Manappuram GF&L Fast-growing gold lending franchise:: Standard Chartered Research,

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Manappuram GF&L
Fast-growing gold lending franchise


 We have an OUTPERFORM rating and price target of
Rs185 based on a target P/BV of 3.2x.
 We take a positive view of Manappuram’s leadership
position in India’s under-penetrated gold finance market
which is likely to grow rapidly over the next few years.
 While NIMs and RoAs should come down due to some
regulatory and competitive pressures, we expect these
to remain substantially higher than the sector average.



Leader in an under-penetrated market – Lending against
gold jewellery looks severely under-penetrated with only
10% of India’s gold stock of US$840bn in FY10 used for
financing against gold, of which only 1.2% is financed by
organised players, according to the World Gold Council.
MGFL is the #2 player in the organised gold lending
segment with market share of 6.8%.
Strong financial performance to continue – Over FY08-
10, MGFL’s net profit grew at a 138% CAGR and average
AUM grew 111%. NIM of 21.6% and RoA of 7.5% in FY10
were substantially higher than the sector. We expect strong
financial performance to continue with earnings growth at a
77% CAGR over FY10-13E and AUM growth of 98%. NIMs
and RoAs are likely to come off but should still beat sector
averages by a wide margin.
Branch expansion key to growth – Aggressive branch
expansion, beefed-up marketing efforts and strong riskmanagement
practices will be the key earnings drivers, in
our view. We expect branch network to expand to 3,000 by
FY13E from 1,795 in 9M FY11.
For details, please read our initiation report on MGFL dated
1 Apr ’11.