Muthoot Finance has a higher RoA (3%) than Manappuram (2.4%)
If you break it down - the 2 drivers are
- Net Interest Margins (NIM)
- Cost to income ratio (C2I)
NIM for Muthoot - 9.4%
NIM for Manappuram - 13.5%
Despite higher margins, Manappuram has a lower RoA - why is that? (It is another question whether these high margins are a good thing - such high NIMs could also imply that Manappuram is lending to a riskier set of customers who are willing to pay higher interest rates)
C2I for Muthoot - 45%
C2I for Manappuram - 60%
So, Manappuram is spending most of its income on operating costs. Breaking down the operating costs will further help understand this. E.g. how much gold loans outstanding per branch (Manappuram - 2.9 crores, Muthoot - 5.75 crores) - implying more business per branch / scale advantages / better operating leverage for Muthoot. Or you could look at gold loans per employee (Muthoot - 1.1 crores per employee, Manappuram - 0.57 crores per employee)
In general, Muthoot is run more efficiently with more control on costs. Also, Muthoot lends more conservatively than Manappuram. All signs of a better management. (Other signs of a better management are also there - e.g. 40% dividend payout ratio by Muthoot). Structurally, Muthoot has scale advantages, reputation advantages, better operating leverage, higher branding, etc.
Muthoot loan book growth (from its bottom) - 14%
Manappuram loan book growth (from its bottom) - 13.55%
The higher profit growth of Manappuram is only due to some reduction in operating expenses, which is one-time kind of improvement.
Just my thoughts based on ultra-quick analysis - so maybe I am missing something. Would like to hear your views on Muthoot vs. Manappuram.