Thanks @Bhajan_Watwani for your input, and yes you are right. Muthoot has been increasing Gold Loan AUM consistently as a better growth rate vs Manappuram in FY2022, FY2023, FY2024 i.e. almost double is the growth rate.
(in Rs. Cr)
Q1FY2025
FY2024
FY2023
FY2022
FY2021
Manappuram Cons. AUM
44932
42069
35428
30261
27224
(% Growth - FY21 as base)
6.81%
18.75%
17.07%
11.16%
Manappuram Gold AUM
23647
21561
19746
20168
19082
(% Growth - FY21 as base)
9.67%
9.19%
-2.09%
5.69%
Vs
(in Rs. Cr)
Q1FY2025
FY2024
FY2023
FY2022
FY2021
Muthoot Cons. AUM
98048
89079
71497
64494
58280
(% Growth - FY21 as base)
10.07%
24.59%
10.86%
10.66%
Muthoot Gold AUM
80922
72878
61875
57531
51926
(% Growth - FY21 as base)
11.04%
17.78%
7.55%
10.79%
Out of curiosity, checked the reason behind this growth in gold loan is that double the branches (i.e. more the branches, more the visibility & accessibility to borrowers - hence more loan growth). But it seems - here in last 3 financial years (in absolute numbers) Manappuram have added more Gold loan branches vs Muthoot (i.e. 497 vs 223).
Absolute No.
Q1FY2025
FY2024
FY2023
FY2022
FY2021
Manappuram - Gold Branches
4044
4044
3985
3829
3547
(% Growth - FY21 as base)
0.00%
1.48%
4.07%
7.95%
Manappuram - Non Gold Branches
1279
1242
1247
1228
1044
Manappuram - Total Branches
5323
5286
5232
5057
4591
(% Growth - FY21 as base)
0.70%
1.03%
3.46%
10.15%
Vs
Muthoot - Gold Branches
4855
4854
4739
4617
4632
(% Growth - FY21 as base)
0.02%
2.43%
2.64%
-0.32%
Muthoot - Non Gold Branches
1904
1687
1099
962
819
Muthoot - Total Branches
6759
6541
5838
5579
5451
(% Growth - FY21 as base)
3.33%
12.04%
4.64%
2.35%
Wondering what could be the reasons for such different pattern:
Is it employees of Muthoot are more efficient vs Manappuram’s employee
Muthoot Goodwill in customer is better vs Manappuram (may be because Manappuram auction more proactively vs Muthoot - my understanding basis management concall comments)
Lending rate of Muthoot is more affordable vs Manappuram
Muthoot branches are more strategically situated (to source better business) vs Manappuram
mannupurram has been non-aggressive even when iifl finance got ban on gold loan mannapuram had golden chance to capture market share but they failed.I have also seen mannapuram giving gold loan at 20-22 percent per annum in rural areas which is big.
the most important factor for Muthoot is the free-float availability in trade, Mannapuram’s public float is very big in percentage terms and retailers are the weak hands and one should never invest in a company with a higher free float when its equivalent is available with a very limited free float in the market. I’m sure this phenomenon is evergreen and keeps the mannapuram trade at very low levels until the Muthoot float of promoters comes down via the open market sale
Other than the excessive free float in available shares, is Promoter (cum senior management) also a key parameter for Manappuram’s under-valuation vs Muthoot.
In Manappuram, Mr. VP Nandkumar is active, whereas his next generation doesn’t seems to to be much interested and active.
Whereas in Muthoot, it seems all the family members - almost 7 George - are actively involved in business. Hence, it appears not just some but they have full skin in game.
Another reason for manappuram underperformance compared to muthoot could be the promoter getting into trouble frequently (but acquitted). That’s when I reduced my stake in manappuram (got burnt once in yes Bank fiasco as both shareholder and depositor).
Thanks for your inputs. You are Right. Dr. Sumitha Nandan was appointed as ED, Hence, yes - we can say next generation there in board.
