Gold loan companies-- muthoot and manappuram finance

Hi Secret Investor- This is indeed very interesting. I tried to look at the exchange disclosures but could not find this information. Could you kindly advise where can i check and confirm such insider buys? Many thanks in advance!

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This is what I found on valueresearch site. My understanding is that all insider trading needs to be reported to BSE. @Secretinvestor whats your source please?

Mar 26, 2015 I Unnikrishnan Sell Market 253,327 32.30 81.82
Mar 23, 2015 I Unnikrishnan Sell Market 896,054 33.45 299.73
Mar 09, 2015 I Unnikrishna Sell Market 10,600 34.05 3.61
Nov 22, 2014 Shailesh Mehta Sell Market 13,000 38.20 4.97

Yes, Manappuram seems to be turning around nicely and my buy decisison was based on cheap valuation along with other factors listed below.

  1. 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.
  2. The rural economy pickup will magnify their gold loan portforlio. Monsoon dependant though. But there is a high probability of rural economy pickup.
  3. 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.
  4. 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.
  5. 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.
  6. 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.


Superb result from Ashirwad the MFI subsidiary of Manapuram with net profit rising handsomely. With results of MFL due on 12 may whats the expectation? Views invited.

Discl- have been a consistent buyer over last few months from 30-41 Rs

Asirvad_FY16 Results.pdf (1.7 MB)Manappuram_KRChoksey tgt 52 mar 16.pdf (1.3 MB)

Another good recent article o Asirwad miceofinance

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hi @Vivek_6954

Thanks for sharing the results doc of Asirvad. I track Manappuram closely and was just curious that were did you get this information! It was indeed helpful.
The results for Asirvad is good but on expected lines, i was expecting ~25 Cr of PAT (based on few realistic assumptions and management guidance) and they did ~24 Cr.

With respect to Manappuram, i was expecting 5% growth in Gold AUM and ~6-7% in Total AUM on QoQ with atleast a PAT of Rs. 300 Cr for FY16, on a very conservative level. But this was before the average increase in gold prices of ~9-10% in Q4 over Q3 (this is happening for the first time after a gap of ~4 years) - so ideally the GOLD AUM should swell a bit more and there by positively impacting the absolute profitability indicators.

I think the above is very much in the CMP, as it is flirting around my assessed fair value (last worked out in Jan 2016 and a lot has changed since than). Would be very interesting to see the actual numbers and the accompanied management commentary + guidance.

~ I do own.


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Manappuram FY '16 consolidated results:

PAT - FY '16 v/s FY '15:
353 cr. v/s 271 cr.
PAT - Q4 '16 v/s Q4 '15 v/s Q3 '16:
130 cr v/s 70 cr. v/s 100 cr.

I have been looking at both Manappuram and Muthoot since a long time. As far as I am concerned (in my biased opinion), going just by the past track record I feel Muthoot business and stock both would give more stability and Manappuram would be slightly more volatile business with opportunities on the upside also but till recently offered more MoS to a value investor; though recent run up in Manappuram has closed that opportunity.

As Ray Dalio says, I would look to have about 10% gold/silver in my portfolio (Jim Rickards calls it a hedge). Actually I am more inclined towards silver which is about 80x cheaper but 16x scarcer - I believe its like a higher beta version of gold. However, we all know the problems of possessing either in physical form. Since its a hedge, I wouldn’t count on the leveraged ETFs also. Ideally I would like to have about 10% of my portfolio in gold/silver mining companies. There are quite a few ETFs for this on US stock exchanges. However, I never went through the hassles of owning any shares outside BSE/NSE. In the end decided to keep 20% each (as a percentage of my portfolio) in Manappuram and Muthoot Finance. The businesses are well run, but the primary reason for buying is the MoS at current prices, derisking of Manappuram business from gold price as already explained, and primarily my bullishness on gold price. I count both of these businesses also as a higher beta on gold. In case gold price goes up (which is my bet) the volumes would hopefully go up by a similar amount just due to increase in gold price - there could be further increase due other factors like new customers, more business from older customers. However if this happens, there would be an inevitable PE expansion, which combined with equity infusion could work wonders.

I did not have the confidence to buy Manappuram before 3 years when it went below 10 Rs. Finally when I got another opportunity in last 6-8 months, I got anchored to the price of 22, and then 26. Eventually when I had more funds available which I was sure I wanted to deploy in these 2 stocks, I bought full quantity which I wanted in Muthoot (again price anchoring bias) since Muthoot was not going up much, whereas Manappuram had run up quite a bit and I was greedily hoping that I would get another chance at mouth watering valutations. Finally started buying Manappuram from 37 odd; I believe the valuations are still attractive. Got 90% of desired quantity. This is to show how price anchoring got me stuck.

