Recommendation From Finance -Leasing & Hire Purchase Sector

Manappuram Finance Ltd. 

ADD LUSTRE TO YOUR PORTFOLIO WITH MANAPPURAM 

HERE IS WHY
Positive financial trend
Improving asset quality
Product management 

Manappuram Finance (MFL) is a prominent NBFC in India which offers gold loans, microfinance, housing loans and commercial vehicle loans.

On the consolidated financial front, the total income from operations stood at Rs.1,084.86 crore in Q4FY19 as against Rs.886.77 crore, posting a growth of 22.34 per cent. Assets under management (AUMs) soared 23.3 per cent to Rs.19,400 crore in Q4FY19 from Rs.15,800 crore in Q4FY18. Net interest income (NII) showcased a growth of 18.10 per cent as it climbed to Rs.731.07 crore in Q4FY19 from Rs.619.02 crore in Q4FY18. Net profit rose 42.75 per cent YoY to Rs.255.59 crore in Q4FY19 from Rs.179.05 crore in Q4FY18.

The consolidated income from operations increased 20.3 per cent to Rs.4,116.32 crore in FY19 from Rs.3,420.76 crore in FY18. NII exhibited a growth of 17 per cent as it rose to Rs.2,796.88 crore in FY19 from Rs.2,390.31 crore in FY18. PAT surged 36 per cent YoY to Rs.919.87 crore in FY19 from Rs.676.40 crore in FY18. MFL’s liquidity position improved 60.8 per cent YoY to Rs.1,164.20 crore in FY19 from Rs.724.12 crore in FY18. RoA and RoE stood at 5.2 per cent and 23.06 per cent, respectively in FY19. The company reported capital adequacy ratio (CAR) of 23.9 per cent.



MFL’s operating performance in terms of AUM and PAT growth has showcased a sustained uptrend over the last six quarters. For Q4FY19, AUMs rose 9.3 per cent QoQ. The standalone GNPAs sank to 0.5 per cent in Q4FY19 as against 0.6 per cent in Q3FY19. The company has adopted a conservative approach and maintained excess provisions of Rs.28.6 crore.

The gold loan business delivered a strong performance with AUMs rising 10.5 per cent YoY and 3.5 per cent QoQ in Q4FY19, while gold tonnage rose 5.5 per cent YoY. The management succeeded in curbing security costs to Rs.17 crore in Q4FY19. It anticipates healthy growth in gold loans in line with market growth as it aspires to open 100-150 branches next year in the unbanked region.

MFL is relatively immune to the liquidity crunch plaguing the NBFC sector, as its assets are short-tenure in nature and there is an excess of ALM. Although NIM dropped sequentially by 56 bps to 15.7 per cent on account of sturdy growth in lower yielding loan growth businesses, it is expected to improve over the next couple of years as the share of non-gold businesses increases.

During the quarter, the non-gold business, which constitutes nearly 33 per cent of total consolidated AUMs, exhibited a brilliant performance. Asirvad MFI posted a 58 per cent YoY growth in its AUM to Rs.3840 crore, the CV division increased its AUM by 78 per cent to Rs.1,100 crore and the home finance subsidiary reported AUM growth of 38 per cent to Rs.520 crore.The management is contemplating venturing into the insurance business to cater to captive customers. The board has approved the takeover of Manappuram Asset Finance Ltd. with a loan book of Rs.200 crore and networth of Rs.23 crore.Owing to its improving asset quality across segments and healthy growth prospects, we urge our reader-investors to BUY this stock. 

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