About the Company

Manappuram Finance Ltd. is one of India’s leading gold loan NBFCs. Today, it has 4208 (Includes branches of subsidiary companies) branches across 28 states/UTs with assets under management (AUM) of Rs. 166.18 billion and a workforce of 24,717.

Q4FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 1319 1191 10.75% 1355 -2.66% 5194 4352 19.35%
PBT 608 461 31.89% 623 -2.41% 2270 1680 35.1%
PAT 458 340 34.71% 465 -1.51% 1698 1230 38.05%

 

Consolidated Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 1630 1618 0.74% 1650 -1.21% 6375 5551 14.84%
PBT 622 534.0 16% 657 -5% 2316 2007 15%
PAT 468 398 18% 483 -3.11% 1725 1480 16.55%

Detailed Results

  1. The company had a decent quarter with consolidated revenues rising 0.74% YoY and consolidated PAT rising 18% YoY.
  2. Standalone numbers were very good with revenue & profit growth of 11% & 35% YoY respectively in Q4 and 19% & 38% YoY respectively in FY21.
  3. RoA for the quarter came in at 6.0% while consolidated RoE came in at 26.4%.
  4. Total AUM grew 7.9% YoY to Rs 272 bn while gold AUM grew 12.4% YoY, highlighting excellent growth in standalone business.
  5. The company has a borrowing cost of 9.1% in the quarter.
  6. The share of new businesses in revenues was at 29.9% in Q4.
  7. The book value per share was at Rs 86.3 at the end of Q4.
  8. The company has access to Rs 7364 CR of undrawn bank lines.
  9. In the gold loan business, the Opex to AUM has remained steady at 6% in Q4 & FY21.
  10. Gold AUM per branch rose significantly to Rs 5.41 Cr per branch in FY21vs Rs 4.81 Cr per branch a year ago.
  11. The standalone business has GNPA and NNPA of 1.9% and 1.5% respectively while maintaining a CAR of 29%.
  12. The online gold loan’s share of total gold AUM was at 54% in Q4 & FY21.
  13. In Asirvad MFI, AUM was at Rs 5982.6 Cr which is up 8.8% YoY while RoE was at 0.2% in Q4.
  14. The GNPAs for Asirvad has risen to 2.5% in Q4 vs 2.1% in Q1. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 23.3%. The cost of funds for Asirvad was at 10.5% in Q4.
  15. Collections are back to 101% in March.
  16. The company has announced a final dividend of Rs 0.75 per share.

Investor Conference Call Highlights

  1. About 70% of Manappuram’s loan book is against gold.
  2. The commercial vehicle business saw higher GNPAs due to lockdowns. It came down to 5% at the end of FY21.
  3. The company’s consolidated profit of Rs 468 Cr is its highest ever full-year profit.
  4. In Q4, the company added 3 lakh new customers and collateral of nearly 4 tonnes of gold. Gold loan average ticket size and the average duration were INR 44,600 and 100 days, respectively.
  5. Total gold holdings stood at 65 tonnes.
  6. The gold loan AUM declined 5.6% QoQ due to a significant decline in gold prices by 12% in Q4 and 21% from Q2 prices.
  7. The weighted average LTV stands at INR 2,922 per gram or 71% of gold price on 31st March 2021.
  8. Loans to NBFCs at INR 183 crores and loans to SME and others at INR 261 crores.
  9. The home loan business was up 5.2% QoQ at Rs 666 Cr.
  10. The collection efficiencies in Jan, Feb & March were at 99%, 100% & 101% respectively. The company has made provisioning of 5.71% of AUM for Asirvad.
  11. Collections have dipped 7-8% in April on account of the 2nd wave of COVID.
  12. The collection efficiencies for vehicle finance in Jan, Feb & March were at 106%, 105% & 113% respectively. Currently, they are at 90%.
  13. The company did a write-off of Rs 123 Cr in FY21.
  14. Of the Rs 5985 Cr MFI loan book, Rs 45 Cr is secured SME loans and Rs 2.5 Cr of loan deferrals the rest is all MFI. The company will be looking to use the 15% other lending limit in MFIs to develop gold loan businesses in the areas where they are not currently present and where Asirvad is present.
  15. On average, the company maintains around 15-20 days of repayments in cash.
  16. 62% of the loan book is of Rs 1 Lac plus size but it corresponds to around 20% of the customer set.
  17. The LTV holiday provided by RBI has been over the industry should see a rollover of existing customers to the normal LTV.
  18. The company policy has always been to retain non-defaulting and in-time repaying customers by giving them a higher ticket size.
  19. The company is targeting the ratio of 80:20 for existing to new customers for Asirvad.
  20. The company has done restructuring of 4% of MFI loans and 8% of vehicle loans only.
  21. The management believes that microfinance business on a sustainable model can bring forth an ROE of over 20%. Overall, it plans to keep microfinance at 10-15% of the overall AUM.
  22. The company is aiming to grow other secured lending segments like vehicle, home loans, etc to a higher proportion to match MFI contribution.
  23. The opportunity size for NBFCs in the gold loan space remains high since 75% of the gold loan market is still dominated by unorganized players according to the company’s research.
  24. The management is ambivalent on the need for doing an IPO for Asirvad as both Manappuram and Asirvad have enough capital with them now.
  25. The company is targeting a customer growth rate of 10-15% annually. In MFI, it is looking to add around 4-5 lac customers each year.
  26. Interest accrual as of FY21 was at Rs 716 Cr.
  27. The company auctioned off 1 ton of gold in Q2 amounting to around Rs 400 Cr.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s leading gold loan providers by growing its core business consistently. The company’s current quarter performance has been mixed with 0.74% YoY revenue growth & 18% PAT growth. Gold AUM fell 5.6% QoQ mainly due to a 12% drop in gold prices. The company saw a good revival in Asirvad and collections have improved to 101% in March before falling 7-8% afterward due to the 2nd wave of COVID. The vehicle finance division has also come back strong and posted collections around 113% in March before declining in FY22 due to the 2nd wave of COVID.  It remains to be seen whether the company will be able to sustain its growth momentum in the gold loan space with falling gold prices and how will things pan out for Asirvad and the MFI industry given the accelerated upcoming waves of COVID. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.

