Manappuram Finance

Can you share your views on the above post?

Regards,
Vinoth

Excellent Q3 results

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/E86133D9_8C91_40B3_BDD6_2D0AE7C5E76A_163436.pdf

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/7E4C62CA_86B3_4835_B227_A122F5719AB8_164042.pdf

Disc: Invested from very low levels and consists 8% of my PF.

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Provision has gone up by 100% compare to Q2. Can someone explain to me how to read how much amount they recovered from the previous write-offs in this qtr result?

Thx in advance.

Hello,

Gross NPAs gone up to 2.3% of AUM in Q3 FY17
NPAs on account of theft, spurious collateral etc. are only 0.09% of AUM.

Am waiting for management commentary details for more infoManappuram Finance_The second coming_BUY.pdf (726.0 KB)
.

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Its seems to be a DHAMAKA result from Manappuram growing profits by >100% YoY, NII grown > 50% YoY… Only negative is NPAs have gone up this quarter( to 2%) - which Management says would be recovered as the gold held as security gets auctioned in next 45 days.
Dream Return ratios:
NIM > 15%
ROA > 5%
Yield ~ 24-25%
ROE - 23-24%
TTM EPS ~Rs 9
PE - - 10.
Capital adequacy - 22.8%
Cost of funds - 9.9%

Dividend - they paid ~44% of profit as dividend last year.

Investor presentation:

Presentation says " Positive Operating Leverage to kick in which would result into better Return Ratios and Profitability"

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Did anyone get on the con call?

I am looking for answers to the following questions:

  1. Did Manappuram make use of the 60 day grace period offered by RBI for recognising NPAs?
  2. If yes, then how higher would the NPAs go?

They haven’t used the grace period, as per Management comments GNPA will come down to 1% in Q4 once they are done with auction

Thanks. Do you have the transcript for the concall?

its on research bytes dot com

is there some serious problem?

Something fishy at Manappurm…why such frequent robbery?
Is it worth to compare story ?? of …“a loss making bussiness man setup FIRE in empty godown and claim insurance!!!”

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Asirvad Microfinance Subsidiary:

  1. It ended Q3 with an AUM of Rs 1,650 crore, an increase of 136% over the year ago quarter and 5% increase over the preceding September quarter’s figure of 1,571 crore.
  2. Target is loan book of Rs 2,700-3000 cr by March '18
  3. In Sep 2016 - CRISIL assigned “A+/Stable” credit rating - which is the highest rating given by CRISIL to a microfinance company.

@mparadkar …“They are now planning to move into low cost/affordable housing segment. Interesting move”

It reminds me 2001 DOT com bubble. Each and every company want to work as IT company by having dot com in its business name. Now most of NBFC, HFC and MFI are presenting their case for Affordable housing as main Driver!!!
No up move in financial condition of companies who built affordable housing but all financial companies are taking affordable housing as their business Driver!!
Are we moving ahead of reality (too much optimism!!!)

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There is a difference. In dot com bubble, there were no earnings only projections of earning. Here, the earnings are real, and growing. Price to earnings in moderate range.

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Take out history chart of P/E of any HFC companies and earning growth and validate your view. Rerating of P/E can not be without too much optimism.
X growth in overall growth in loan of housing now shared between X+X companies who provide loan. Too many companies in single field…increase competition and reduces moat/ quality of earning.
Nobody willing to buy reality company stock available very cheap valuation but everybody rushing to buy companies which is financing loan (service company).

Who told in dot com bubble there are no earnings ?? Can you prove that with data. Infact, infosys doubled its profits every year. The way non finance companies are opening new HFC subsidaries each quarter, it appears NBFC could be most probable bubble candidate . But it is no where close to bubble territory now. Lot of steam left. Euphoria should be preceded by good earnings and when the expectations too far exceed the reality bubbles burst. If you take history(1999,2007) all companies are at peak earnings before the bubble bursts.

Also, one should consider behavioral change of new generation compare to old generation. New generation don’t want to own home but happy to take on rent and have more money spend on discretionary / consumables. New trend to take loan for car, washing machine, TV, vacation trips, etc instead of investing in owning home!!!

http://m.timesofindia.com/city/gurgaon/4-jobless-graduates-pulled-off-manappuram-gold-heist/articleshow/57103758.cms

In less than 48 hours - half the robbers arrested, 30 kg gold found. Case pretty much closed.

The only concern from Manappuram’s point of view which was raised earlier as well is the frequency of these robberies. But this definitely should answer the question of ‘something being fishy’ with the company. Also reinforces my trust in the police forces to nab such criminals.

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Manappuram would be earning close to 800cr. this year and atleast 1000-1100 cr. next year. And its trading at a market cap of only ~8000cr! Clearly consensus view is not in favor of it and hence undervaluation. Everyone here needs to EVALUATE seriously(if not already) of the risks and returns here.

  1. Risk due to gold value dropping have considerable reduced(shorter term loans and lower LTV) - Per Edelweiss analysis its negligible now equal to 0.03%. http://forum.valuepickr.com/uploads/default/original/2X/e/ee9403e74afe1e5dde3196b12f6c9a3989a51d2e.pdf

  2. Management projects gold loan business to grow ~20% YoY

  3. Non-Gold loan business is expected to grow at even higher rate - from 12%, share of non-gold loans is expected to double in 1-2 years

  4. With strong CASH earnings - they used it to buy a Microfinance company(Asirvad) which is growing 100% YoY( currently at 1600cre AUM) and should continue its high growth in next few years as its reach is still very small and demand at bottom of pyramid is huge. I personally think this buy is an OUTSTANDING buy for company’s shareholders.

  5. They have strong operating leverage levers - they can use their existing gold loan branches in rural/semi-urban areas for other loans - vehicle/home loan etc…

  6. High ROE(23%) , High NIM(15%), High Loan Yield(24%), ROA - 5% point to the SWEET spot they are in currently. Further Cost of Funds is still high at 9.9 - they have a scope to reduce further. Further with demonitization and move towards digital economy, there should be a further shift from money lenders to organized economy.

  7. They distributed 44% of profits last year as dividend. Assuming they earn around Rs 8 this year and Rs 11 next year - (and assuming dividend is distributed at same rate) it should come to about Rs 3/- this year and Rs 4/- next year - i.e. 3% dividend yield and 4% dividend yield respectively.

Views may be biased as I invested recently. But it seems a low risk-high reward scenario here.

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just to update all, police have recovered he 32kg gold looted from manappuram gurgaon branch…can we still invest at current price of ~100?