But as a minority shareholder - I am concerned if the Promoter Family cum management is serious in growing the company (and generating sustainable risk adjusted return) - if not better than the competition - then atleast at par with competition.
If not, why not to have a professional management - who have the fire in belly for growth.
For Ex: Aditya Birla Capital (ABC) - They brought in ex-ICICI ED to run the show and not some Birla family kid.
Manappuram & ABC - both NBFC - hence comparing.
Note: My thoughts are just to discover the reasons for continuous under-performance of Manappuram, and not to pin-point anything negative about an individual or group. Thanks.
Underperformance primary due to market sentiment and subdued gold growth now micro finance also under pressure and earlier some concerns about ethics overall good company at a fair price if management is honest
This has been a value trap and I have written about it previously. You cannot say that in past it has given this return so in future as well that should repeat. Well that can repeat in future but how far in future no one knows.
There was no substance in the ED raids. They were just perpetrated by some vested interest to tarnish the name of the company. Some local guy from the same village who had a grudge or maybe plain black mail. More than the regulatory actions what is worrying is if the company is run professionally. looks the the recent issue where an employee siphoned off more than 20Cr. Are systems in place to take care of these kinds of issues? As I see it the whole company is being run on Nandakumar, who is an honest man who built the company from scratch but who not young anymore. Though his daughter is brought on board, she needs to prove herself
Disc. Invested and did today as well
Pessimism tends to be quite strong in this stock. However, as long as the EPS and book value continue to grow while NPAs remain manageable, it’s not a major concern. The price can quickly adjust, often within just a week or a few trading sessions. Currently, it’s trading at about 1.3 times the book value and PE 6.7 , so I believe the downside risk is fairly limited at this point. It’s hard to catch the absolute bottom, but I feel this is near it
While Manappuram’s long track record in gold loan gives so much confidence I am not so sure about the other part of their portfolio. They have seen many cycles in gold loan but the problem is that now only about half of AUM is gold loan; a quarter of it is in MFI .I don’t know how to look at it but the signals are not so great.
A couple of days ago Manappuram was in news for this reason . Today it is about Asirvad . RBI has pointed out the usurious lending practices.
One instance of press coverage may not tell the standards set in lending practices, if any, but neither do such instances taken together gives one confidence in the direction they are taking.
While both Manappuram and Muthoot are known as gold lenders , for Muthoot more than 80% AUM is gold loan. This should be taken into account while comparing both.
Manappuram has historically been a highly volatile stock, which explains its lower valuation compared to Muthoot. The presence of Ashirvad Finance, a microfinance lender, has always been a concern. The true value and potential re-rating of Manappuram can only be realized after Ashirvad Finance is separately listed. Until then, the stock price is expected to remain volatile.
RBI cease and desist order on Ashirvad is very bad news for manappuram. Ashirvad is 25% of their loan book. Being short term loan, ashirvad loan book will run down at crazy speed. May lead to liquidity issue also
Looks like market had a news, that’s why stock fell 25% in last 1-2 months.
Let’s see how much impact it has tomorrow and this week
The RBI had previously stated that it removed the cap on the interest rates that could be charged, so it’s unclear why there is now sudden concern about high interest rates. Especially since the RBI had earlier indicated that there is no upper limit for interest rates
Why do you believe there will be liquidity issues since the loan recovery is feasible? Unlike the COVID situation, where job losses made loan repayment difficult, in this case, the RBI has imposed sanctions and requested a revision of their interest rate policy. While this may take some time, they should still recover over 95% of their money as usual.
For IIFL, a special audit was required before the restrictions could be lifted, involving a detailed review of processes. In contrast, for Ashirvad Microfinance, the RBI has requested the submission of proof of compliance, not a full audit. Ashirvad needs to review its processes, make necessary adjustments, and provide documentation like policy changes and revised procedures. I feel This approach is less complex, so the ban is likely to be lifted more quickly than in IIFL’s case.
I expect less than 1 month