 


 

Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 1355 1133 19.59% 1294 4.71% 3875 3161 22.59%
PBT 623 456 36.62% 544 14.52% 1662 1219 36.34%
PAT 465 334 39.22% 406 14.53% 1240 891 39.17%

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 1650 1451 13.71% 1578 4.56% 4744 4042 17.37%
PBT 657 560 17% 544 20.77% 1694 1516 11.74%
PAT 483 414 17% 405 19.26% 1257 1114 12.84%

Detailed Results

  1. The company had a decent quarter with consolidated revenues rising 13.7% YoY and consolidated PAT rising 17% YoY.
  2. Standalone numbers were very good with revenue & profit growth of 20% & 39% YoY respectively in Q3 and 23% & 39% YoY respectively in 9M.
  3. RoA for the quarter came in at 6.1% while consolidated RoE came in at 29%.
  4. Total AUM grew 14.7% YoY to Rs 27642.5 Cr while gold AUM grew 24.4% YoY, highlighting excellent growth in standalone business.
  5. The company has a borrowing cost of 8.95% in the quarter.
  6. The share of new businesses in revenues was at 26.9% in Q3.
  7. The book value per share was at Rs 81.2 at the end of Q3.
  8. The company also raised fresh borrowing of Rs 1925 Cr through NCDs, and bank loans.
  9. In the gold loan business, the Opex to AUM has remained steady at 5.5% in Q3.
  10. Gold AUM per branch rose significantly to Rs 5.7 Cr per branch vs Rs 4.8 Cr per branch a year ago.
  11. The standalone business has GNPA and NNPA of 1.3% and 0.8% respectively while maintaining a CAR of 25.9%.
  12. The online gold loan’s share of total gold AUM was at 59% in Q3.
  13. In Asirvad MFI, AUM was at Rs 5357.7 Cr while RoE was at 6.8% in Q3.
  14. The GNPAs for Asirvad has risen to 2.63% in Q3 vs 2.1% in Q1. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 24%. The cost of funds for Asirvad was at 10.7% in Q3.
  15. Collections are back to 99% in Dec.
  16. The company has announced an interim dividend of Rs 0.65 per share.

Investor Conference Call Highlights

  1. The company has extended its doorstep gold loan facility to all our branches across India, which allows Manappuram to service customers, even beyond normal working hours, at their homes and offices.
  2. The CV finance segment saw good revival with collection efficiency reaching 110%. The CV division’s AUM stood at Rs 988 Cr which was down 7% YoY.
  3. The company has undrawn bank lines of Rs 2502 Cr bringing its surplus liquidity up to almost Rs 5000 Cr.
  4. CP exposure has come down to 8% vs 24% a year ago.
  5. Gold holding was at 68.24 tons which was flat QoQ and down 7.2% YoY.
  6. Gold loan average ticket size and average duration was INR 46,318 and 75 days respectively.
  7. The total number of gold loan customers stood at 26.24 lakh with an net increase of 67,000 new customers in Q3.
  8. The weighted average LTV is now at 63%. Gold loan disbursements during the quarter stood at INR 57,445 crores.
  9. The disbursements for Asirvad in Q3 were at Rs 1306 Cr.
  10. The home loan business had a total book of INR 633 crores, which was up 2.1% QoQ and 5.4% YoY.
  11. In MFI segment, the company has taken provision of Rs 48.4 Cr in Q3. The overall provisioning for FY21 so far is at Rs 320 Cr which the management feels is adequate enough.
  12. The states of WB and Odisha are showing revival in collections and the management has stated that the situation in these states should normalize by Q1FY22.
  13. WB exposure is at 12% of MFI AUM.
  14. The pressure on MFI margins is due to low AUM growth. The management reassures that as AUM growth revives, the margins will rise to normal levels.
  15. In standalone entity, ECL provision stands at Rs 223 Cr while in vehicle finance ECL stands at Rs 66% or nearly 6% of book.
  16. ECL in MFI is at Rs 322 Cr which is also close to 6% of book.
  17. Assam portfolio is very small at only Rs 38 Cr.
  18. The management maintains its growth guidance of 15% revenue growth in FY21 & FY22.
  19. RoA is expected to stay in the range of 6-7%.
  20. The management remains confident that it will not need to take any additional provisions related to COVID-19.
  21. The LTV in gold loan is capped at 75% and as gold price goes up, the LTV is taken down.
  22. The provisioning in NBFC lending is at Rs 20 Cr on a book of Rs 450 Cr.
  23. The company is now seeing 15-20% of new customers being onboarded online.
  24. The company made writeoffs of Rs 68 Cr in Q3.
  25. Out of the customer set of 23 Lac for Asirvad, around 1 Lac didn’t make any payments till Dec and as per RBI guidelines, the company has restructured the portfolio of this 1 Lac customer set.
  26. Many industry entrants in the gold loan space have seen QoQ growth of more than 10%. The management states that it is a temporary phenomenon as the LTV cap has been relaxed to 90% till 31st Thus these new entrants have been aggressively acquiring customers and expanding AUM by offering higher LTV. But ultimately this is temporary and should fade away as the cap comes back to normal levels.
  27. The incremental yield is expected to remain stable at current levels.
  28. The company has applied to RBI for permission to open up 300 new branches in North India. These branches are expected to break even within 1 year of opening.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s leading gold loan providers by growing its core business consistently. The company’s current quarter performance has been decent with 14.7% YoY overall AUM growth with continued growth momentum in gold loan segment. The company continues to see good traction in the online gold loan and it has also activated doorstep gold loan facility to all branches in India. The company has seen good revival in Asirvad and collections have improved to 99% in Dec. The vehicle finance division has also come back strong and posted collections around 110%.  It remains to be seen whether the company will be able to sustain its growth momentum in the gold loan space with every big bank getting into this space and how will things pan out for Asirvad and the MFI industry. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.

