Initiating Coverage
Institutional Equities
Manappuram Finance 9 June 2016 Reuters: MNFL.BO; Bloomberg: MGFL IN
De-risking And Diversification To Drive Earnings Growth
BUY
Manappuram Finance (MFL) is the second-largest non-banking finance company or NBFC in the under-penetrated organised gold finance market in India. The company has a twopronged strategy, enabling it to enter into a growth phase. Firstly, it has de-risked its gold loan portfolio from gold price volatility leading to lower auctions and non-performing assets or NPAs. Secondly, it has diversified its portfolio into non-gold products to drive growth and utilise excess capital on its books. With strong assets under management or AUM CAGR of 25%, healthy net interest margin or NIM, operating leverage and contained credit costs, we expect PAT to post a 27% CAGR over FY16-FY18E. We initiate coverage on the stock with a Buy rating and a target price of Rs85, valuing it through a residual income model.
Sector: NBFC CMP: Rs58 Target Price: Rs85 Upside: 47%
Hatim Broachwala, CFA
[email protected] Entering the growth phase: FY16 marked an end to the company’s three-year long consolidation phase. Key factors in the growth of gold loans were stable gold prices, steady +91-22-3926 8068
loan-to-value or LTV regime, a level-playing field, weak players shifting out and de-focus by banks. We have factored in gold AUM posting a 15% CAGR over FY16-FY18E as against the management’s guidance of 20%. De-risking gold loan portfolio: The company has borne the brunt on account of volatility in gold prices in the past. As a result, MFL moved to short-term (3-6 months) loan products with a maximum LTV of 75% which has helped the company in bringing down auctions losses significantly. As much as 90% of its gold loan portfolio has already migrated into the short-term category. Interest accrued on loans eased to 3% of loans as against an average of 7% over the past five years. Auctions as well as auction losses have declined significantly. Diversification into non-gold products: MFL has embarked on a strategy of diversifying into microfinance, home loan, commercial vehicle or CV financing and loan against property or LAP. Non-gold portfolio forms 12% of AUM in FY16 against 4% in FY15. In line with the management’s guidance, we expect non-gold portfolio to increase to 25% of AUM in FY18E. Robust asset quality: Despite moving to 120-day recognition for NPAs (a year ahead of regulatory requirement) GNPAs eased to 0.9% backed by its strategy of de-risking gold loans. Most of its current GNPAs relate to non-payment of principal, but yet there is payment of interest. Also, the company has provided 35bps for standard assets (a year ahead of regulatory requirement). We have conservatively factored in GNPAs to rise by 30bps to 1.2% by FY18E. Return ratios to strengthen further: Return ratios have already improved significantly from their trough levels in FY13. With likely strong growth in AUM, stable margins, contained credit costs and operating as well as financial leverage to kick in, we expect RoA/RoE to improve further by 30bps/440bps to strong levels of 3.2%/17.6%, respectively in FY18E. Valuation and outlook: With the worst-case scenario behind, regulatory environment turning favourable and gold prices stable, MFL is targeting healthy growth going forward. Its de-risking strategy has helped in keeping credit costs at a lower level. Diversification into other segments will enable faster utilisation of excess capital on its balance sheet and avoid any undesirable treatment from the regulator for being a single-product company. Tier I capital in excess of 23% ensures unhindered growth along with no need to raise capital for the next two years. MFL trades at an attractive valuation i.e. P/ABV of 1.6x/1.5x on FY17E/18E financials. We have assigned Buy rating to MFL with a target price of Rs85. Y/E March (Rsmn) Net interest income Pre-Provision Profit PAT EPS (Rs) ABV (Rs) P/E (x) P/ABV (x) RoA (%) RoE (%)
FY14 FY15 10,494 10,908 3,899 4,419 2,260 2,715 2.7 3.2 28.6 30.2 21.6 18.0 2.0 1.9 1.9 2.4 9.2 10.6 Source: Company, Nirmal Bang Institutional Equities Research
FY16 14,005 5,908 3,551 4.2 31.9 13.7 1.8 2.9 13.2
FY17E 16,724 7,455 4,453 5.3 35.2 11.0 1.6 3.1 15.3