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Manappuram reported its highest ever quarterly profits post the change in regulatory regime and its reported earnings at INR1.24bn were 25% higher than our estimates of INR1.0bn (standalone). The strong performance was driven by lower auction losses on the back of product re-engineering. Key highlights of the quarter are:

  1. Business growth in its gold loan business was relatively modest with AUM and customers growing 4.6% and 3.2% sequentially. Auctions have subsided from an average of INR5.5bn per quarter to INR1.8bn in the current quarter.

  2. Gross yields expanded 230bps on a YoY basis to 24.1%, resulting in 40.7% NII growth. This was largely a result of shift to shorter tenured products, a strategy orchestrated in Oct’14.

  3. Asset quality was in fine fettle with GNPAs at 1.4% despite migration to 120 days recognition. Standard asset provisioning was increased to 35bps (30bps earlier) during the quarter.

  4. Asirvad, the microfinance subsidiary, reported 43% sequential growth in AUMs to INR10bn. It now constitutes 9% of Manappuram’s consolidated AUM.

Lessons learnt, businesses transformed, accrual of benefits started!

Two important lessons were learnt during the turbulent phase of 2012-14. Firstly, gold loan business is a commodity business and needs to be de-risked from gold price fluctuations. Secondly, it is important to reduce the dependency on single product and explore other retail lending products. With these learning’s in mind, management implemented the following changes – 1) Introduced shorter tenured products so that decline in gold prices don’t lead to interest income losses and, 2) Acquired Asirvad Microfinance and forayed into home finance as well as vehicle finance.

The fruits of these transformations have started to flow. Auctions have declined significantly in H2FY16 and yields have expanded, indicating the success of the short term product. New businesses have enabled consolidated AUMs to grow at 19% despite only 9% growth in gold loan AUMs. We expect growth and profitability profile of Manappuram to significantly improve over FY16-18e.

Valuations inexpensive, upgrade target multiple on reduced risk & improved earnings

On the standalone business, we expect AUM CAGR of 11% to drive earnings CARG at 21% over FY16-18e. On the consolidated basis, we expect AUM CARG of 15% to drive earnings CAGR of 25%. Given the reduced auction risk in its gold loan business and improving return ratios, we assign 1.4x book value to the gold loan business (1.1x earlier) which translates to Rs50 per share. Now that its microfinance business has started contributing to earnings, we value it at 1.5x FY18e book or Rs 8 per share. Thus, we arrive at SOTP based valuations of Rs58 per share. Current valuations at 1.1x book look attractive. Maintain BUY.

Digant Haria
Research - NBFCs
Antique | Institutional Equities

another one from moneylife , the in & out analysis of gold loan dynamics

Rising default in gold loans indicates financial crisis at grassroots level

Vivek bro… How do you see Manappuram post demonetization?

Solid stock .Nirmal bang has already given a target of 145 in a recent report.

Hi Vivek, Do you have access the Nirmal bang research report on Manappuram? If yes, can you share it in this forum?


There you go!…/top…picks-for…nirmal-bang/top-picks-ppt/

Thanks Mridul


Mr. Market still seems to find lots of risk in Manappuram vs. Muthoot. Valuation is reasonable despite recent run up in BFSI segment. Good result by Muthoot has met with muted response from the market.
I find that gold loan has become secured micro finance biz when they reduced credit period to few months. Their huge connect with masses in South India is underappreciated.

Disc: I have taken exposure in Manappuram.

Hello Sir,
How do you see the valuations for Manapuram at this point in time (CMP -90 rs). Please share your thoughts.


Hi Raghu,

Plesae don’t ‘sir’ me. I think it’s still as undervalued as it was about 13 months back at 40. All bullish reasons including valuation are still intact.


Discl.: Continue to hold full quantity. Manappuram and Muthoot form > 46% (almost even split) of my portfolio.

thanks Chintan :slight_smile:

Hi Chintan/Vivek,
Had one more doubt regarding the valuation difference at current b/w Muthoot and Mannapuram. Muthooth clearly seems to be in favour compared to its peer. I did not find any post comparing one with the other on different parameters. Can you share your view on how one is faring better than the other.

Manna is stagnant despite good overall growth prospects is due to its MFI operations in my opinion.

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