An employee in manappuram finance taken out 20cr illegal loan
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It’s from his subsidy Manappuram comptech ( not from gold loan )
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13 august results
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Asirvad Micro Finance results -
Results are standalone not consolidated
What is happpening in IPO front of Asirvad? Is it going to happen or still some issues left. Anybody who has clear cut understanding of matter, please help us in understanding the matter of their ipo route through holding corporation? Why they are not demerging Asirvad and seperately listing them on exchanges?
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Can someone please share the net profit from the Ahirvad result? I’m unable to open the link.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/c61edc80-3592-4fce-bd13-885f894ce049.pdf
Good results.
Key highlights from the conference call:
- Management has now guided a 15% gold loan growth for this year, up from the previous estimate of 10-12%.
- The non-gold portfolio (excluding Ashirwad) is expected to grow by 30-35%.
- Discussion on Ashirwad Microfinance is currently on hold due to the upcoming IPO.
- Stress in the microfinance sector has likely peaked, with improvements expected going forward.
Growth drivers include:
- Rising gold prices
- Expansion efforts
- Stable borrowing costs
- Reactivation of old customers
- Increasing demand
- Shift from unorganized to organized gold loans
Risks include:
- A drop in gold prices
- Regulatory changes
- Geopolitical tensions
- A decrease in demand
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Analyst target price post result
- ICICI securities : 260 Buy
- Jefferies: Rs 270 (maintained BUY )
- Nirmal Bang: Rs 248 (BUY ,raised from previous Target price of Rs 242)
- IDBI Capital: Rs 225 (maintained TP ,HOLD )
- Axis Securities: Rs 250 (BUY ,raised from Rs 220)
- Morgan Stanley : 245(BUY , overweight)
- Motilal oswal :250 (BUY )
Disc : Invested
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Dear @maheshkumar … I too have manappuram finance and I have started buying it from 89 levels and kept on accumulating when all ED fiasco is happening. I have heard management commentary on ED raids and some how got the feeling that management is innocent in this case. It forms good portion of my portfolio. My exit criteria from manappuram will be value unlocking after Asirvad listing. What is your exit criteria for manappuram. As an investor , I feel lot of difficulty in getting the right exit criteria. This is where I am struggling a lot. I like to know your prespective?
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I think as long as the Gold prices go up we can hold Manappuram. My view is that it is indirectly investing in gold.
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The gold finance business carries significant geopolitical and regulatory risks, along with the potential for non-performing assets (NPA) in non gold
Therefore, regular careful assessment is necessary before making a decision to exit.
Personally, I would exit Manappuram under the following conditions:
- Overvaluation:If the stock’s valuations become excessively high. Currently, the stock trades at a price-to-earnings (P/E) ratio of 7.5, with a dividend yield of 2%, effectively making the P/E around 5.5 for a company growing at 20%. I believe the fair value should reflect a P/E ratio of at least 15 or more.
I don’t value Manappuram on price to book as its PE if u compare with other NBFCs then there is a mismatch
- Increased Competition: If the company faces significant competition that negatively impacts the growth of its gold loan business.
- high NPA in non gold
4)There are also numerous unpredictable factors that could arise in the future. These challenges will become clear over time, but I believe the management has proven its ability to navigate through difficult situations effectively. For instance, they successfully handled the challenges posed by demonetization, the COVID-19 pandemic, and recent regulatory hurdles. The management has consistently demonstrated their competence, having been in this business for decades. I feel confident they have the capacity to overcome future challenges, and I remain optimistic about their continued growth.
5 ) business model failing due to regulatory risks
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How will an IPO of subsidiary be value unlocking to shareholders? A demerger will be. IPO, I don’t think so. It will be a value destructor in fact. Manappuram will become a holding company of Aasirvad and will get discounted.
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Prof Sanjay Bakshi video old video from covid 19 era
Still many things are relevant
My takeaway
He Explains the relationship between the price-to-earnings ratio and the price-to-book value
He gives an example scenario where a business ( Manappuram ) appears cheap based on its P/E ratio but expensive based on its P/B ratio.
Prof explains that if the company’s book value were increased without changing its earnings, the P/B ratio would decrease, making the stock appear more attractive. However, this also results in a lower return on equity which ultimately makes the investment less efficient.
Explains the paradox of improving the P/B ratio at the expense of ROE, showing the complexity and potential contradictions in relying on these metrics alone for investment decisions.
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One more optimistic report
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Interesting to know that it was about Manappuram. When he posted this video on October 20 it had high P/B but low P/E. The price crashed to about half or two thirds from its highs after that, making it a low P/B and high P/E by November 22.
So with the benefit of hindsight what was market pricing in 2020? I think it was the fluctuating gold prices. The assets were not likely to become NPAs as he said ; but then the fluctuations forced their hands to auction the gold or recall the loans and bring down the loan book.
In addition the barriers were not as strong as it was supposed to be. It was not new entrants but the banks that focused on gold loans much during the period. In a low entry-barrier business low PE and high PB indicates arrival of competition as he said. When the business became high PE and low PB by 2022 the cycle has turned. Banks had better things to focus on and the intensity of the competition probably reduced?
But when I last checked a quarter ago the microfinance in which they have not yet proven themselves seemed to get riskier and I partially exited.
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The gold finance business is highly operationally intensive. While entering the market is relatively easy due to the lack of significant barriers, maintaining and expanding the business on a large scale, as companies like Manappuram and Muthoot have done, is challenging. Bajaj Finance and many others attempted to venture into this sector but failed to keep focus
Similarly, many banks and non-banking financial companies (NBFCs) have tried their hand at gold finance, but often lose interest as it’s a single run business and most banks are intersted in 4s and sixes
The gold finance business is not easy to sustain.
Many triggers will help them
-benefit from an increase in gold prices, which boosts AUM
This advantage, combined with average growth potential, makes companies grow around 20% over long term
non-performing assets (NPAs) are not a major concern in the gold finance industry.
Before the COVID-19 pandemic, there was little competition in this space, but post-COVID, competition surged, which ironically increased the popularity of gold loans.
Despite the influx of competitors, demand remains high. It is estimated that two-thirds of the gold loan market is still in the unorganized sector. There is a gradual shift from unorganized to organized sectors, which is expected to drive further demand and growth.
Several factors act as triggers for the gold finance business: rising gold prices, the migration from unorganized to organized sectors, the perpetual need for loans, increased demand due to inflation, and the advantages NBFCs have over banks in terms of faster processing, better customer care, and longer working hours.
The gold finance industry is here to stay for the long term. Although competition may fluctuate, it is difficult for new entrants to sustain their operations over extended periods.
Only companies with a primary focus on gold loans will likely endure, while those whose main business lies outside of gold finance may struggle to maintain a foothold in this demanding industry.
In summary, while there are no significant barriers to entry, sustaining and growing a gold finance business is fraught with challenges. Over time, I strongly believe that Manappuram will see a significant re-rating from its current price, and this potential will become more apparent in hindsight.
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How can a share price crash make the p/e high?
On the contrary p/e should also have crashed as p is the numerator and as a result directly proportional to p/e.
Also I don’t see Nov 2022 PE greater than Oct 2020 PE as per screener.
What we see is, share price crashed in line with EPS crash and PE remained same or actually reduced from oct 2020 to nov 2022.
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