FY18E 20,436 9,612 5,723 6.8 39.5 8.5 1.5 3.2 17.6
Key Data Current Shares O/S (mn)
841.2
Mkt Cap (Rsbn/US$mn)
48.6/729.6
52 Wk H / L (Rs)
59/20
Daily Vol. (3M NSE Avg.) Shareholding (%)
4,637,369
4QFY16 3QFY16 2QFY16
Promoter
33.7
32.6
32.3
FII
40.4
40.0
42.9
DII
7.3
8.9
7.7
18.7
18.6
17.1
Others
One Year Indexed Stock Performance 220
200 180
160 140 120 100 80
60 Jun-15
Aug-15
Oct-15
Dec-15
Manappuram Finance
Feb-16
Apr-16
Jun-16
NIFTY CNX NIFTY INDEX
Price Performance (%) Manappuram Finance Nifty Index
Source: Bloomberg
1M
6M
1 Yr
47.3
120.2
111.7
7.0
7.4
2.8
Institutional Equities Valuation and outlook We expect net interest income (NII) CAGR of 21% over FY16-FY18E, tad lower than AUM growth, as we expect a marginal compression given the diversification into other segments. Operating leverage is expected to kick in as the growth in gold loans is with the same number of branches. Despite conservatively factoring in higher credit costs, we expect PAT CAGR of 27% over FY15-FY18E We expect RoA/RoE to improve 30bps/440bps by FY18E to a healthy level of 3.2%/17.6%, respectively. It is well capitalised with a CRAR of 24% and Tier-I of 23.5%, provides the ability to grow at the desired rate without the risk of equity dilution for the next two years. MFL trades at an attractive valuation i.e. P/ABV of 1.6x FY17E earnings and 1.5x FY18E numbers. Superior return ratios along with higher growth in AUM deserves higher valuation. We have assigned Buy rating to the stock with a target price of Rs85, valuing it through a residual income model, implying P/ABV of 2.1x FY18E numbers. Exhibit 1: MFL better placed on RoA versus P/BV matrix (%) 4.3
BAF
P/BV - FY18
3.8
SKSM
3.3 MMFS
CAFL
2.8 2.3
SCUF
1.8
MUTH
LTFH
1.3
MFL
0.8 1.0
2.0
3.0
4.0
5.0
6.0
ROA - FY18
MFL
MUTH
SKSM
CAFL
BAF
SCUF
MMFS
LTFH
Source: Bloomberg, Nirmal Bang Institutional Equities Research Note: MFL – Manappuram Finance, MUTH – Muthoot Finance, SKSM – SKS Microfinance, CAFL – Capital First, BAF – Bajaj Finance, SCUF – Shriram City Union Finance, MMFS – Mahindra & Mahindra Financial Services, LTFH – L&T Finance Holding
Exhibit 2: Valuation catching up with improvement in fundamentals (x) 3.0 2.5 2.0 1.5 1.0 0.5
P/Adj. BVPS
Mean
+1 SD
Jun-16
Feb-16
Oct-15
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
Feb-11
Oct-10
Jun-10
-
-1 SD
Source: Bloomberg, Nirmal Bang Institutional Equities Research
2
Manappuram Finance
Institutional Equities Exhibit 3: Gold NBFC - comparison of key parameters Manappuram Gold AUM (Rsmn) Non-gold AUM (Rsmn) Total AUM (Rsmn) Growth in AUM (%) NIM (%) Cost-to-income (%) Cost-to-AUM (%) RoA (%) RoE (%) Gold holding (to) Loan per gram (Rs) Branches - Gold loan Employees - Gold loan Employees/branch (x) AUM/branch (Rsmn) GNPA s(%) NNPAs (%) Credit costs – incl. std. assets (bps) CAR (%) Tier I (%) EPS (Rs) ABV (x) P/E (x) P/ABV (x)
Muthoot
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
10,0414 10,0414 3.4 10.7 63.9 5.5 1.7 8.6 51 1,952 3,295 18,210 5.5 30 1.2 0.8 83.8 22.7 20.6 2.5 28.1
82,420 82,420 (17.9) 11.5 64.1 5.9 1.9 9.2 46 1,809 3,293 16,794 5.1 25 1.2 1.0 51.3 27.7 26.7 2.7 28.6
92,245 3,977 96,221 16.7 12.2 60.4 6.0 2.4 10.6 53 1,737 3,293 15,863 4.8 28 1.1 0.9 32.3 25.6 25.1 3.2 30.2
10,0806 13,524 114,330 18.3 13.3 58.5 6.8 2.9 13.2 60 1,691 3,293 16,259 4.9 31 0.9 0.7 44.0 24.0 23.5 4.2 31.9
260,004 3,864 263,868 8.0 10.8 37.6 3.8 4.1 30.2 134 1,940 4,082 24,881 6.1 64 2 1.7 35.5 19.6 13.4 27.0 88.3
216,179 2,436 218,615 (17.1) 9.4 46.7 4.6 3.2 19.5 118 1,832 4,270 25,012 5.9 51 1.9 1.6 18.4 24.7 18.0 21.0 105.5
233,499 586 234,085 7.1 9.8 52.0 5.1 3.0 14.5 131 1,782 4,200 22,882 5.4 56 2.2 1.9 16.5 24.8 20.0 16.8 116.4
243,355 434 243,789 4.1 10.7 43.5 4.8 3.3 15.1 142 1,714 4,200 22,781 5.4 58 2.9 2.5 68.1 24.5 20.9 20.1 125.8
23.4 2.1
21.6 2.0
18.0 1.9
13.7 1.8
10.2 3.1
13.1 2.6
16.4 2.4
13.7 2.2
Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 4: Our estimates versus Bloomberg consensus estimtaes Y/E March
Our estimates
Bloomberg cons. estimates
Variation (%)
(Rsmn)
FY17E
FY18E
FY17E
FY18E
FY17E
FY18E
PAT EPS (Rs) ABV (Rs) RoA (%) RoE (%)
4,453 5.3 35.2 3.1 15.3
5,723 6.8 39.5 3.2 17.6
4,692 5.6 35.5 3.5 16.1
5,554 6.6 39.5 3.5 17.2
(5.1) (5.1) (0.8) (40bps) (80bps)
3.0 3.0 (30bps) 40bps
Source: Bloomberg, Nirmal Bang Institutional Equities Research
