Analysts said Manappuram’s June quarter numbers were weak, with its gold loan book falling 13.3 per cent sequentially. They are worried about Manappuram’s aggressive auctioning policy of late, even as the last 12-15 months have been an exceptional period for small businesses.
A fall in the high-ticket portfolio and tepid customer additions are other concerns, brokerages said, even though they see up to 38 per cent potential upside for the stock from the prevailing level.
“After auctioning a portfolio of Rs 410 crore in March quarter, the company carried out another auction of Rs 1,500 crore in June quarter. Besides this, a weak new customer acquisition trend and attrition of high-ticket portfolio — due to severe price competition from banks — have further contributed to the decline in business,” said Nirmal Bang Institutional Equities.
On Wednesday, the scrip fell 14.56 per cent to hit a low of Rs 163.35 on BSE.
“Taking into account the net reduction of 2,00,000 in the total customer base in June quarter and the historical annual net customer acquisition, we expect minuscule 1 per cent growth in the total customer base in FY22. Given the run-off in the high-ticket size segment, we have also reduced our average ticket size assumptions,” Nirmal Bang said.
Motilal Oswal said Manappuram has taken a cautious view on gold prices – to guard itself against a decline in gold prices. The company, it said, deemed it more prudent to auction gold to de-risk itself.
“In the process, it has had to trade-off growth for protection on asset quality,” it said.
Manappuram’s gold asset under management (AUM) for the quarter fell 6.8 per cent YoY to Rs 16,500 crore from Rs 17,700 crore while the gold tonnage dipped 16 per cent to 58.1 tonnes from 69 tonnes. Non-gold AUM grew by 8 per cent to Rs 8,200 crore from Rs 7,600 crore, Manappuram said.
The gold loan company said its gold AUM was impacted by Covid-19, as many branches were either not functional or only partially functional, leading to a decline in new customer acquisitions. As prices of gold declined 17 per cent from peak, it led to some borrowers withdrawing collateral, Manapurram added.
The average loan to value (LTV) fell to 63 per cent in July from 71 per cent at the end of March quarter.
“A decline in the gold loan segment is a one-time blip due to LTV management and decline in new customer acquisition. The short-loan tenure (three months against the industry average of 6-12 months) is resulting in a quicker downward re-pricing and high auctions. We expect, the company to deliver steady gold loan growth of 12 per cent in FY22 and it has potential to deliver RoA of 5.4 per cent and RoE of 21 per cent by FY23,” said Arihant Capital.
This brokerage has cut its EPS estimates by 11 per cent for FY22 and 10 per cent for FY23, respectively to factor in the decline in gold loan AUM and yield. Arihant has downgraded its rating on the stock to ‘Hold’ from ‘Buy’ but has revised upward Rs 201 from Rs 197 earlier. Nirmal Bang sees the stock at Rs 226 and Motilal at Rs 220.
