Manappuram Finance

The gold finance business carries significant geopolitical and regulatory risks, along with the potential for non-performing assets (NPA) in non gold
Therefore, regular careful assessment is necessary before making a decision to exit.

Personally, I would exit Manappuram under the following conditions:

1. Overvaluation:If the stock’s valuations become excessively high. Currently, the stock trades at a price-to-earnings (P/E) ratio of 7.5, with a dividend yield of 2%, effectively making the P/E around 5.5 for a company growing at 20%. I believe the fair value should reflect a P/E ratio of at least 15 or more.

I don’t value Manappuram on price to book as its PE if u compare with other NBFCs then there is a mismatch

2. Increased Competition: If the company faces significant competition that negatively impacts the growth of its gold loan business.

3. high NPA in non gold

4)There are also numerous unpredictable factors that could arise in the future. These challenges will become clear over time, but I believe the management has proven its ability to navigate through difficult situations effectively. For instance, they successfully handled the challenges posed by demonetization, the COVID-19 pandemic, and recent regulatory hurdles. The management has consistently demonstrated their competence, having been in this business for decades. I feel confident they have the capacity to overcome future challenges, and I remain optimistic about their continued growth.

5 ) business model failing due to regulatory risks