Manappuram Finance - Maintaining Profitability In Core Business: Nirmal Bang

Nirmal Bang Report

We hosted the management of Manappuram Finance Ltd., in order to gain an insight into the company’s business outlook.

Following are the key takeaways of the session based on queries by institutional investors:

1. The company is focusing on maintaining gold loan IRR at current levels of ~22% in order to maintain its margins.

2. With firm gold prices, Manappuram Finance is confident of asset quality improvement in gold loans. In other segments, the non-performing assets are much below historical peaks and LGDs are comfortable ~20-65%.

3. Key factors that differentiate Asirvad Microfinance from other MFI peers include well-funded parent Manappuram Finance with CAR of 31%, strong execution, geographical diversification and strong underwriting models. With respect to IPO, Asirvad Micro Finance has submitted answers to SEBI’s queries and expects to get approval for listing soon.

4. Expansion into micro, small and medium enterprise and allied segments is happening through gold loan branches with focus on grocery segment, small traders and SSI units.

5. Increase in dividend pay-outs, if any, will be decided after carefully evaluating organic/inorganic growth opportunities.

We maintain a Buy rating on Manappuram Finance with a target price of Rs 223 (valued at 1.2 times December 2025E adjusted book value plus subsidiary value of Rs 59.9 per share).

As mentioned in our gold finance thematic dated January 16, 2024, which was based on channel checks in Kerala and interactions with managements/industry laterals, we have been positive about Manappuram Finance’s prospects as a diversified lender, but successful execution of its growth plans is key.

In our view, following will be the triggers for the stock’s re-rating:

1. Permission from the RBI in future for addition of new gold loan branches will lead to better growth in the core business,

2. Timely listing of sizeable MFI subsidiary and its growth ahead will add value to the parent in the long run.

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