Interesting to know that it was about Manappuram. When he posted this video on October 20 it had high P/B but low P/E. The price crashed to about half or two thirds from its highs after that, making it a low P/B and high P/E by November 22.
So with the benefit of hindsight what was market pricing in 2020? I think it was the fluctuating gold prices. The assets were not likely to become NPAs as he said ; but then the fluctuations forced their hands to auction the gold or recall the loans and bring down the loan book.
In addition the barriers were not as strong as it was supposed to be. It was not new entrants but the banks that focused on gold loans much during the period. In a low entry-barrier business low PE and high PB indicates arrival of competition as he said. When the business became high PE and low PB by 2022 the cycle has turned. Banks had better things to focus on and the intensity of the competition probably reduced?
But when I last checked a quarter ago the microfinance in which they have not yet proven themselves seemed to get riskier and I partially exited.
| Subscribe To Our Free Newsletter |
