I like and am invested in Manappuram finance since some time from levels of around 92.
My view is that gold loan is a business which can gain on the back of demonetisation.
As a business they lend to the lowest level of pyramid but still bcos of gold collaterals the risk of asset quality deteriorating remains low. If needed they can auction gold and recover dues.
What I liked about their business was their reduction in tenure of loans. This reduces asset quality risks quite well. They also are trying to reduce their dependence on gold loans by focussing on MFI, affordable housing and other streams of businesses. I think Manappuram and even Muthoot are very well placed to pounce on the affordable housing opportunity. With the kind of growth in the housing loan segment shown in past few quarters by both cos, I wouldnt be surprised if these would end up with a big portfolio of affordable housing loans.
There have been a lot of doubts expressed about the growth prospects of gold loan business. My view is that till now these two companies have weathered the competition very well and have managed to grow barring the couple of years when there were regulatory headwinds.
Valuationwise also bcos of concerns of NPA and tepid growth, these companies had not run up in line with other NBFCs. Maybe its time for gold (loan cos) to glitter.
disc: invested in both manappuram and muthoot.