 


Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 1294 1077 20.15% 1226 5.55% 2520 2028 24.26%
PBT 544 428 27.10% 495 9.90% 1039 763 36.17%
PAT 406 336 20.83% 369 10.03% 775 556 39.39%

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 1578 1390 13.53% 1516 4.09% 3094 2591 19.41%
PBT 544 548 -0.73% 492 10.57% 1037 955 8.59%
PAT 405 433 -6.47% 368 10.05% 773 700 10.43%

 

Detailed Results

  1. The company had a mixed quarter with consolidated revenues rising 13.5% YoY and consolidated PAT falling 6.5% YoY.
  2. Standalone numbers were very good with revenue & profit growth of 20% YoY in Q2 and 24% & 39% YoY respectively in H1.
  3. RoA for the quarter came in at 5.1% while consolidated RoE came in at 26%.
  4. Total AUM grew 18.6% YoY to Rs 26903 Cr while gold AUM grew 30.1% YoY, highlighting excellent growth in standalone business.
  5. The company has a borrowing cost of 9.13% in the quarter. The cash and undrawn bank lines of the company were at Rs 5440 Cr as of Q2.
  6. The share of new businesses in revenues was at 26.6% in Q2.
  7. The book value per share was at Rs 76.2 at the end of Q2.
  8. The company also raised fresh borrowing of Rs 2484 Cr through NCDs, and bank loans.
  9. In the gold loan business, the Opex to AUM has risen slightly to 5.5% from 5.4% in the last quarter while security costs have gone down 85.1% YoY.
  10. Gold AUM per branch rose significantly to Rs 5.6 Cr per branch vs Rs 4.6 Cr per branch a year ago.
  11. The standalone business has GNPA and NNPA of 1.1% and 0.7% respectively while maintaining a CAR of 24.8%.
  12. The online gold loan’s share of total gold AUM was stable 61% in Q2.
  13. In Asirvad MFI, AUM was up 5% YoY & down 1% QoQ while RoE has crashed for the subsidiary to -0.9% in Q2.
  14. The GNPAs for Asirvad has risen to 2.53% in Q2 vs 2.1% in Q1. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 25.7%. The cost of funds for Asirvad was at 11% in Q2.
  15. Collections are back to 90% with only 9% doing no repayment in Oct.

Investor Conference Call Highlights

  1. Commercial Vehicle AUM fell 20% YoY.
  2. Gold loan AUM constitutes 73% of consolidated AUM.
  3. The gold loans’ average ticket size and the average duration were INR 46,499 and 47 days.
  4. The weighted average LTV stands at INR 2,869 per gram or 61% of the current gold price.
  5. Collection for Asirvad in WB was at 75%. The reason for this lower collection is the uneven state lockdowns in WB which have hampered business activities.
  6. Collections in Karnataka have seen a temporary blip and should come back to normal.
  7. In Asirvad, the loan breakup is term loans of close to 60%, debentures of 12%, and securitization of 25%.
  8. The number of customers in gold loans is at 26 lacs.
  9. The yields in the gold loan business have not been affected since the loans are small in size of up to rs 50,000 and of 2 months duration and thus the demand for the instant loan stays stable.
  10. The management expects to see at least 10% QoQ growth in Q3 & Q4 for gold loan AUM.
  11. The company has added headcount in Asirvad for collection to reduce pressure on the existing personnel and this has resulted in higher employee costs in Q2.
  12. The company will not be requiring any additional capital for Asirvad currently.
  13. Collection in commercial vehicles has been steadily rising from 59% in July to 81% in Oct.
  14. Vehicle Finance provision stands at INR 78 crore.
  15. The management shall continue to keep a conservative approach and keep higher provisions than required by regulation.
  16. The management has stated that the gap in the collection as compared to pre-covid figures is not due to delinquency but due to delay in payment schedule and lags in collections.
  17. The management expects collections to come back to pre-covid levels in Q4.
  18. The stagnation in collections from Sep to Oct is mainly on account of the festival period and temporary lockdown coming up in the country.
  19. The tonnage has gone down as people can now take bigger loans for smaller amounts of gold due to high gold prices. Once gold prices come down, the situation will reverse.
  20. Gold loan growth has been primarily pushed by the Online Gold Loan facility during the pandemic.
  21. In Q2, gold loan disbursement was at INR 93,368 crore vs INR 68,390 crore in Q1 & INR 50,250 crore in Q2FY20.
  22. Only 5% of loan customers are new and the rest are repeat customers.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s leading gold loan providers by growing its core business consistently. The company’s current quarter performance has been decent with 18% YoY overall AUM growth despite QoQ decline in Asirvad AUM. The company has also seen good traction in the online gold loan which has been the primary driver of the standalone business and now accounts for 61% of all loans. This brings a significant opportunity for the company to improve its operating model and reduce manpower and physical costs. The company has stayed cautious with Asirvad and collections have slowly improved to 90% in Oct. It remains to be seen how the company’s collections will be affected in the near future and how will things pan out for Asirvad and the MFI industry. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in  Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.


