Out of curiosity, send a loan enquiry to Indiagold platform. and a received a call back today. Key takeaways on their offering vs NBFCs like Muthoot, Manappuram & IIFL:
Gold loan is offered in tie-up with Like HDFC, Axis, Shiwalik (small finance bank). They offered me loan from Shiwalik only.
Gold will be safe-lockers at Bank branch (in this Shiwalik)
Rate of Interest around between 11%-12%
Tenure of either 6 months or 12 months
PF 0.5% + GST,
No prepayment charges
No Gold valuation charges
Doorstep loan processing
As players like Indiagold are intermediary (as of now), hence, ROI is marginally higher than Banks but significantly lower than NBFCs like Muthoot, Manappuram & IIFL.
But in long term, it can help Banks to capture much more market and hit market share of NBFCs specially those customers who deals in high ticket and want better rate also.
Like co-lending model, which is the new trend for many nbfc to grow, if players like Indiagold will have a tie-up with many more Banks - it will be an alarming trend to watch for.
Structurally I have problem to envision for this to happen
Coz gold loans are not commodities, so it’s not like to like comparison
The major difference is in loan realisation amount the customer gets no matter how convenience on the delivery, banks ain’t gonna increase percentage of loan amount per gram meaningfully as long as this doesn’t change so does the consumer preferences.
Convience can’t disrupt here, due to the stringent regulatory measure, such highly regulated instruments like gold loan, until this gets relaxed.
If you ask me, I would say its safer for player like Manapuram, muthoot to enter after the banks enroll in this platform
can be good in the long term as bain capital can subscribe to loans of the company and other support if required -Parent support
may make the company more professional
real question what will be the role of Nandakumar and his family?
will the culture and the management change
will that be good or bad?
This Indiainfoline referring to this piece from ET:
Some key points mentioned by ET:
“Bain is said to have shown interest in buying a 10-11% stake from Nandakumar’s family and simultaneously infusing Rs 2,000 crore of primary capital into the shadow lender via a preferential allotment. It will then make a voluntary open offer for an additional 25% of the company which, if fully subscribed, will take its economic interest to 45-47%, making it the single largest shareholder. Bain is keen on controlling rights to ensure the company is professionally run. Bain is said to have offered a premium of 20-25% to the current market price. However, this could not be independently verified. At the present market value, a 47% stake would cost Rs 6,289.46 crore.”
“Nandakumar is trying to retain control and only dilute a smaller 5-10% to bring in “confidence capital,” said one of the persons. But the Boston-headquartered private equity (PE) group has made clear that a minority stake is of no interest.”
"Succession Challenges:
Industry sources said the Reserve Bank of India (RBI) has not been enthused by the addition of Nandakumar’s daughter Sumitha Jayasankar to the board as executive director. A gynaecologist by profession, she has been groomed to take over the reins at the company from her father.
Coming under pressure from the regulator on the issue of succession planning and realising that RBI may prefer an out-and-out finance professional rather than anybody in the family taking the leadership, Nandakumar started thinking of divesting his stake,” a person aware of the development said.
He has engaged previously with strategic and financial investors including IDFC and Poonawalla Finance as well as PE funds such as Carlyle to explore a buy-in, business carve-out or even a merger of operations, said the people cited. Those negotiations didn’t work out and there is no guarantee that the current discussions will end in a transaction, they said."
Key takeaways:
There are interest private parties, who see a potential money making opportunity in Manappuram.
The one with capital will come, when they will have their ways to operate business - not interested in minority stake.
Current promoter’s next generation - not considered good (as per regulator as well as market forces)
Current promoter don’t want to let go of operational control to professionals (deputed by a private party) .
In past also, there were talks of takeover - but no result.
Most important - Either current promoter will have to mend his ways - the way he run business (means bring in professional as his replacement) OR regulator will keep their life as difficult as possible OR down the line they may be some hostile takeover opportunities too.
Bain Capital will be an equity investor not a debt investor - Hence, my view is they will not subscribe to loans of company.
For Sure, Bain Capital will put in their best people to run the show. At the end of day, they will expect ROE (on their own equity investment) in double digits and that will happen will Company share price will increase, and that will help each investor.
Imagine a scenario, where valuation gap (in terms of P/B and P/E) between Manappuram and Muthoot is skewed to nil.
When I reviewed the screener, I noticed that the Earnings Per Share (EPS) of Manappuram Finance increased significantly, from ₹11.16 in March 2019 to approximately ₹26 in 2024. However, during the same period, the stock price has not appreciated; in fact, it appears to have slightly declined.
Given that five years is considered a sufficiently long horizon, I am curious as to why the stock price has not moved in tandem with the company’s earnings growth. Members of the forum, could you help me understand what factors I might be overlooking?
Put in another way, the price to earnings ratio has declined during this period. Or in market parlance there has been a derating of the stock.
Rerating and derating can happen due to various reasons and all reasons point towards change in market expectations regarding the future of the company. It can be change in expectations regarding growth, margin, need for reinvestments or the cost of capital.
From ED raids to COVID related disruption to change in product mix to change in competitive environment, expectations may have indeed changed for Manappuram.
The question seems to stem from the saying that stock prices should be slave to corporate earnings. While it acts as a good general guidance, expecting a perfect correlation is not warranted. A better and may be a more robust perspective is to view stock price as the present value of future cash-flows.
It is a different question whether we as individual investors agree with the change in market expectations or not.
PS: If you use a different time frame, say 2006 Nov to 2024 Nov, the price has grown by about 210 times but the EPS has grown only by about 150 times.Do we really have a reason to complain?
NAVI’s emergency response, be it to regulator or investors seems above all. They have established when it is the matter of existence, management will not leave any stone unturn to get the life back.
Is Manappuram doing the same … May be Yes, may be No.
Navi is able to resolve their new loan ban issue swiftly with RBI, why Malappuram is not able to show such urgency, management need to show fire in belly to increase business, they might lost much interest in expanding business and it will be better new promoters comes who are interested in creating wealth.
After the recent Ban from RBI on issuing new loans through Manappuram’s microfinance division, the stock fell up to 130 rs and currently trading at 175 as on today.
In my view, even if their microfinance division is adjusted or removed completely, the stock is at fair value.
as we know there is a tightening rule by RBI for unsecured loans, can’t expect a huge growth in this segment as well.
FII shareholdings is down from 34.81% in Dec’21 to 30.36% in Sep’24, still substantial %age (1/3rd ) own by them. DII holdings is down from 14.33% to 10.97%. public share holding increased from 15.8% to 23.41%. number of shareholders increased from 2.61 Lac to 5.74Lac (double)
FII - No major names except , 3.4% hold by smallcap world fund.
DII -2 MF DSP & SBI
Public -No Major name.
high number of retail investors.
whats your observations here, please share
Frankly, none of these concerns matter if the company delivers strong fundamental performance. Narratives shift swiftly. In the past, Manappuram was criticized for its concentrated gold loan book, which analysts linked to low valuations. Now, despite diversifying into MFI, home finance, vehicle finance, and MSME lending, the concern has shifted to the unseasoned nature of the new portfolio and potential asset quality challenges. There will always be some narrative.
The company has successfully navigated various headwinds in the past, and if its performance continues to improve, investors will return, and the narrative will shift accordingly. Management succession might pose a temporary overhang, but this could stabilize if a fund acquires a significant stake with management control.
