Foreign brokerage CLSA said Manappuram Finance’s focus on diversification plan with a target of achieving a 50:50 loan mix between gold and other segments is going smoothly. In its latest note, the brokerage retained its ‘Buy’ rating on the Manappuram Finance Ltd stock and suggested a target price of Rs 185 on the same post the recent analyst meet.
The analyst meeting focused on sharing the management’s strategy on the non-gold business segments, which include vehicle, MSME, home and microfinance Non-gold segments at present account for 47 per cent of consolidated AUM mix.
The management reiterated its aim to achieve 20 per cent ROE with a 20 per cent medium-term loan CAGR.
“We believe a diversified business mix lends more comfort to the name as the gold financing industry’s competitive landscape has changed in the past few years,” CLSA said.
On Friday, shares of Manappuram Finance were trading at Rs 173.40 on BSE, up 1.97 per cent. The stock is up 45 per cent year-to-date.
For the gold loan segment, the management believes it can achieve 10-12 per cent growth in coming quarters. In addition, it said competition from banks has still not affected the low-ticket low-tenure customer segment, which continues to prefer NBFCs to banks given faster servicing by NBFCs
Vehicle and equipment finance forms about 8 per cent of the consolidated AUM mix. Within this segment, commercial vehicle and equipment forms 59 per cent of the mix, cars 24 per cent and 2Ws 17 per cent.
“The majority of this book is used vehicle financing; only 2W and 8 per cent of cars are new vehicle financing. The strategy here is to keep penetrating deeper pockets. The share of non-metro cities in the used vehicle segment is 48 per cent and the company targets to take this to 55 per cent by FY25,” CLSA said.
The share of micro, small and medium enterprises (MSME) and HFC in Manappuram Finance’s consolidated AUM is 7 per cent and 3 per cent respectively. Manappuram also disburses micro home finance and secured personal loans in the MSME segment.
Meanwhile, subsidiary Asirvad Microfinance is the third largest microfinance player in India now.
“Asirvad holds a 7.7 per cent market share in the microfinance industry. What makes Asirvad stand out versus its peers is its best in class geographic diversification, in our view. The share of the top three states for Asirvad is the lowest at 37 per cent while for Spandana, Fusion, Muthoot and CreditAccess Grameen it is 50-75 per cent. The company is in the process of filing for listing and thus commentary on this segment is restricted,” CLSA noted.
(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.)
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