Manappuram Finance

But can’t thr be a possibility that IIFL gold loans are at an inferior quality. Probably to focus and show this short term profit, thr gold loan lending is aggressive.

On the other hand, the experienced Manapuram is proceeding cautiously and focussing on book quality rather than chasing growth??


IIFL has quite a different product as compared to Manappuram. They do long tenor loans as compared to Manappuram (average tenor at 2 years vs 3-6m for Manappuram). This difference also ought to bring a difference in growth and yields I believe


Quality doesn’t matter as long as it’s a gold loan. Npa has no meaning in gold loans

1 Like

I think quality does matter after a point as I believe upon auction, the company can only recover the principal and not the interest (someone correct me if I am wrong). So if a company ends up doing a lot of auctions, they will not receive interest and end up losing on a lot of business

  1. To ur earlier reply, that was part of my concern - longer the Loan tenure, greater the risk. And short term profits can be bumped up with cheaper avlbl debt nd reckless lending. The chickens vl cm home to roost later.

2.) U were spot on NPA part to @Souresh_Pal reply. I hv been a participant in these Gold loan auctions nd the strtng price for these is the pending amt(a.k.a recovery amt ) only, irrespective of prevailing rice of gold.


I have shared auction nos regularly on this thread. Whenever industry goes through headwinds, Manappuram is the first to report auctions, as their loan tenure is the shortest. Also, Manappuram’s auction are generally on the higher side over time.

The reason why Manappuram and Muthoot have been struggling for growth is they haven’t gone into colending model vs new age cos which are doing colending with banks. Banks have lower cost of borrowing and if they can find distribution partners (like NBFCs), they can offer much lower rates. Additionally, most banks only expect 2-3% ROA from this segment, whereas Manappuram/Muthoot are used to operating at 5%+ ROAs over cycles. Its anyone’s guess if this colending model is a terminal risk for traditional gold financiers.

In my personal observation, every few years lending cos come up with a new model (e.g. securitization, colending, etc.) which are considered superior, works for a few years, and then blows up.

Disclosure: Invested in Manappuram Finance (position size here, no transactions in last-30 days)


How we can confirm about the book quality?

Their GNPA numbers are high for MFI segments. It is around 6.7%. We have no information about the credit rating of customers in any segment.

If you have some data, can you please share?

" gold good growth yoy but flat qoq" —> no wrong. YoY gold loan also have degrown by 9%. 20,500 crore in Q322 to 18,614 crore this Q323 quarter.

Unfortuantely I dont think we have the info. remember MFI is mostly lending to people at the bottom of pyramid and most dont even have regular bank accounts let alone credit ratings. If my memory serves right, I remember that they validate customers using their cashflows/how much wage they get paid daily etc.

1 Like

Looking at all these pessimistic comments…It would appear this company is close to turn around… Company does not want to sacrifice their edge for growth. Aashirwad is a dark horse. They say they might list it or do a capital raise in future. But the bottom line is rural India is struggling which is the main customer base of manappuram for the small ticket small duration loans. Agro commodity prices are sustaining at higher levels so sooner are later demand from farmers/rural households will come back with vengeance.



possible probability of turnaround
Slowly market perception will change from plain gold business to diversified Buiseness
Gold business is a great cash cow, which can buffer the nbfc
An ideal combination
Great dividend yield
And close to book value

book value is steadily increasing
It was 45 rs in 2018 and now it’s 110

But price has steadily declined on background of steadily increasing book value

While price to earning is slowly decreasing
It decreased from 14 to 7 now

Let’s see how long this trend continues falling price vs increasing book value

Also Dividend is gradually increasing

Management is optimistic of growth coming bank from q4

1 Like

How is their Microfinance division compared to Armaan Financial?

Median P/BV for 10, 5 and 3 years is about 2. Something to keep in mind.

Post Base building upside potential

Pivots again shifting away from gold; >15% RoE should be sustainable despite changing mix/yield strategy: Pivots again shifting away from gold; >15% RoE should be sustainable despite changing mix/yield strategy

reports coming up now about non gold segments and now started considering manappuram as diversified

This quarter gold didn’t show growth ,but non gold is firing all cylinders
When gold will start growing then it will be an extra effect

Future Growth in muthoot will be much lower than Manappuram given fast growing non gold portfolio of Manappuram and small base
Still muthoot valuations are twice the Manappuram
I feel either muthoot will halve from here or Manappuram will be 2x from here
Probability of later to happen looks more plausible

Gold loan is operationally very challenging business and this high competition Will likely fade slowly .


@maheshkumar The management prudently focuses on improving their balance sheet and diversifying their portfolio concentration risk. However, the risk of execution in microfinance business needs to be seen. Muthoot Capital Services burnt their fingers badly here. It’s a good case study. But the growth potential is immense.


The market is on wait and watch mode. Once the execution visibility comes in and they show traction. The stock might get re-rated. It’s a matter of time. The management needs to demonstrate that they can do this at scale without risking the quality of book in MFI segment.


Yes there are two things which market is watching closely
1)Can the competeitiors sustain the operational challenges of gold loan on long term .Many have tried in past and everytime everyone failed except muthoot and Manappuram .Gold loan on large scale long term is hard .Banks do it for short period and then they start losing the momentum .

  1. microfinance has huge potential and so far Manappuram is doing well

If Manappuram succeds in either(gold/non gold) than it will be a retating.
If grows in both gold ( gold growth and microfinace growth )then it will be a multi bagger given current lowest valuations


Please provide some insight on your point no. 1, it seems that we all can learn with your experience and learning in gold loan business.
Disclosure: bought third tranche @ 115.66

Why it is operationally challenging to operate gold loans in large scale?

Each and every bank from HDFC bank wants to increase the gold loan portfolio. If each bank takes a small share of manappuram / muthoot, will it be operationally very difficult?
Also, in rural areas, rural banks which gives agricultural loans offers more value for the gold at cheaper rates than Manappuram / Muthoot.

MFI has huge potential but from their numbers from last few quarters, they had GNPA of around 6.7%. Also, we don’t have any clear data on customer quality or ratings in this category.