Reproducing 2 tables from the latest investor presentation from Manappuram’s website.
You can observe that to delink the loss from fall in gold prices, Manappuram has linked the LTV to the tenure of the loan.
| | 3 Months | 6 months | 9 months | 12 months |
|-------------------------------|----------|----------|----------|-----------|
| Gold Value | 100 | 100 | 100 | 100 |
| LTV | 75% | 70% | 65% | 60% |
| Gold Loan | 75 | 70 | 65 | 60 |
| Interest Rate | 24% | 24% | 24% | 24% |
| Interest Cost* | 7.5 | 11.2 | 14.3 | 16.8 |
| Total (Principal + Interest*) | 82.5 | 81.2 | 79.3 | 76.8 |
*Includes interest outgo during 2 months of auctioning period
So a shorter tenure loan has a higher LTV (3 months ~ 75%) and a longer tenure loan has lower LTV (12 months ~ 60%).
Whereas the earlier scenario was:
| | 12 Months |
|-------------------------------|-----------|
| Gold Value | 100 |
| LTV | 75% |
| Gold Loan | 75 |
| Interest Rate | 24% |
| Interest Cost* | 21 |
| Total (Principal + Interest*) | 96 |
Moreover, the presentation states the following about NPAs:
Most of Gross NPAs are from regular customers who have serviced over half of interest due
If the Customer does not pay or close the Loan, there is a ample margin of safety to recover Principal as well as Interest. Also, Linkage to Gold prices is Negligible.
So gold prices would have to fall by > 20% within 3 months or 25% within 6 months or 30% within a 12 months for Manappuram to suffer a significant loss in their portfolio.
What do other members think about this?