Q1FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 1226 951 28.92% 1191 2.94%
PBT 495 335 47.76% 461 7.38%
PAT 369 220 67.73% 340 8.53%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 1516 1201 26.23% 1618 -6.30%
PBT 492 407 20.88% 534 -7.87%
PAT 368 267 37.83% 398 -7.54%

Detailed Results

    1. The company had a good quarter with consolidated revenues rising 26% YoY and consolidated PAT rising 38% YoY.
    2. RoA for the quarter came in at 4.8% while consolidated RoE came in at 25%.
    3. Total AUM grew 25.6% YoY to Rs 25345.8 Cr while gold AUM grew 33.4% YoY, highlighting excellent growth in AUM from all businesses.
    4. The company has a borrowing cost of 9.4% in the quarter. The cash and undrawn bank lines of the company were at Rs 6025 Cr as of Q1.
    5. The share of new businesses in revenues was at 30% in Q1.
    6. The book value per share was at Rs 71 at the end of Q1.
    7. The company also raised fresh borrowing of Rs 1900 Cr through NCDs, CPs, and bank loans.
    8. In the gold loan business, the Opex to AUM has fallen to 5.4% from 6.8% in the last quarter while security costs have gone down 72.8% YoY.
    9. Gold AUM per branch rose significantly to Rs 5.03 Cr per branch vs Rs 4.38 Cr per branch a year ago.
    10. The standalone business has GNPA and NNPA of 1.3% and 0.7% respectively while maintaining a CAR of 22.9%.
    11. The online gold loan’s share of total gold AUM has gone up to 63% in Q1.
    12. In Asirvad MFI, AUM grew 20% YoY but declined 8.4% QoQ while RoE has crashed for the subsidiary to 0.2% in Q1.
    13. The GNPAs for Asirvad has risen to 2.1% in Q1 vs 1.56% in Q4FY20. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 26.9%. The cost of funds for Asirvad was at 11.1% in Q1. Provision of Rs 75 CR added in Q1 bringing the total provision for COVID-19 up to Rs 130 Cr.
    14. Asirvad now boasts of 1041 branches and a customer base of 2.3 million.
    15. The Housing and Vehicle finance divisions have shown AUM growth of 15.8% and 3.5% YoY respectively.

Investor Conference Call Highlights

  1. The company’s gold loan portfolio which accounts for nearly 70% of the total portfolio, has a tenure of fewer than 3 months while all of the company’s borrowings are long term in nature. This provides a natural hedge against short-term liquidity mismatches.
  2. Growth in gold AUM was driven by a 1% YoY increase in gold holdings and rising gold prices.
  3. Online gold loan customers and digital payments were up by 1.2x QoQ in Q1.
  4. Average LTV is at 57% vs the RBI limit of 75%.
  5. Cash and cash equivalents on a consolidated basis for the company were at Rs 5006 at the end of June. The average duration of liabilities has increased to 452 vs 260 days a year ago. CP exposure has come down to 9% vs 23% last year.
  6. There was no moratorium on the gold loan book. Around 26% of non-gold businesses were under moratorium in the stand-alone entity.
  7. The majority of MFI customers opted from moratorium in phase 1. Collection efficiency from MFI business was at 55% in June and it is expected to be at 70% in July.
  8. 37% of customers opted for a moratorium in phase 1 in the vehicle finance business.
  9. In Loan to NBFCs, the portfolio got reduced by 15.5% QoQ.
  10. The management believes that collections in Asirvad will return to normal after the moratorium ends.
  11. Around 25-30% of customers are still under moratorium at the end of July.
  12. The accrued interest in Q1 was at Rs 492 which is 2.7% of AUM.
  13. The management believes that the current provisioning is adequate enough to account for aggressive scenarios.
  14. GNPA in Vehicle finance is at 10% and for housing finance, it is at 5%. NNPA for the vehicle & housing finance divisions are at 4% and 3.9% respectively.
  15. Gold tonnage for Q1 was down by 4.3%. This is because as gold prices have gone up, people use less gold to borrow the same amount rather than use the same amount of gold to borrow more.
  16. Overall demand seems to be down by 25%. Around 10% of branches are operating partially.
  17. The company made no disbursements in Asirvad in Q1. It started to lend in MFI in July with disbursements of Rs 70-75 Cr in the month. The company is keeping a cautious stance of lending only to customers who have completed at least one cycle.
  18. Around 6-7 lacs of customers have not paid in the past 4 months during the moratorium.
  19. The management expects normalcy to come back by the start of Q3.
  20. The company is still unable to make any collections in 26,000 of its collection centers out of the 2 lac centers.
  21. In vehicle finance, the management expects the collection to be at 85% in July with at least 4-5 months to get normalcy back.
  22. The management expects a medium to long term CAGR to stay at 20% for the consolidated portfolio. It expects growth in FY21 to be at 10-12% mainly from the gold book.
  23. Gold loan is expected to stay at 78-80% of total AUM at the end of FY21. The unsecured MFI portfolio is not expected to grow more than 1% in FY21.
  24. In vehicle finance, the company does not have any customers who are currently under moratorium. This is because of a conscious effort on part of the company to convince customers to pay up the EMIs.
  25. Overall moratorium book is at 32.83% of the total book.
  26. The major contributor to the reduction in OPEX in Q1 was from a waiver of rent in many cases for the company.
  27. The management expects that there is no additional manpower requirement at the gold loan branches. Employee costs are expected to come down to 6% by the end of FY21.
  28. The management expects slowness in demand for the gold loan as the major reasons for short term gold loans like the requirement for education during the academic seasons, use in festivals, etc are coming down due to COVID-19.
  29. Total disbursement for the MFI industry in June was at Rs 100 Cr.
  30. Unlike some of the competition for Asirvad, the company is not looking to add additional loans to existing customers like emergency loans and top-up loans more for adjusting the interest, moratorium interest, and the EMIs.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been decent with >20% YoY overall AUM growth despite QoQ decline in Asirvad AUM. The company has also seen good traction in the online gold loan which growing even faster in current times of COVID-19 disruption and is now accounting for 63% of all loans. This brings a significant opportunity for the company to improve its operating model and reduce manpower and physical costs. The company has stayed cautious with Asirvad and has not disbursed any amount in Q1. It remains to be seen how the company’s collections will be affected once the moratorium ends and collection for disbursals in FY21 starts and how will things pan out for Asirvad and the MFI industry. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in India Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.


