Manappuram Finance

Hi Gaurav, Saeyons and Devansh, At the cost of hijacking this thread even more, I will make my last post. I agree that Gold/Silver look an attractive investment. But stock markets may not crash since central banks do not have the ability to raise interest rates. For dow, s&p etc, the CAPE ratio is ~26. So the earnings’ yield is 100/26 = ~4%. This is higher than yield on fixed income.


Have studied in detail all 3 NBFC’s, Manappuram, Cholamandalam and Muthoot. Not able to pick and choose one over another for long term investment perspective. Muthoot seem to be undervalued as compared to others while Cholamandalam has been growing at much faster pace.

Took into account branch network, Loan book growth and pan india presence as well as type of business (Gold loans / Vehicle / SME loan) etc.

Please suggest if any other factors play important role and what would be preferred pick in the segment (may want to include Bajaj Finance as well)

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Every one still seems to be concentrating on Manappuram’s gold loan business. I think the biggest drivers for growth going forward are going to be microfinance and housing finance for affordable housing. The microfinance sector is well regulated now with less uncertainty. Manappuram’s low cost of funds (relative) allows it to pass on the interest benefits to its customers. The governments focus on affordable housing means that there is a big opportunity for housing finance near the bottom of the pyramid.

Of course there is an execution risk. Also Manappuram has been very slow in rolling out these businesses. But now that they are out of the blocks I am expecting the management to aggressively grow these segments.

Valuation will improve only if the management is able to demonstrate consistent growth in AUM & RoE. Price to Book for Manappuram is low (~ 1.9) as compared to Bajaj Finance (~5.5). That is because Bajaj has been consistently growing its AUM and delivering stable and high (~ 20%) RoE.

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That’s exactly the point. The demand for gold is going to go down slowly from hereon in India. If Manappuram’s major portfolio is gold, it wouldn’t see that level of growth going forward which will be in HF and Vehicle Finance segments.

  1. India has an estimated 20,000 tons of gold. Less than 5% is in circulation today… we don’t have to buy another ounce for the market size to increase.

  2. Besides, 80% of the markets is still in the unorganized sector where interest rates are closer to 40 - 50%. So the market sizedoesn’t have to increase for the organized sector to grow much bigger. They are simply going to gain share from the pawn brokers and money lenders.

  3. Manappuram - bcos of their technology edge are going to gain share even within the organized sector. They are not the biggest today, but is the most progessive and tech lead company in the sector today.

The company itself has guided 20% for the gold book to grow over the next 3 years. I personally think they will do much better than that. Ofcourse, I am a gold bug and a gold bull. So u can discount what I am saying to whatever extent u want to deem appropriate.


Are you sure about this number? I think management guided 20% growth rate for overall business not just gold.

no no… he had explicity stated in an cnbc interview that the gold loan book would grow by 20%.

He repeated the same in the conf call after q4 results (check page 6) –

They have guidance for each of their verticals separately.

You are right. I stand corrected.

Disc: Invested.

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Despite the recent run up, Manappuram Finance remains a good bet . While the valuations may not have remained that cheap as it was last year, still on relative basis , the stock is reasonably priced at Market Cap of around Rs. 7,200 cr and trading at around 2% dividend yield. AUM is around Rs.13,000 cr. Further re rerating would depend upon:

  1. How efficiently and quickly can they scale up non gold businesses (presently around 11%)
  2. How quickly can they reduce over dependence on south (presently around 65%)
  3. Their ability to reduce dependence on bank finance.( presently around 72%)
    Key things to monitor would be volatility of earnings if gold prices fall, and regulatory changes that may be made by RBI / GOI.
    So far the Management has been able to walk the talk.
    What can be the other risk factors? Views invited.

Discl: Invested form lower levels. Current holding >30% of Portfolio


Hi all,

Will be interested in understanding from seniors here as to how to value a stock like Manappuram. The recent run up seems to be purely fundamental as the company is confident of a 25% CAGR asset growth for next few years.

