Manappuram Finance

Thoughts on the latest results.

Though MFI segment grew well, their GNPA is at 6.7% and this will affect profitability due to provisions. No information about the credit rating of borrowers as well.

Their top-line(Gold loan) is shrinking quarter over quarter amidst rise in gold prices. Management mentioned in previous con-call that they will not introduce any more teaser loans to retain those customers. Gold loan customers are also steadily declining.

Positives

• Asirvad MFI segment grew both sequentially 13% and yearly 22%.
• Asirvad MFI segment’s ROA improved to 3.59% and ROE improved to 20.02%. GNPA reduced to 6.7%.
• MSME grew at 23% and their GNPA is low. But they contribute only 4% of the overall AUM.
• Decent growth in Vehicle Finance(12%) and House finance(8%).

Negatives

• Top line business – Gold AUM degrew on both sequentially and yearly.
• Avg. Ticket size of loans has reduced and number of customers are also declining. They are not able to hold their high value customers. In past they introduced teaser loans at rate below 12% to retain high value customers. But they are facing intense competition from banks. Cost of funds also increased to 8.1%.