 

Q4FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1191 892 33.52% 1133 5.12% 4352 3427 26.99%
PBT 461 314 46.82% 456 1.10% 2672 2209 20.96%
PAT 340 214 58.88% 334 1.80% 1230 790 55.70%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 1618 1167 38.65% 1414 14.43% 5551 4242 30.86%
PBT 534 409 30.56% 544 -1.84% 2007 1457 37.75%
PAT 398 277 43.68% 402 -1.00% 1480 949 55.95%

Detailed Results

    1. The company had a very good quarter with consolidated revenues rising 39% YoY and consolidated PAT rising 44% YoY.
    2. RoA for the quarter came in at 5.7% while consolidated RoE came in at 28.2%.
    3. Total AUM grew 29.8% YoY to Rs 25225.2 Cr while gold AUM grew 30.9% YoY, highlighting excellent growth in AUM from all businesses.
    4. The company has a borrowing cost of 9.46% in the quarter. The cash and undrawn bank lines of the company were at Rs 2300 Cr as of Q4.
    5. The share of new businesses in revenues was at 32.7% in Q4.
    6. The book value per share was at Rs 68 at the end of Q4.
    7. The company also raised incremental borrowing of Rs 3979 Cr through domestic and overseas bon issuances and bank loans in the standalone business.
    8. In the gold loan business, the Opex to AUM has fallen to 6.8% from 7.6% in the last quarter while security costs have gone down 53.9% YoY.
    9. Gold AUM per branch rose significantly to Rs 4.81 Cr per branch vs Rs 3.84 Cr per branch a year ago.
    10. The standalone business has GNPA and NNPA of 0.9% and 0.5% respectively while maintaining a CAR of 23.4%.
    11. The online gold loan’s share of total gold AUM has gone up to 48% in Q4.
    12. In Asirvad MFI, AUM grew 43.3% YoY while delivering 25.5% RoE for FY20.
    13. The GNPAs for Asirvad has risen to 1.56% in Q3 vs 1.34% in Q2. The NNPA is still due to the company’s good provisioning. Asirvad maintained a CAR of 25.4%. The subsidiary made a COVID-19 provision of Rs 50 Cr.
    14. Asirvad has undrawn bank lines of Rs 1760 Cr and excess cash of Rs 1190 at the end of Q4. 100% of loans qualify for PSL.
    15. Asirvad now boasts of 1042 branches and a customer base of 2.37 million vs 1.8 million a year ago.
    16. The Housing and Vehicle finance divisions have shown good AUM growth of 21% and 20% YoY respectively.
    17. % of digital collections for Manappuram were at 72% while for Asirvad it was 9%. The digital tracing of MFI customers was at 94%.
    18. The company has announced a dividend of Rs 0.55 per share in the quarter bringing its dividend for FY20 to Rs 2.20 per share.

Investor Conference Call Highlights

  1. The company saw a gold tonnage growth of 7.2% YoY in FY20.
  2. At the portfolio level, the average LTV is less than 50% against the target limit of 75% showing significant room for borrowing for customers against their collateral.
  3. The management has stated that Asirvad Microfinance follows strict guidelines for diversification of risks like a 10% lending cap on states and a 1% lending cap on districts with an aim to reduce the district cap to 0.5% in the next three years. This has enabled the MFI to be able to minimize geographical concentration risk.
  4. Asirvad also has the lowest operating expenses in the industry according to the management.
  5. The commercial vehicle finance division saw higher GNPL mainly due to the auto industry slowdown which was further exacerbated by the lockdown for COVID-19.
  6. During Q4, the company consciously chose to reduce lending to smaller NBFCs and MFIs given the current macro environment.
  7. In the current environment, the company is focussing on digital collections and customer communications.
  8. The average goal load size and duration were Rs 38,500 and 58 days respectively. Most of the gold loan customers did not opt for the moratorium.
  9. Asirvad was rated AA- by CRISIL which is the highest rating in the MFI industry at present.
  10. The company has reduced the CP ratio to 11%.
  11. Only 100 gold loan customers have applied for a moratorium as of April.
  12. Despite the loss of business due to the lockdown, the management remains confident of achieving 10% revenue growth in FY21.
  13. The total value under moratorium for the vehicle finance division is Rs 130 Cr.
  14. The consolidated cash position of the company is Rs 2500 Cr in cash and Rs 1500 Cr in undrawn lines.
  15. The company was disbursing around Rs 700 Cr every day.
  16. The management has stated that the majority of customers in the vehicle finance business are 1-2 vehicle owners and thus this customer set should be in a more advantaged position as compared to fleets and wholesale customers. In this division, 10% of customers applied for the moratorium.
  17. After COVID-19, the bounce rate on gold loans has gone up 18-20%.
  18. The online gold loan business has seen good traction since the lockdown started and it has witnessed a portfolio growth of 10-12% already.
  19. The management expects almost 70% of gold loan volumes to shift to online by the end of Fy21.
  20. In the 1.5 months since 1st April, the company has disbursed Rs 20,000 Cr.
  21. The management has clarified that Manappuram does not provide any corporate guarantee for any of the subsidiaries’ borrowings and all of them raise debt on their own.
  22. The management has stated that employee costs in Asirvad have gone up almost 50% YoY mainly due to the company opening up more than 100 branches in FY20. As a percentage of revenues, Opex is kept below 5% which is very good for an MFI.
  23. The company has managed to reduce back-office costs of Rs 20-25 Cr per year. This was done mainly through outsourcing various back-office tasks. For example, the company has outsourced infrastructure management to IBM.
  24. The main focus of cost savings from an online gold loan is that it shall reduce the number of employees required to run a branch. The management believes that the current number of employees in branches can handle up to Rs 15 Cr per branch as opposed to the current Rs 5 Cr per branch.
  25. The company will institute a 100% bank disbursal in Asirvad from August 17 onwards.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been very good with >20% YoY AUM growth across all segments. The rise of Asirvad in FY20 has been particularly good. The company has done well to emphasize good risk management for the MFI unit by capping lending % at both state and district level. The company has also seen good traction in the online gold loan which is expected to keep growing even faster in current times of COVID-19 disruption. It remains to be seen how the company’s collections will be affected once the quarter ends and collection for disbursals in FY21 starts. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in India Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.


