Manappuram Finance

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.”

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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.”

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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.”

 

 

 

 

 

 

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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.”

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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.
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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.
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