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Fastest growing gold loan company
Manappuram has been the fastest growing gold loan company in the
country. It has tripled its AUM in the past one year and grown it eight
times over two years. Manappuram is the second largest listed gold
loan company after Muthoot with more than 7% share of the organized
market. A phenomenal rally in gold prices and rapid network expansion
(79% CAGR in branches over FY09-11) has driven the exponential
growth in AUM. During Q1 FY12, AUM accretion was significantly ahead
of our expectation at Rs14.8bn, higher 20% qoq (13.5% volume
growth and 6.5% value growth).
New branches to drive 51% AUM CAGR over FY11-13E
After beating industry growth handsomely, we expect Manappuram’s
growth momentum to moderate over FY11-13 to 51% due to increased
penetration/competition in South (especially Kerala), slower adoption in
other regions and base effect. Net loans (on the balance sheet) would
witness a higher 60% CAGR on account of lower loan assignments. Bulk
of the anticipated growth would be driven by substantial uptick in
productivity of the new branches.
NIM to contract on declining yield and increase in funding cost
We estimate Manappuram’s margin to correct by ~370bps over FY11-
13 from 16.7% to 13%. Margin contraction would be a function of both
increase in funding cost and decline in loan yields. Company’s
borrowing cost increased significantly in Q1 FY12 (up 110bps qoq) due
to loss of PSL status on assignments and sharp increase in bank
lending/CP rates. Funding cost is likely to increase further in the shortterm.
Yield on gold loans though resilient in Q1 FY12 is expected to
correct in the longer term. It is currently materially higher than
Muthoot, a like-to-like competitor. Even at 13%, Manappuram’s NIM
would be the highest in the industry and amongst NBFCs in general.
Operating leverage to cushion RoA while RoE to improve
With company having significantly invested in capacity augmentation
and brand awareness, material operating leverage would kick-in over
FY11-13. We expect a substantial improvement in AUM/Branch from
Rs36mn to Rs56mn as new branches mature. Further, advertising
expenditure is estimated to only marginally increase. As such,
opex/average assets ratio is likely to decline considerably from 7% in
FY11 to 5.4% in FY13. This would cushion the impact of margin
contraction on RoA. However, RoE would improve as leverage
increases. Given the profitability and growth matrix, Manappuram’s
valuation at 1.5x FY13E P/BV is extremely attractive.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Fastest growing gold loan company
Manappuram has been the fastest growing gold loan company in the
country. It has tripled its AUM in the past one year and grown it eight
times over two years. Manappuram is the second largest listed gold
loan company after Muthoot with more than 7% share of the organized
market. A phenomenal rally in gold prices and rapid network expansion
(79% CAGR in branches over FY09-11) has driven the exponential
growth in AUM. During Q1 FY12, AUM accretion was significantly ahead
of our expectation at Rs14.8bn, higher 20% qoq (13.5% volume
growth and 6.5% value growth).
New branches to drive 51% AUM CAGR over FY11-13E
After beating industry growth handsomely, we expect Manappuram’s
growth momentum to moderate over FY11-13 to 51% due to increased
penetration/competition in South (especially Kerala), slower adoption in
other regions and base effect. Net loans (on the balance sheet) would
witness a higher 60% CAGR on account of lower loan assignments. Bulk
of the anticipated growth would be driven by substantial uptick in
productivity of the new branches.
NIM to contract on declining yield and increase in funding cost
We estimate Manappuram’s margin to correct by ~370bps over FY11-
13 from 16.7% to 13%. Margin contraction would be a function of both
increase in funding cost and decline in loan yields. Company’s
borrowing cost increased significantly in Q1 FY12 (up 110bps qoq) due
to loss of PSL status on assignments and sharp increase in bank
lending/CP rates. Funding cost is likely to increase further in the shortterm.
Yield on gold loans though resilient in Q1 FY12 is expected to
correct in the longer term. It is currently materially higher than
Muthoot, a like-to-like competitor. Even at 13%, Manappuram’s NIM
would be the highest in the industry and amongst NBFCs in general.
Operating leverage to cushion RoA while RoE to improve
With company having significantly invested in capacity augmentation
and brand awareness, material operating leverage would kick-in over
FY11-13. We expect a substantial improvement in AUM/Branch from
Rs36mn to Rs56mn as new branches mature. Further, advertising
expenditure is estimated to only marginally increase. As such,
opex/average assets ratio is likely to decline considerably from 7% in
FY11 to 5.4% in FY13. This would cushion the impact of margin
contraction on RoA. However, RoE would improve as leverage
increases. Given the profitability and growth matrix, Manappuram’s
valuation at 1.5x FY13E P/BV is extremely attractive.
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