Q3 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1133.3 900.93 25.79% 1077.29 5.20% 3161.1 2534.61 24.72%
PBT 456.42 333.88 36.70% 427.55 6.75% 1219.38 903.41 34.98%
PAT 334.06 211.91 57.64% 336.17 -0.63% 890.54 576.88 54.37%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 1414.25 1100.81 28.47% 1334.09 6.01% 3933.04 3075.51 27.88%
PBT 544.36 387.83 40.36% 514.44 5.82% 1473.23 1047.15 40.69%
PAT 402.23 247.14 62.75% 407.65 -1.33% 1082.11 671.14 61.23%

 

Detailed Results

    1. The company had a very good quarter with consolidated revenues rising 28% YoY and consolidated PAT rising 63% YoY.
    2. RoA for the quarter came in at 6.3% while consolidated RoE came in at 30.4%.
    3. Total AUM grew 35.5% YoY to Rs 24099 Cr while gold AUM grew 29.7% YoY to 16243 Cr, highlighting excellent growth in AUM from all businesses.
    4. The company has a borrowing cost of 9.12% in the quarter. The cash and bank balance of the company rose to Rs 2196 Cr.
    5. The share of new businesses in revenues was at 32.6% in Q3.
    6. The company also raised $300 million via its US dollar medium-term note which was subscribed 3.8 times.
    7. In the gold loan business, the Opex to AUM has fallen to 7.6% from 8% in the last quarter while security costs have gone down 51% YoY.
    8. The standalone business has GNPA and NNPA of 0.5% and 0.2% respectively while maintaining a CAR of 23.4%.
    9. The online gold loan’s share of total gold AUM has gone up to 44% in Q3.
    10. In Asirvad MFI, AUM grew 57.2% YoY while delivering 26.8% RoE.
    11. The GNPAs for Asirvad has risen to 1.34% in Q3 vs 0.86% in Q2. The NNPA is still due to the company’s good provisioning.
    12. The company has announced a dividend of Rs 0.55 per share in the quarter bringing its dividend for the 9M period to Rs 1.65 per share.

Investor Conference Call Highlights

  1. The rise in gold loan AUM was a result of a combination of increase in gold holdings of 11% YoY and higher gold prices.
  2. Despite growth being driven by new customers, the average ticket size for the company has remained around historical levels of Rs 22000. All disbursals were done using non-cash methods.
  3. Asirvad Microfinance was awarded AA- by CRISIL which is the highest rating for anyone in the Indian MFI sector.
  4. The vehicle finance business saw AUM growth of 43.2% YoY to Rs 1397 Cr with NPA at 2.87%.
  5. The home loan business saw AUM growth of 25.8% YoY to Rs 601 Cr while the loans to corporates saw AUM decline of 12.8% QoQ to Rs Rs 667 Cr.
  6. The company’s presence in Assam is very small with a book of only 47 Cr where only NPA is around only Rs 43 Lac.
  7. The number of vehicle finance branches has gone down due to the consolidation of a few locations into a single branch.
  8. The company is targeting to shave off another 100 bps from the current Opex to AUM ratio by next year.
  9. The management expects tonnage to increase by 3-4% in the quarter. The current LTV is around 61%.
  10. The company is very particular about risk management, especially in Asirvad. It has instituted lending caps of a maximum of 10% for all states as a risk management measure. It has also moved to district level risk exposure.
  11. The company has also consciously kept the ticket size limited to Rs 45000 as a measure of risk management.
  12. And the final measure of risk management that the company practices is to keep lending ticket size in new regions capped at 25000-30000.
  13. The company has also mandated that a borrower cannot have more than 3 loans (2 MFIs + 1 bank) including the companies at a time.
  14. The accrued interest as of Q3 has been around Rs 512 Cr.
  15. The management has stated that the total possible exposure of the company to the affected districts in Karnataka is around Rs 36 Cr. Out of this possible Rs 36 Cr the company has already made provision of Rs 15 Cr.
  16. In the CV loan business, the management expects GNPAs to stay at current levels and it does not expect any additional stress to appear in this business area.
  17. Around 50% of the gold loan book is in ticket sizes of above Rs 1 lac.
  18. While expanding into a new state, the company follows a hub and spoke model where it chooses a central district to expand into first after which it expands into other neighbouring spokes once the central hub for the region is consolidated. In most cases, the company will try and choose the most beneficial district in the state for its hub. The hub district does not need to be contiguous to every other district necessarily.
  19. In the CV loan business, around 87% of the book is for used-vehicle finance. Around 35% of the book is in South India while North and West count for 27% each and the East has around 115 of the book.
  20. The management has stated that the company has been working hard on keeping costs for physical security guards capped while investing in electronic security and cellular safes which have helped the company increase volumes per branch while keeping security costs capped to a certain extent.
  21. Due to the GNPAs rising QoQ for Asirvad and the entire industry as a result of various reasons like natural calamities, political disruptions, etc; the management had taken the decision to increase provisioning to 1.5%.
  22. The management has guided that the company is looking to target tonnage growth of 10% to 18% in the next 2 years.
  23. The management has stated that around 60% of the company’s customers are new to credit (They have no credit bureau records).
  24. In case of home loan customers, most of them are not first-time borrowers and so they will be having credit scores. Thus the company is able to mandate a minimum credit score for customers of this segment as a risk management measure.
  25. The management has mentioned that the NPAs in the microfinance segment can be expected to stay elevated at current levels as there are always some disruptive event like natural disasters, etc which are going in some region of the country which may cause a slight drop in collection efficiency in those regions thus pushing NPAs up.
  26. West Bengal is the 2nd largest state for Asirvad with a book of around Rs 650 Cr and a NPA figure of Rs 10 Cr.
  27. In the vehicle finance business, the rejection rate for 2 wheeler applications is around 10% while the rejection rate for CV applications is around 25%.
  28. The rejection rate in the home loan business is around 40%. Once sanctioned, around 20% of the sanctioned loans are rejected due to legal and other reasons connected to the property in question.

