. The reason for this uptick in demand is due to limited avenues available for borrowing due to lockdown. 
  • The company is expecting 10-15% growth in the loan book in the current year. The rise in the gold price is also one of the reasons why there will be demand for gold loans.
  • The company has a loan portfolio of around Rs 50,000 mn to microfinance. This is one-third of the gold loans book. Few customers from the portfolio had asked for the moratorium and the company has allowed the moratorium period. 
  • He mentioned that asset quality is expected to remain stable. With the increasing gold prices, it has become valuable to the customers. It has also led to a lower loan to value ratio. He expects this will help the company maintain its asset quality.

 

Consensus Estimate: (Source: market screener, investing.com websites)

  • The closing price of Manappuram Finance was Rs 107/- as of 24-April-2020. It traded at 1.6x/ 1.3x/ 1.1x the consensus Book Value estimate of Rs 66.5/ 83.2/ 101 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of Rs 182/- implies a PB multiple of 1.8x on the FY22E EPS estimate of Rs 101/- 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Gold loan NBFC, Manappuram Finance , 0 Comments Read more...
01 Feb

Growth picking up post demonetization, GST- Mr V.P.Nandakumar, Manappuram Finance

Update on the Indian Equity Market:

On Friday, NIFTY closed -0.6% lower. Among sectoral indices NIFTY Metal (-2.3%), NIFTY Pharma (-1.2%), NIFTY IT (-1.1%) closed lower while, NIFTY Realty (+1.2%), NIFTY PSU Bank (+0.8%), NIFTY Bank (+0.6%) higher. The biggest gainers were Kotak Bank (+3.7%), SBI (+2.4%), IndusInd Bank (+1.9%) whereas Tata Motors (-5.0%), ONGC (-4.5%), and PowerGrid (-3.6%) ended with losses.

Edited excerpts from an interview of Mr V.P.Nandakumar, MD, CEO, Manappuram Finance on CNBC-TV18

  • Targeted growth in gold loan had been 10-12%. In three quarters the achieved growth is 11%.
  • Price increase of gold has helped the company and that has led to volume growth.
  • Microfinance institutions (MFIs) are doing well and the asset quality is also maintained in this difficult hour for the non-banking financial companies (NBFCs) industry. The gold loan industry and the MFI industry are faring better.
  • Overall demand is better  in last three quarters.
  • In non – gold loan, the recovery is slightly less because of natural calamities such as floods, political issues.
  • There is some interference of local politicians with the collection but the companies themselves are confident of achieving it.
  • 10%-15% AUM is growth is expected. changes made in regulation, demonetization, GST have crippled the market. The market is now picking up post-GST, demonetization.
  • The company has raised $300 Mn as overseas bonds and the cost is 11.6%. The coupon rate was 5.9% but because of hedging, the all-inclusive cost is about 11.6%.
  • The domestic cost is easing because of the banks’ lending rates, it has slightly come down. It is now 9.25%.
  • Speaking about the decision to take dollar loan Mr V.P Nandakumar says, the domestic cost is low but the sectoral liquidity pressure cannot be ignored. There is liquidity pressure in the NBFC sector.
  • Mr Nandakumar says natural calamity is a challenge that the company faced. In the last year, there had been floods and that had led to delays.
  • Speaking on asset quality, he says, the company is analyzing district wise and pin code wise. with these measures, he doesn’t think the asset quality will deteriorate any further.

Consensus Estimate (Source: market screener website)

  • The closing price of Manappuram Finance was ₹ 188/- as of 31-January-20. It traded at 2.8x / 2.3x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 64.9/81.6/101 respectively.
  • Consensus target price of ₹ 190/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 101.
By Gold loan NBFC, Manappuram Finance , , , , 0 Comments Read more...
14 Jan

We have targeted 10-15% growth in gold loan -V.P. Nandakumar, Manappuram Finance

Excerpts from an interview of Mr V.P. Nandakumar, MD, and CEO, Manappuram Finance with Live Mint dated 13-01-2020:

Update on the Indian Equity Market:

On Monday, NIFTY closed +0.6% higher. Among sectoral indices NIFTY Realty (+2.1%), NIFTY IT (+1.7%), NIFTY Metal (+1.2%) closed higher. None of the sectoral indices closed on a negative note. The biggest gainers were Infosys (+4.7%), IndusInd Bank (+3.7%) and Coal India (+3.1%) whereas Yes Bank (-5.8%), Bharti Infratel (-1.2%), and UPL (-1.2%) ended with losses.

