Excellent preparation on gold loan cos.
Regarding point 1, you assume the lender takes away a big chunk of money as compared to owner of business. But in case of manappuram and even muthoot, isnt lender and owner of business the same guy i.e the company itself?
Regarding credit profile of borrower as mentioned in point 2, its always risky at the bottom of the pyramid but as compared to MFI, gold provides some sort of cushion in case of defaults. But in a normalised scenario as per the NPA figures provided by the co the default rate is quite within limits.
I think the small size of loans is exactly what gives these companies the edge over banks. I cant imagine a bank officer going all out to market loans with a ticket size of 30-50k. They would always be interested in doing higher ticket size loans of vehicles or personal loans or consumer loans or HF besides corporate loans.
The main competition for them would be from unorganised players and that will always remain.
I like the move by Manappuram management to shorten the loan tenure which can act as a big risk mitigator.
Both companies are quoting above or near to their all time highs and seem to be in the process of climbing the wall of worry after which fireworks can begin.