Yes, Manappuram seems to be turning around nicely and my buy decisison was based on cheap valuation along with other factors listed below.
- The new gold loans are of shorter duration between 3 and 6 months. This the management claims have contributed to lesser risk of default because of gold price fluctuation. The recent results seems to corroborate the same.
- The rural economy pickup will magnify their gold loan portforlio. Monsoon dependant though. But there is a high probability of rural economy pickup.
- Their Micro Finance division is growing at a fairly good pace QoQ. The management seems to be knowledgable about what they are doing in this division.
- Their other divisions of home finance and vehicle finance are too small to base a decision on. Having a small base is a positive but we need to see the NPA’s in the future to judge their capabilities in these divisions.
- Cheap valuation. People disliked owning it because of the regulatory risks in the past. But if you see it in the context of how management have tried to mitigate these risks, I feel the management has done a good job.
- Their capital adequacy ratio is pretty good and they have significant funds to grow without further infusion of funds.
Disc - Invested between 25 and 30 levels. Opportunistic bet for now. Views could be positively biased. Please do your research before investing and please think if there is enough MOS before investing.