Analyst’s View

Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been very good with >25% AUM growth across all segments. The company has done well to balance its efforts and expand both its core business of gold loans and other businesses like Microfinance and vehicle finance and consistent pace all the while keeping NPAs in check. Asirvad’s performance for the quarter also has been very good and the company has been able to keep the rise in NPAs at a much lower level than the industry due to its good risk management practices. It remains to be seen whether the company will be able to achieve its ambitious fold tonnage growth target of 10-18% for the next 2 years. Nonetheless, given the company’s market positioning and its history of consistent performance across all operating segments, Manappuram Finance remains one NBFC stock that all investors should keep an eye on.

 


 

Q1 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 950.5 702.79 35.25% 892.56 6.49%
PBT 335.3 265.65 26.22% 314.32 6.67%
PAT 220.3 171.15 28.72% 213.57 3.15%

 

Consolidated Financials (In Crs)
Q1FY20 Q1FY19 YoY % Q4FY19 QoQ %
Sales 1184.69 947.18 25.08% 1103.32 7.38%
PBT 414.43 309.38 33.96% 380.12 9.03%
PAT 272.22 199.99 36.12% 258.33 5.38%

 

Detailed Results

    1. The company had a good quarter with consolidated revenues rising 25% YoY and consolidated PAT rising 36% YoY.
    2. RoA for the quarter came in at 5.1% while consolidated RoE came in at 23%.
    3. Total AUM grew 21.5% YoY while gold AUM grew 6.6% YoY highlighting excellent growth in AUM from other businesses.
    4. In standalone terms, the cost to income ratio fell to 30.8% from 35.7% a year ago. Security costs also fell to Rs 15.4 Cr from Rs 35.4 Cr.
    5. In Asirvad MFI, AUM grew 72.2% YoY while delivering 25% RoE.
    6. Vehicle & Equipment finance AUM grew 70% YoY.
    7. Housing Finance AUM grew 33% YoY.
    8. The company had a well-matched ALM profile with undrawn bank lines of Rs 1070 Cr.
    9. The company also raised $75 million of long term borrowings from IFC with a 3-year tenure.
    10. The marginal cost of borrowing for the company came down 9 bps to 9.25% in Q1.
    11. The company maintained a CAR of 23.3% in Q1.
    12. Gross NPAs for the company in Q1 was at 0.7% while net NPAs came in at 0.4%
    13. Gross NPAs for Asirvad MFI was at 0.68% while net NPAs were at zero.
    14. The company has announced a dividend of Rs 0.55 per share in the quarter.

Investor Conference Call Highlights

  1. The company expects the gold loan growth to pick up in Q2 driven largely by tonnage. The company has also noted that average LTV on the gold loan book was ta 62% and customers were not necessarily borrowing the whole 75% against their gold deposit value.
  2. Asirvad finance has emerged as a major contributor to the company. The management is evaluating a primary fundraise in this subsidiary for $ 85 to 100 million.
  3. The company expects its vehicle finance division to be the third great growth contributor after gold loan and microfinance.
  4. The costs to assets ratio for the company fell to 7.8% from 8.15% a year ago. The company has also maintained Rs 80 Cr of surplus provision as well.
  5. The transition to IndAS 116 has had a positive impact in PBT of Rs 4 Cr.
  6. The management hopes to maintain their credit costs at current levels in the rest of the year and in FY21.
  7. The management reassures that they have ample liquidity from their existing bank lines and also have additional sources like IFC and NABARD in case of additional requirements.
  8. In terms of liquidity policy, the company maintains at least 5% in liquid assets at all times.
  9. The company’s AUM exposure to flooded areas this year was only 2-3%.
  10. The management expects gold tonnage to increase by 10% and gold AUM to grow 12-15% in FY20.
  11. The company has admitted that their gold tonnage is not growing as fast as the competition but they are not concerned with this as they are not focusing on aggressive expansion of the gold loan AUM as they have to be able to maintain excess liquidity at all times and their target is for consolidated AUM growth of more than 20% which they expect to achieve this year.
  12. The management has admitted that asset quality is a challenge in the housing finance division. They are trying two different approaches to resolve this. One is to sell stressed assets and bring down the level of stressed assets in the book. The other is to progressively reduce ticket sizes and LTV. The company has also launched a micro-home loan product with LTV as low as 30% and yield lease at 21.5% to bring up yields and lower LTVs for the portfolio. The company has also seen ticket size come down from 13-14 lacs to 8.42 lacs currently.
  13. The company shall allocate 50% of its capital for gold loan, 20% for micro mortgages in affordable housing and SME loans, 15% for vehicle finance and 10% for microfinance.
  14. In housing finance, the company is mainly present in the West and South of India. The NPA levels for this division have been at 4.3% which is expected to come down to nearly 2% by the end of the year once the stressed assets in this division are slowly sold off.
  15. In vehicle finance, 70% of the loan book is for commercial vehicles while 25% is in two-wheelers and 5% in passenger cars and farm equipment. Within this commercial vehicle loan book, 85% is for used commercial vehicles and 15% for new commercial vehicles.
  16. This division is very exposed to the South of India and Kerala exposure is about 40% of the division’s portfolio. The company has identified Rajasthan and Madhya Pradesh for expansion of this division. The company plan to set up a foothold in the micro home loan market and gradually increase their ticket size.
  17. In the SME loan book, the company has an exposure of Rs 850 Cr among 56 companies.
  18. The gold price movement brings down the LTV for the gold loans.
  19. The company is yet to start on its plans for insurance operations. They are currently looking to build their team and they plan to submit their license application by the end of the year.
  20. The average loan life for gold loans is 72 days. In almost 2/3rd of all cases, the company sees the borrower close their loan within the 3-month tenure set in the loan. Only 1/3rd of borrowers go for resetting for another 3 months.