3
Manappuram Finance
Institutional Equities Highly under-penetrated gold finance market Gold demand remains buoyant As per World Gold Council, India holds 22,000tn of gold. Also, India is one of the largest gold markets in the world. Despite a few import-related curbs and slide in gold prices, demand for gold remains strong. India accounts for 27.1% of world’s jewellery demand, and 19.2% of global demand for gold bars and coins. Exhibit 5: India’s gold demand remains strong (Tonne) 700
600
Exhibit 6: India has one of the highest global market shares
662
613
(%) 35
654
30
552
30.8
29.1
27.1
25.7
25
500 400
20
362
312
24.2 20.5
15
300 195
181
200
19.2
17.0
10 5
100
0
0 2012
2013 Jewellery (tonne)
2014 Bars & Coins (tonne)
2012
2015
Source: World Gold Council, Nirmal Bang Institutional Equities Research
2013 Jewellery
2014 Bars & Coins
2015
Source: World Gold Council, Nirmal Bang Institutional Equities Research
Part of the large appetite for jewellery in India is driven by the cultural role that the yellow metal plays in India. Limited access to financial assets means gold has an important parallel status as a store of value. In India, gold jewellery is a desirable possession as well as an investment to be passed down through generations. Indian consumers have an affinity for gold that emanates from various social and cultural factors. Further, the low level of financial inclusion and poor access to financial products and services make gold a safe and attractive investment proposition. Gold loans in India have been largely concentrated in South India, which holds the largest proportion of India's gold portfolio and is typically more open to borrowing against gold as compared to consumers in northern and western regions of India. Demand is further concentrated in rural pockets of India. Rural India is estimated to hold around 65% of total gold stock as this section of the population views gold as a secure and easily accessible savings vehicle along with its consumption purpose. Exhibit 7: Indian consumers’ purchase intentions (%)
Exhibit 8: South India constitutes the largest market (%) 15
Luxury Cosmetics
8
Electronic Items
10
Designer Shoes
40 20
13
Designer Handbags
15
22K Gold Jwellery
63
25 0
10
20
30
40
50
60
70
Source: World Gold Counci Survey, Nirmal Bang Institutional Equities Research
4
South
West
North
East
Source: Working Group Report, Nirmal Bang Institutional Equities Research
Manappuram Finance
Institutional Equities Scope to tap unorganised market The gold loan industry has huge potential to grow from here on as currently it is estimated that less than 2% of the total gold stock in India is used for pledging/obtaining gold loans. In addition to a growing organised gold loan market, there is a large long-standing, unorganised gold loan market which is believed to be up to three times the size of organised gold loan market. Unorganised market is characterised by the presence of numerous pawn-brokers, money-lenders and landlords operating at the local level. These players charge interest rates usually in excess of 30%. Being completely unregulated, customers are vulnerable to exploitation at the hands of money-lenders and pawn-brokers. Organised players have gained market share on the back of better distribution and relatively lower lending rates. We expect organised players to continue to gain market share over unorganised players. Exhibit 9: Huge potential for organised players (%)
Exhibit 10: Handsome growth for organised players (Rsbn) 1,800
24
Organised gold loan (Rs Bn) 1,550
1,600 1,400 1,200 1,000
850
800 540
600 400
76
200
Organised
Un-organised
320 200
0 FY08
Source: IJCMS, Nirmal Bang Institutional Equities Research
FY09
FY10
FY11
FY12
Source: RBI, Nirmal Bang Institutional Equities Research
NBFCs gain market share Although banks continue to retain the dominant share in gold loan market, the share of NBFCs has been steadily increasing over the years. The share of gold loans disbursed by NBFCs in total loans was 13.2% as of end-March 2008, and more than double at 27.7% as of end-March 2012. Exhibit 11: NBFCs gaining share in the organised pie (%) 120
100
13.2
12.2
20.3
80
27.5
27.7
72.5
72.3
FY11
FY12
60
40 20 0
86.8
87.8
FY08
FY09
79.7
FY10 Banks
NBFCs
