S V Raja Vaidyanathan, Managing Director, Asirvad Microfinance:
With the support of Manappuram, Asirvad will certainly emerge as one of the top three in the very near future.
We expect the industry to register a modest growth of 30 per cent.
Despite the growth, the industry caters to less than 25 per cent of the demand and this indicates the potential for future growth
Capital was also a constraint for growth for us. But since Manappuram Finance acquired the company in 2015, the growth was accelerated and today we are the sixth largest NBFC – MFI in the country Rs 2300 crore Assets Under Management (AUM). We have a PAN India presence. We are spread across 21 states with 1.5 million members and a network of around 832 branche
SKS says they can grow at 80%! Market can absorb. Though, in my opinion, investing in MFIs is like playing with fire. Imagine, they call 30% growth as ‘modest’.
Lending business is not about disbursement, it’s all about collection! When tragedy hits, everyone will seek cover, when there will be none. So be cautious with Mana’s MFI vertical. Gold loan business is good as it is lending like MFI (at similar rates) but with collateral! No risk!
Disclaimer: Invested. Added more in last 3 months.
Mate, read carefully what i have written before writing. What is risky and what is not, what is easy hunting ground and what is not, all there in my last msg.
Reg diversification, they need to grow, hence diversifying. Gold loan cannot grow as fast as it has been growing in the past. Right now MFI loan book is close to 18% if my memory serves me right. As this share increases, loan book would be lot more risky.
Reg competitors, gold loan is not an easy business to pursue despite availability of cheaper funds. Many tried but haven’t managed to grow it substantially. This has been discussed very thoroughly on this thread.
It is not Tax paid. It is just accounting tax expense which is made up of current and deferred tax. Here the negative tax expense will relate to deferred tax asset for tax losses which can be carried forward and utilized when the company is in profit.
Asirvad has turned around while gold loan business is stagnant (in fact de-growing in terms of profitability qtr on qtr from last 4 qtrs). Though, the good part is that all 4 qtrs this year have had sequential growth. We cannot compare yoy here for obvious reasons. So overall, decent numbers.
NNPA has improved from .4 to .3 while GNPA is stagnant at .7
ROA, ROE, CAR, Cost of Borrowing has deteriorated slightly…nothing big though.
Security costs are yet to come down as promised.
Housing Fin GNPA is 4.8%. need to be monitored.
Vehicle finance division is growing fine. NPAs are low here compared to other players.
They need to do something to bring back Gold loan financing on track. Disbursements have improved in this qtr so hopefully, next year is going to be much better on lower base.
Manappuram gold tonnage is almost highest level. This qtr they took one time provision of 12cr in gold. Their mfin provision is gradually decreasing, trend was 40cr>30cr>15cr till this qtr. And this trend will continue, will not be surprised if they post 200cr pat next qtr
Manappuram gold loans are of 3 month tenure where as Muthoot’s loan tenure is much higher. The probability of a loan becoming non performing is much lesser when you sell lower tenure products. Now you know why the NPA levels of Manappuram is significantly lower than that of Muthoot.
1 reason as i heard in d concall muthooth does not auction d gold quickly and gives d customer additional time to arrange and repay d loan while manappuram auctions within 6 months
Some time back put out ambiguous filing that Board will meet to consider acquisition. They could be acquired. They would acquire. Ambiguous
INTENTIONAL?
Put out filing that y’day Board Meeting would commence at 9.30. Uploaded results at 5.21 pm - after market hours
INTENTIONAL?
Last 2-3 quarters - File results ALWAYS after 5.20 pm and concall is scheduled at 5.30 pm
INTENTIONAL?
Last 2-3 quarters - Stories planted in media/ research reports by Brokerages. Price runs up 2-3 weeks ahead of results. Post results, price falls off a cliff
MISCHIEF?
YOU DECIDE
Poor EXECUTION
Top line stagnant while Muthoot has grown leaps and bounds
GNPA in microfinance 2.5%
Home Finance GNPA 4.8% in a 3 year old business is obscene
Vehicle Finance - GNPA 3% - 3 year old book
Underscores POOR credit risk underwriting skills
4, Excuses
1.5 years after DEMON still parroting that as an excuse
Housing finance parroting the same excuses last three quarter
Expenses - parroting the same "Security"excuse 2-3 quarters
Underscores poor execution
GUIDANCE
Vague. More HOPE than SUBSTANCE. WIll grow at 10%. Have been saying 20% (last year), then scaled it down, last three quarters
No concrete evidence of any improvement
Glaringly obvious that they believe that performance will miraculously right itself
This IMHO is the biggest RED FLAG
I dont know what is wrong
But I know all will be well
Sorry for “picking” on them, If you feel this is too one-sided
Counterview - Rohit Chauhan has put out a good investment thesis for Manappuram. You may google and read that for balance
Agree on timing of results and concall issue. The problem lies with the promoter for not being very clear and assertive in communications. But let’s be clear that he has been consistent with what is he saying on being acquired. I would look at good RoE, high dividend payout ratio and fair growth plans rather than missing communications only. IMO, being in FnO makes it more vulnerable to stock price volatility and rumours.
Sure, the most disappointing aspect is high GNPAs in the new verticals. However, absolute NPAs have fallen in Vehicle finance and Ashirvad sequentially. Only housing remains an outlier and that’s why loan growth is on the lower side. The problem lies in their hurry to deploy cash generated from gold loan biz which has led to NPA creation. Even Bajaj Finance promoter mentioned the impact of Demo on debt repayment by SMEs so the problem is real. Look at Motilal’s Aspire which is in the similar segment have high NPA in housing segment. Looks like they have not built recovery infrastructure given their size.
On growth front, QoQ growth is important till this quarter. Both gold and MFI have grown handsomely and I find no reason to doubt what they are projecting. Since FY15 gold loan AUM has been rising @9-10% and dropped in FY18. I am pretty ok if they keep growing at 10-15%. They are projecting cost to income of 7% of AUM in FY19 which is a big trigger even if it goes below 7.5% . Costs have started falling in Q4 itself so let’s watch.
Their gold loan strategy is clearly more prudent than Muthoot. The current environment in which gold prices are expected to take a knock will hurt Muthoot since they are carrying price risk by not auctioning periodically. And gold loan growth is getting better for Manappuram so Muthoot is not benefitting from being sympathetic to the borrowers. In fact, I loud MFS for promoting healthy repayment culture in the gold loan segment.
CFO has resigned
(he has been selling his stock options over the last couple years)
Two or three quarters back the CTO/ CIO had resigned
(he sold his stock options prior to that)
