Yes and giving good window to accumulate!
Company To Consider Issuance Of Private Placement Of Rated, Listed, Secured, Redeemable Ncds
too many people writing obituaries of gold finance companies. Don’t know if it is a contrarian sign to add more or just take an exit route to reduce underperfoamnce of PF.
Gold loan companies used to offer long tenure loans until the crisis in 2012-14 when gold prices declined. Since these are balloon loans, interest is added to the principal and repaid at the end of the loan. Accrued interest becomes an unsecured loan. Now these companies are offering shorter tenure loans of 3 month and 6 months so that accrued interest plus principal does not go beyond value of the collateral. However, now customers are having trouble repaying the loan in six months and that is causing NPAs to rise.
As per revised RBI NPA recognition norms, these NBFCs have to recognize an asset as NPA sooner than before. These companies are letting customers take more time to replay the loans instead of auctioning the gold as they fear losing customers if they auction the collateral. With loan book growth in single digits, investors are asking for a pickup in growth and not slowdown.
Manappurum is trying out the MFI route as MFIs are offering similar interest rates without collateral and taking away Mana’s customers. Muthoot is somewhat slow in MFI route as defaults are more. Overall, lending to the bottom of the pyramid is a risky business because customers can often and suddenly lose ability to repay.
Actually, the NPAs primarily come from the big guys like Vijay Mallya and JPA. The poor guy usually pays up. He can’t run away or hire a lawyer. He can’t siphon cash as well. MFIs have better repayment rates than most of the banks or even housing finance cos.
We should use facts and numbers as well!
Four Muthoot Finance branches cheated by pawning silver jewelry covered with a thick coat of gold. Wonder how gold loan companies control this risk.
Was planning to start a thread on investing in gold through equity route for last many days but somehow could not do it.
Why this ?
Principle of wise investing suggests that one should always diversify into different asset classes for safety and to benefit from cyclical movements in those.
Am nowhere suggesting to directly invest in gold, the idea is to bet on gold via equity.
Today came across 2 interesting threads which capture my feelings on the same.
Background : Gold has been in bearish zone for last 7-8 years. Internationally gold -prices had risen upto US$1948 per ounce in 2011 and after that they been moving in a range of US$ 1100 to Us$ 1400.
We have not felt the drawdown of this extent due to depreciation in INR in last 7-8 years.
Few studies and experts suggest that we may be entering into bullish zone in next few years , may be from 2020.
Reasons have been beautifully captured in this twitter thread, the author is a famous expert in international finance and asset classes . The bull case scenario is US$ 5000/ounce ( yes, almost 4 times of today’s prices) :Gold Bull case scenario
How to play gold in India via equity
Here’s another beautiful twitter storm which almost captures all the points that I was planning to write. Author suggest to invest via Manapuram and Muthoot Finance .
Both of these are gold loan companies . As per author , even if gold does not play out as predicted or rupess/dollar exchange rate does not change in next few years, still an investor can have 10-12% annual returns via investing in these companies . And if gold and US$ plays out, that would be the icicing on the cake . Here is the link : Gold via Equity in India
Hope these 2 threads give some food for thoughts for every reader.
Look forward to your views and opinions .
Dis :recently invested in Muthoot Fin