The NIM will decrease in gold loans eventually. U can’t expect people to cough up 24% interest when there is loan on offer at 7 to 9 %. And more over muthoot and manappuram were in existence since several decades. They never ever tasted success in other line of businesses, when they tried they burnt fingers in microfinance etc. The management haven’t demonstrated any success except for gold loans. So considering all these factors don’t you thing their future earning potential is already embedded in present valuation?? There are no triggers what so ever to give any hope of making it into the big league. The 10% growth in gold loan portfolio is nothing , most banks doubled their gold loan portfolio in last 1 year. And contrary to the popular belief here that banks burnt their fingers when LTV was increased to 90% during covid, no bank made losses in the gold loan segment(i can confirm for my bank). When you have stiffest competition in your core area and no ability from management to diversify into other lines of business what valuation will you give?? It’s upto the individual to decide what they are willing to pay for a sunset business.
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