Manappuram Finance — Microfinance Is Now The Prime Engine Of Growth: Systematix

Systematix Research Report

We attended Manappuram Finance Ltd.'s analyst meet hosted by its senior management team.

We came back positive from the meeting. The management sounded confident of achieving its guidance of 20% compound annual growth rate in consolidate assets under management over the next few years (largely aided by higher growth in non gold business) with a sustainable return on equity of 20%.

As part of the diversification strategy, non gold AUM share in overall portfolio has further improved in Q4 FY23 (45-46%) from ~42% in Q3, and with relatively higher growth in that portfolio, its share will reach 50% in FY24.

We have increased our FY24/25 earnings estimates by 5%/6% respectively to factor in higher growth in non-gold segments. We estimate a 16% CAGR in Manappuram Finance’s AUM to deliver a 20% CAGR in earnings over FY23-FY25E.

We believe, with optimal product mix along with improving asset quality and expansion in the micro finance institution business, Manappuram Finance should be able to improve their return on asset/return on equity to 4.5%/19% by FY25E from 4.1%/16.9% in FY22, respectively.

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