Analyst’s View

Manappuram Finance has long been one of the trailblazers in the NBFC segment catering to personal finance in India. They have a robust and resilient gold loan business forming the nucleus with many other business divisions like microfinance, housing finance and vehicle finance as other avenues for lending. The company has done well to develop these divisions particularly the microfinance division. The company has also maintained a healthy liquidity profile and is also planning to expand into life insurance operations of its own given its wide distribution network. It remains to be seen how long they shall continue to stay immune from the ongoing liquidity situation in the NBFC space and whether their plans for restructuring their stressed assets in the housing finance division will go as planned. They need fund-raising for the capital infusion required to expand their microfinance division and launch their life insurance operations. In the current economic environment, it may be a tough ask to raise funds. Nonetheless, based on their consistent historical performance and their success in raising different business lines other than their flagship gold loan business, Manappuram Finance continues to be a good stock to keep an eye out for, particularly given their resilience in the current economic conditions.

 


 

Q3 2019 Updates

Financial Results & Highlights

Standalone Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 90094 74355 21.17% 85087 5.88% 253461 219993 15.21%
PBT 33389 26106 27.90% 30387 9.88% 90341 80213 12.63%
PAT 21192 16904 25.37% 19380 9.35% 57688 52271 10.36%

Consolidated Financials (In Lacs)

Q3FY19 Q3FY18 YoY % Q2FY19 QoQ % 9M FY19 9M FY18 9M% Change
Sales 110081 88154 24.87% 102752 7.13% 307551 257798 19.30%
PBT 38784 26536 46.16% 34993 10.83% 104716 76132 37.55%
PAT 24716 17122 44.35% 22400 10.34% 67115 49586 35.35%

Detailed Results

    1. The company has delivered a strong growth of 24% YoY in revenues on a consolidated basis.
    2. The corresponding PBT and PAT has been phenomenal with growth of 46% and 44% respectively in YoY basis.
    3. They have maintained a robust consolidated ROE of 23%.
    4. Standalone gross NPA has declined to 0.6% compared to 0.7% last quarter.
    5. Their biggest segment, the gold loan category has seen a YoY growth of more than 10% keeping pace with organized gold loan market which has been estimated to grow at around 10-12% pa.
    6. Gold loan yields has seen an improvement in current quarter because of withdrawal of discount schemes and passing on the increase in borrowing costs to the end customers.
    7. This was also the first quarter when all of the lending product categories reported profits on a standalone basis.
    8. Their Ashirvad subsidiary dealing in personal finance has grown phenomenally with 41% increase in revenues and a rise of 52% in net interest income compared to last year while delivering a robust ROE of 29.4% in the current quarter.
    9. Ashirvad Microfinance been growing their AUM at a CAGR of 65.8% p.a. for the last 4 years. They grew 17% QoQ and 51% YoY in AUM.
    10. They continue to maintain a well matched ALM profile and have undrawn banking lines of Rs 19,240 million to maintain sufficient liquidity.

Investor Conference Call Highlights

  1. For the first time, all product categories have reported standalone profits.
  2. The company is planning to raise equity for Ashirvad Microfinance in the near future with an expect dilution of around 15%.
  3. The cost of borrowing has increased by around 50bps to 9.75% which was passed to customers mainly due to withdrawal of rebates.
  4. The online gold loan business line is staying robust and now accounts for 36% of total gold loan portfolio.
  5. The management expects the AUM mix of gold and non-gold sectors to reach 50-50 ratio in the near future after a few years.
  6. Manappuram is also planning to infuse around Rs 100 Cr into their housing finance division.
  7. In housing finance division, the company aspires to double their current AUM and scale up at a faster rate than before.
  8. Management is targeting an overall gold loan AUM growth of 15% YoY. The growth for the current year till date has been 10.6% which is expected to catch up to make for the slack in the next quarter.

Analyst’s View

Manappuram Finance has long been one of the early entrants in the NBFC segment catering to personal finance in India. They have a robust and resilient gold loan business which is still growing double digits every year. Other than their flagship gold loan business, they have also branched out into other personal finance lending business lines. Leveraging their large customer reach and target market, they have been growing these segment at an exponential manner. Manappuram seeks to establish itself as a one stop solutions providers for all the borrowing needs that a retail customer may have. Despite the recent tightening in the NBFC segment, Manappuram has had no problems raising funds for its business, thus highlighting their robust risk profile and stellar market reputation. However, in the current difficult environment, it remains to be seen whether the liquidity problems in the housing finance sector will spill over to other NBFCs like Manappuram as well or not.

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