Source: Working Group Report, Nirmal Bang Institutional Equities Research
5
Manappuram Finance
Institutional Equities Exhibit 12: Competitive advantage of gold loan NBFCs Parameters
Gold loan NBFC
Banks
Moneylenders
LTV
Up to 75%
Lower LTV than NBFC
Higher than 75%
Processing fees
No/minimal
Higher than NBFCs
Nil
Interest charges
18%-24%
12%-15%
36%-60%
Penetration
Higher
Lower
Higher
Mode of disbursal
Cash/cheque
Cheque
Cash
Working hours
Open beyond banking hours
Typical banking hours
Open beyond banking hours
Regulated
Regulated by RBI
Not regulated
Proper branch
No fixed place for conducting business
Customer service
Regulated by Reserve Bank of India (RBI) Proper branch with dedicated staff for gold loans Core focus
Non-core
Core focus
Documentation
Minimal documentation
Entire KYC compliance
Minimal documentation
Repayment structure
Flexible
EMI-based
-
Turnaround time
10 minutes
1-2 hours
10 minutes
Fixed office place
Source: Company, Nirmal Bang Institutional Equities Research
Smaller players exiting business leading to consolidation Stringent regulations and falling gold prices has led to consolidation in the industry and works in favour of large specialised companies. New NBFC entrants into the market were worst-affected by the regulatory uncertainty and their inability to manage asset quality in a scenario of declining gold prices. Some smaller NBFCs like Cholamandalam Investment and Finance Company, Magma Fincorp, Mahindra Finance and Capital First have completely exited from gold loan business. Relatively bigger ones like IIFL and SCUF have started focusing on other businesses like small and medium enterprise or SME financing and home loans. Also, all banks in South India have significantly curtailed their operations in gold loans. Operational expenses are high in gold loan business and companies which have small gold loan books will find it difficult to sustain their business during tough times. This leaves specialised NBFCs and South India-based private banks as the only serious players in retail gold loan market. Specialised gold loan NBFCs have single-minded focus on the gold loan segment and view it as their bread and butter segment. This strong focus has enabled these NBFCs to develop processes and systems tailored for catering to gold loan segment which has small ticket size, requires quick turnaround and demands expertise in a host of operational aspects such as valuation of gold, safeguarding the pledged gold and ability to recover adequate value on gold auctioned to contain any possible credit losses.
6
Manappuram Finance
Institutional Equities Pan-India presence along with a strong distribution network MFL enjoys an extensive pan-India presence through 3,293 branches spread across 23 states and 4 Union territories in India. The company boasts of a strong presence in rural and semi-urban markets as more than 65% of the gold is held in rural India. MFL focuses on a diversified presence across India, and southern region still constitutes 68% of the branch network compared to 76% in FY11. Exhibit 13: Diversified with focus in southern region (%)
Exhibit 14: Widely spread (%)
Region wise Branch Network (%) 6
16
22
11
15 32 68
South
North
West
30
Rural
East
Source: Company, Nirmal Bang Institutional Equities Research
Urban
Semi-Urban
Metro
Source: Company, Nirmal Bang Institutional Equities Research
Incremental diversification into non-southern regions The southern region accounts for the largest share of gold loan market in India. It was also realised that there is potential to expand gold loan market to northern and western regions of India, provided the branch network is expanded and the loans are available easily with flexible options. Such a widespread distribution network proved to be a key enabler for AUM diversification with southern region contributing 65% to total assets against 83% in FY12. Exhibit 15: AUM break-up in FY12 (%) 5
Exhibit 16: AUM break-up in FY16 (%) 8
4
8
12
15
65
83
South
West
North
East
Source: Company, Nirmal Bang Institutional Equities Research
7
South
West
North
East
Source: Company, Nirmal Bang Institutional Equities Research
Manappuram Finance
Institutional Equities Revisiting the growth phase Phase 1 (FY08-FY12) – High growth
CAGR of over 95% in AUM during this period.