  • Mr Nandakumar says, the all-inclusive cost is expected to be around 11%. on January 13, 2020, the company will finalize the hedging portion.
  • The coupon rate is 5.9%. The hedging rate is yet to be finalized.
  • Mr Nandakumar says they want to diversity liability and this is a new addition.
  • The incremental cost is 9.2%, this is costly, but diversification of liability is needed as there are liquidity challenges in the non-banking financial companies (NBFCs) sector and the company is a little more cautious about that.
  • So far, the company has not been affected.
  • Speaking about the slowdown in vehicle financing, Mr Nandakumar says, they do not lend to fleet owners.
  • Primarily the thrust area is lending to the operators who have one-two trucks, this segment remains stable.
  • Recoveries remain the same. The company will be achieving around 30-35% growth in the commercial vehicle (CV) finance this year.
  • The company has targeted 10-15% growth in gold loan and they are confident to achieve it.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of Manappuram Finance was ₹ 177/- as of 13-January-20. It traded at 2.6x / 2.1x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 65.7/81.3/97.6 respectively.
  • Consensus target price of ₹ 177/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 97.6.
By Gold loan NBFC, Manappuram Finance, Uncategorized 0 Comments Read more...
16 Dec

Gold financing is our core competency and will stick to it: Mr George Muthoot, MD, Muthoot Finance

Update on the Indian Equity Market:

On Friday, NIFTY ended 1% higher at 12,087. Among the sectoral indices, Nifty PSU Bank (+4%), Nifty Metal (+2.3%) and Nifty Realty (1.7%) were the biggest gainers. None of the indices ended in the red. The stocks rallied on the back of optimism over a trade deal between the US and China. Adding to the sentiment was the victory of the Conservative Party in the UK elections. Among the Nifty50 stocks, Axis Bank (+4.2%), Vedanta (+3.8%) and Hindalco (+3.6%) were the biggest gainers.  Dr Reddy’s Laboratories (-2.8%), Bharti Airtel (-2.0%) and Zee Entertainment Enterprises (-1.6%) were amongst the losers.        

Gold financing is our core competency and will stick to it: Mr George Muthoot, MD, Muthoot Finance

Excerpts from an interview with Mr George Alexander Muthoot, MD, Muthoot Finance published in Economic Times on 10th December 2019:

  • The core strength of the business is gold financing. 90 per cent of the portfolio is only gold loans. Focusing on their core competency is has helped them get good business till date.
  • Their business is not dependent on gold prices since the average tenure of the loans is four months. If there was a sudden movement like 50 per cent fall in gold prices in two-three months, it would be a problem. Small up or down movement in the prices does not affect their business.
  • Talking about the business opportunity, he said that the market is huge since there are 30,000 tonnes of gold lying as ornaments. The organised gold lending market is just about 100-200 tonnes.
  • As the market develops, more and more people are using the opportunity to monetise the idle gold. To attract new customers, they are undertaking a lot of advertising.
  • Moving on to the rationale behind purchasing IDBI’s AMC business, he says the company has good customers who have been investing in the company because they relate to the company and are confident of depositing their money with them. The company believes that if they were to start a mutual fund, they will retain their customers.
  • Although the company has guided for revenue growth of 15 per cent, they would probably achieve 15-20 per cent growth this year. Gold finance acts as bridge finance for people unable to get loans from the banks. Once people are able to obtain a bank loan, they replace the gold loan with it.
  • People have a variety of options to obtain financing. Microfinance or fintech finance has not affected the gold financing market.
  • Their focus is on customer convenience. The average ticket size is ₹ 40,000, there is no service charge or pre-payment charges.
  • On diversifying the core business, he said the gold loan is their core strength and they will stick to it. Mutual funds are just a service offered to the customers. It is just a way for customers to deposit their excess money.

Consensus Estimate (Source: market screener and investing.com websites)

  • The closing price of Muthoot Finance was ₹ 717/-  as of 13-December-19. It traded at 2.5 x/2.1 x/ 1.8 x the consensus book value per share (BVPS) of ₹ 285/ 338/ 397 for FY20E/21E/22E respectively.
  • Consensus target price of ₹ 779 implies a PB multiple of 1.9 x on FY22E BVPS of ₹ 397/-.
By Gold loan NBFC, Muthoot Finance 0 Comments Read more...