Muthoot vs. Manappuram – Comparison of 2 Gold Businesses

Reading Time: 6 minutes

Source link | Follow PA Wealth on Twitter | Subscribe to PA Wealth Services

Muthoot Finance and Manappuram Finance are 2 close peers in Gold loan Industry in India. Checkout the comparative parameters of these players with this brief update:

(A) Consolidated Loan Assets

The consolidated loan assets of both Muthoot Finance and Manappuram Finance increased at a CAGR of around 9%. The AUM of Muthoot Finance grew by 24% in FY21. On the other hand, AUM of Manappuram Finance grew by 8% in FY21.

stock research muthoot finance with its consolidated loan assets
stock research Manappuram finance with its consolidated loan assets

(B) Loan Composition

Gold Loans form 90% of the loans portfolio of Muthoot Finance. On the other hand, Manappuram’s Gold Loan Portfolio is 70% of the total AUM. In case of Finance companies, diversification can result in poor asset quality.

Over the years Manappuram diversified into Micro Finance loans, MSME and Vehicle finance. Manappuram also acquired a majority stake (85%) in Asirvad Microfinance Private Limited, one of the leading microfinance institutions in Tamil Nadu in February 2015.

stock research muthoot finance with its detailed loan composition
stock research manappuram finance with its detailed loan composition

(C) Gold Loan Assets

Gold loan assets of Muthoot Finance increased by 17% in FY19, 21% in FY20 and 29% in FY21. Increase in Muthoot Finance Gold loans from March 21 to Sept 21 is 5%. On the other hand, Manappuram gold loan assets decreased from March 21 to Sept 21 by 2%.

Also Read on FinMedium:  Ambika Cotton Mills - A Fundamental Analysis
stock research muthoot finance with its trend of gold loan assets
stock research manappuram finance with its trend of gold loan assets

(D) Number of Branches

stock research muthoot finance with its growth of branches count

Muthoot Finance has 60% of its Branches in South India, 16% in North and 17% in West.

Similarly, Manappuram’s branches presence is 57% in South, 15% North and 15% West.

(E) Funding Sources

stock research muthoot finance with detailed borrowing profile
stock research manappuram finance with detailed borrowing profile

Both of the companies have a diversified funding structure giving an advantage of better cost of funds.

(F) Shareholding Pattern

Muthoot Finance has a strong shareholding by the Muthoot family promoters. The promoters hold 73% of the shares of the company which is a very positive fundamental.

In Manappuram Finance, promoters’ shareholding is 35%. Majority of the shares are held by Mr VP Nandakumar, son of the founder of Manappuram Finance.

(Click to enlarge the image)

stock research muthoot finance with shareholding pattern detail
stock research manappuram finance with shareholding pattern detail

(G) Sales and PAT Growth %

stock comparison muthoot and manappuram net sales growth
stock comparison muthoot and manappuram profit growth

(H) Key Performance Indicators

stock comparison muthoot and manappuram ROA growth
stock comparison muthoot and manappuram ROE growth
stock comparison muthoot and manappuram PAT Margin growth
stock comparison muthoot and manappuram NIM growth
stock comparison muthoot and manappuram NPA trend

(I) Strengths

Muthoot Finance Strengths

  1. Muthoot Finance has sustained its leadership position in the gold financing segment, supported by the long and established track record of 80 years of its promoter family.
  2. The company’s operating efficiency – indicated by average gold loan AUM per branch – has been higher than that of peers. As at the end of March 31, 2021, the average AUM per branch stood at Rs 11.2 crore, almost double of that for fiscal 2013.
  3. While the company had started to diversify into non-gold segments, its primary focus would remain on gold loans over the medium term in light of the challenges being faced by other asset classes after the pandemic.
  4. The company’s earnings profile has been healthy in the past and, has improved further over the last few fiscals to outperform NBFCs and banks.Over the past 2-3 fiscals, increased focus on collection of interest on a regular basis and revision in interest rates on different schemes helped sustain margins.
  5. Asset quality as measured by annualised credit costs has also been under control, except a one-time deviation in the fourth quarter of fiscal 2018 when NPAs rose due to change in NPA recognition norms from account-wise to borrower-wise.
Also Read on FinMedium:  JK Cement Fundamental Analysis and Future Outlook

Manappuram Finance Strengths

  1. Manappuram Finance is the second-largest gold loan non-banking finance company (NBFC) in India. The company’s consistent efforts in advertising and branding strategy have increased its brand recall significantly amongst customers.
  2. Experienced promoters and management team.
  3. Good asset quality though witnessed moderation in FY21 on account of impact of COVID-19.
  4. Average Gold AUM per branch was ₹ 5.42 crore in FY 2021, up by 12.6% compared to ₹ 4.81 crore in FY 2020. In FY15, the same amounted to Rs 2.81 crore in FY15.

(J) Key Challenges for both the Players

  1. Geographical Concentration – As major presence in South India
  2. Increasing competition from banks in gold loan business
  3. Asset quality challenges associated with non-gold loan segments

Drop us your query at – info@pawealth.in or Visit pawealth.in

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

Also Read on FinMedium:  India Model Portfolio - Billion Dollar Valuation

Source link | Follow PA Wealth on Twitter | Subscribe to PA Wealth Services

Disclaimer: The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of the FinMedium or its members. The presentation of material therein does not imply the expression of any opinion whatsoever on the part of the FinMedium concerning the legal status of any company, country, area, or territory or of its authorities. For more info. please read our ToU & Privacy Policy here. If you have any concerns regarding this post, please reach out to our grievance officer Ghanisht Nagpal and drop a mail to editor@finmedium.com

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!


PA Wealth

PA Wealth

Equities | Mutual Funds | Insurance | Investment Services | For service details, mail them on: info@pawealth.in
Please Share Now :)

Leave a Reply

Your email address will not be published. Required fields are marked *