Unsecured MFI lenders are being valued at 4-5x FY17 book.
Secured gold lending business of Manappurram with 65% LTV ratio and 90 day NPA recognition cycle is being valued at 2.5x FY17 (approx.).
Clearly, market is taking cognizance of the same and rerating this stock upwards.
I believe the process of rerating will be slow from here on as more and more minds (like yours truly) overcome their historical bias about Mana/Muthoot and take the plunge :slight_smile:

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Few more interesting developments are:

  1. They having acquired small housing finance company
  2. They having acquired small Micro Finance company
  3. Gold loan products modified to short duration loans and large shifting happened to these new products, reducing events of defaults
  4. Going for huge automation
  5. Benefit of having ready customer front and distribution structure will help to quickly grow new businesses.

Excellent prescience and timing in picking up this gem.Congrats. Whats your take at CMP?

How is manapuram placed techncally? any advice from technical experts?

Hello Vivek ji!

I was lucky to pick up this gem at lower levels( at an avg price of around Rs.25). Hv written about reasons for buying the same in my Portfolio post. Obviously, valuations have expanded but so has earnings. Outlook has further brightened due to robust performance of its non gold businesses. When I bought it , I had no idea that their non gold portfolio would do so well. I also like the confidence of Mr. Nandakumar whenever he speaks.

I remember reading an old interview of Mr.Nandakumar (while I was doing my research for the stock) when he openly disagreed with the fair value of Rs. 26 given by CRISIL in 2014. Although investing community in general don’t like Management to comment on their stock‘s fair price , I liked the reason given by him and also his confidence. (I will post the link to old interview later)

At Rs.8000 Cr (approx) M cap and trading at around 15x FY17 P/E with a dividend yield of around 2% , I think Manappuram is still cheaper than some of the unsecured lenders (which ever matrix be applied). So , someone who wants to play (invest in )NBFC theme and is uncomfortable with their valuation , may find solace in Manappuram. However further re rating is dependent on factors highlighted in my previous post.

As far as I am concerned ,I remain positive and continue to hold it at present, although I may trim my holding anytime I find allocation level reached to uncomfortable level or even sell in case of any earnings/ other disappointments.

I am not a technical expert so won’t be able to comment on the chart pattern.

I would also like to know your views also since I found from above posts that you have also invested quite early.

Discl: Invested from lower levels. Current holding >30% of Portfolio

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I’m no expert, just have a basic working knowledge of charts. Just giving it a shot. Pls. don’t buy/sell on my words.

The charts look stretched as of now. The run-up has been phenomenal. From Dec 2015, the stock has seen a near non-stop ascension to being a 5-bagger at current near 100 levels.
All indicators viz. RSI, Bollinger Bands, Moving Averages etc., all warrant some sort of correction for the stock to take a breather.
While the short-term, medium-term, and long-term trends are still, overwhelmingly UP, I won’t be surprised if the stock forms a trough in the near term, testing supports near 75-80 levels.
Actually, the correction would be a good thing for continued uptrend IMHO.

DISC: Invested.

I have very clearly enunciated my view in my post dated 14 may 2016 listing out the various reasons which has more or less worked out. Its now my top holding.

As rightly pointed out Manappuram lending is collaterized lending,

Opp size is huge due to tonnes of gold jewellery lying idle in bank lockers and not coming into the economy.

Gold prices are expected to remain stable with with interest increase scenario remaining favorable.

Though the runup has been unexpectedly sharp mktcap of 8000 cr vs huge opp size is attractive,

Div yld of 2-2.5% v good,fy 17eps expected to be around 7-8 rs,and expected to easily grow further

Risk management seems v strong and change in business model of gold loan shows that.

Online payment and sanction increases the opp size.Subsidiaries showing great growth

We need to thank ex governor Rajan intelligence in coming out with sensible policies for gold loan and MFIs .

Risk remain steep fall in gold prices,regional concentration ,theft, and change in policy by govt


Very rightly said. i just started taking position from 55+ and continued slowly till 83, but it did not give enough time to accumulate. ended up with comparatively small position only.

Link to the Aug 2014 interview I referred in my last post : Although quite old but is insightful.

Note: The above link to an old interview is shared only for illustration purpose.

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