- Manappuram Finance may benefit from professional management under Bain's joint control
- Higher provisions and stress recognition could cause near-term pain for Manappuram Finance
- Sharp yield moderation will likely reduce Manappuram's profitability over time
While higher growth, improving cost of fund, and operating leverage will compensate for some loss in yields, the brokerage sees overall profitability settling below historical levels. Moreover, while reduced pricing may aid interim growth, its sustainability remains uncertain.
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Dolat Capital Report
With Bain's joint control, Manappuram Finance Ltd. stands to benefit from professional management and increase agility in the gold loan business (lost market share to NBFCs in recent years).
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Near-term pain from higher provisions, both led by improvement in provision coverage ratio (much lower vs peers) and possible stress recognition, could continue.
While increased focus on gold loan book is positive, sharp moderation in yields will be detrimental to profitability over time, with RoAs settling ~160 bps lower vs earlier (sub 4%).
We maintain a ‘Reduce' rating.
Click on the attachment to read the full report:
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