2023-05-14
The management is confident of achieving 10% gold AUM growth in FY24. Banks that offer gold loans at relatively lower yields have become less aggressive as there is a recovery of credit growth in other segments, the management said. In Q4, Manappuram’s non-gold loan AUM improved. The microfinance segment was particularly striking. Overall, AUM growth in Q4 stood at 17.2% y-o-y.
The management is confident of achieving 10% gold AUM growth in FY24. Banks that offer gold loans at relatively lower yields have become less aggressive as there is a recovery of credit growth in other segments, the management said. In Q4, Manappuram’s non-gold loan AUM improved. The microfinance segment was particularly striking. Overall, AUM growth in Q4 stood at 17.2% y-o-y.
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But these positives could get overshadowed by some near-term concerns. “The net interest margin (NIM) is expected to marginally correct in FY24 and FY25 due to moderation in gold loan yields and increase in the cost of funds, but as long as the company can continue to show AUM growth, the trade-off is favourable,” said Akshay Ashok, research analyst at Prabhudas Lilladher. The management expects to maintain cost of funds at current levels, provided there are no further rate hikes. In FY23, cost of funds was 8.1%.
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Manappuram has been actively diversifying into non-gold loan segments to beat the cyclical nature of gold loans. The share of non-gold loan AUM is expected to touch 50% in the next two years. Here, Motilal Oswal Financial Services cautions company should tread carefully in non-gold segments as it is yet to exhibit any clear ‘right to win’ in these.
Meanwhile, so far this month, Manappuram stock is down by 15% as investors’ sentiment got dented owing to the recent searches by the Enforcement Directorate (ED) at the company’s premises.
The investigation pertains to a decade old case related to Manappuram Agro Farms, which was a proprietorship of VP Nandakumar, promoter of Manappuram.
Note that Nandakumar has received an interim stay order from the High Court of Kerala. The ED matter could act as a near-term overhang for the stock until there is more clarity.
According to Yes Securities, the uncertainties or risks from the ED matter and possibly dearer funding or some growth constraints seem to be significantly captured in the current valuation of 4.4x price to earnings and 0.7x price to adjusted book value on FY25 basis.