Dear Sir,

We have recommended Manappuram Finance (NSE Code – MANAPPURAM) to our Premium members. It’s also part of our Model Portfolio with an average price of Rs 100.53.

Since our initial recommendation on the stock in Jul’17, the company has witnessed the worst of NBFC crisis in India and has emerged stronger. The company is primarily into short term gold loan business and on the back of positive ALM (asset liability mis-match) it could handle the crisis better.

Currently, the company is doing well and unlike the other NBFCs, isn’t facing any liquidity crunch.

Since the few years now, the company has been diversifying into other segments like Microfinance, housing finance, commercial vehicle finance, etc. In fact, in the micro-finance segment, company’s subsidiary Asirvad Microfinace is amongst the largest companies and the growth has been good in other segments as well.

While the new segments don’t have the robustness of Gold loan business, they are helping the company leverage its strong brand equity, balance sheet, existing retail customer base and wide branch network.

All the new businesses are profitable and their share has now grown to more than 30% of the consolidated AUM of the company. 

The stock is currently trading around 11 times FY 20 (E) earnings and 2.5 times FY 20 (E) book value. We believe Manappuram is likely to remain a good investment opportunity for the next few years, especially till the time the microfinance business becomes a large pie of the overall business of the company. Once microfinance business becomes really large, the risk profile of the company will change completely and will have to be evaluated accordingly.

We also draw some comfort from the fact that in the last 10 years the company has faced all kinds of crises: gold loan crisis of 2011-12, de-monetization, NBFC issues, etc and has emerged stronger every time. The bad experiences should probably help the management deal with the future adversities better.

 

Detailed initiation report can be downloaded here:

 

Disclosure: I have personal investment in Manappuram Finance.

 

Best Regards,

Ekansh Mittal
Research Analyst
https://www.katalystwealth.com/
Ph.: +91-72-75050062, Mob: +91-9818866676
Email: info@katalystwealth.com

 

Rating Interpretation

Positive – Expected return of ~15% + on annualized basis in medium to long term for investment recommendations and in short term for Special situations
Neutral – Expected Absolute return in the range of +/- 15%
Negative – Expected Absolute return of over -15%
Coverage closure – No further update on the stock
% weightage – allocation in the subject stock with respect to equity investments

Short term – Less than 1 year
Medium term – Greater than 1 year and less than 3 years
Long term – Greater than 3 years
 

Research Analyst Details

Name: Ekansh Mittal     Email Id: ekansh@katalystwealth.com    Ph: +91 727 5050062

Analyst ownership of the stock: In Manappuram Finance

Details of Associates: Not Applicable

Analyst Certification: The Analyst certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

Disclaimer: www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal. Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research services to retail clients on subscription basis. SEBI (Research Analyst) Regulations 2014, Registration No. INH100001690

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision

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This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. Ekansh Mittal/Mittal Consulting/Katalyst Wealth is not soliciting any action based upon it. This report is not for public distribution and has been furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Ekansh Mittal or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Neither Ekansh Mittal, nor its employees, agents nor representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Ekansh Mittal/Mittal Consulting or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.

The recipients of this report should rely on their own investigations. Ekansh Mittal/Mittal Consulting and/or its affiliates and/or employees may have interests/ positions, financial or otherwise in the securities mentioned in this report. Mittal Consulting has incorporated adequate disclosures in this document. This should, however, not be treated as endorsement of the views expressed in the report.

We submit that no material disciplinary action has been taken on Ekansh Mittal by any regulatory authority impacting Equity Research Analysis.

Disclosure (SEBI RA Regulations)

Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – Yes, investment in Manappuram Finance

Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No

Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No

Whether it or its associates have received any compensation from the subject company in the past twelve months – No

Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No

Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No

Whether the research analyst has served as an officer, director or employee of the subject company – No

Whether the research analyst or research entity has been engaged in market making activity for the subject company – No