Branch network grew 7x.
Higher LTV up to 85%.
Gold prices rose 150% in five years.
Lower cost of funds because of eligibility under priority sector lending.
Supported by buoyant economic growth.
Phase 2 (FY12-FY14) – Growth declines
AUM declined 30%.
RBI removed priority sector tag in March 2012, which led to higher borrowing costs.
RBI capped LTV to 60% in March 2012, which weakened competitive positioning Higher LTVfocused customers moved to moneylenders, whereas interest-sensitive customers moved to banks.
Gold prices fell 23% in two years.
RBI prohibited grant of loans against bullion/ primary gold and gold coins.
RBI prohibited inclusion of making charges in the value of jewellery.
RBI placed limit on banks’ exposure to a single gold NBFC to 7.5% from 10.0% earlier.
Tier I capital requirement was increased to 12% in April 2014.
Phase 3 (FY14-FY16) – Growth rebounds
Gold AUM grew 24%, whereas total AUM rose 39%.
RBI increased the cap on LTV to 75% in September 2013.
RBI capped banks’ LTV also to 75%, creating a level-playing field.
Stable gold prices since then.
Enhanced marketing and branch activation initiatives since January 2014.
Introduced short-term products, effectively de-linking with gold prices.
Re-calibrated LTV with tenure of products.
Introduction of non-gold products.
Operating leverage to kick in. Exhibit 18: Gold prices
FY10
FY11
FY12
FY13
FY14
Source: Company, Nirmal Bang Institutional Equities Research
8
FY15
FY16
Gold Price (Ounce $)
Apr-16
Oct-15
Apr-15
Oct-14
Apr-14
Oct-13
0
Apr-13
FY09
500
Oct-12
FY08
0
1,000
Apr-12
12
1,500
Oct-11
8
Apr-07
20
26
2,000
Apr-11
40
2,500
Oct-10
60
3,000
Apr-10
82
75
80
96
Oct-09
100
100
3,500
Apr-09
114
(Rs grms) 4,000
Oct-08
116
120
(Ounce $) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
Apr-08
(Rsbn) 140
Oct-07
Exhibit 17: AUM movement in phases
Gold Price (Rs grms) (RHS)
Source: Company, Nirmal Bang Institutional Equities Research
Manappuram Finance
Institutional Equities AUM posted a CAGR of 25% with kicker from non-gold portfolio AUM posted a CAGR of 95% over FY08-FY12 backed by rising branch network, higher gold prices and higher LTV. After this, on account of several regulatory restrictions coupled with decline in gold prices, AUM declined 30% over FY12-FY14. Post FY14 with easing regulations creating a level-playing field with banks and stabilisation of gold prices, gold loan portfolio rebounded, posting a 24% growth over FY14-FY16. Also, the management embarked on a strategy of diversifying into microfinance, home loan, commercial vehicle or CV financing and LAP loans. The key segment contributing to overall growth is microfinance which grew 240% in FY16 and now accounts for 12% of overall AUM against only 4% in FY15. Overall AUM posted a 18% CAGR in FY14-FY16. With expected CAGR of 15% in gold loans and higher proportion of fast-growing non-gold portfolio, we expect overall AUM CAGR of 25% over FY16-FY18E. Exhibit 19: Healthy AUM growth (Rsbn) 200
Exhibit 20: Number of customers on the rise (%) 60
54.7
180
50
160
40
140 120
23.6
18.3
16.7
26.0
20
100
10
3.4
80
0
60 40 20 0
(10)
(17.9) 116
FY12
30
100
82
96
FY13 FY14 FY15 Total AUM (Rsbn)
114
141
177
FY16 FY17E AUM Growth (%) (RHS)
(20) (30)
(mn) 3.0
2.6
2.5 2.0 1.5
1.2
1.0
1.2
0.5 0.5
1.8
1.6
1.5
1.5 1.8
1.6
1.5
1.5
0.5
0.0 FY10
FY18E
FY11
FY12
FY13
FY14
No of Customers - Gold
Source: Company, Nirmal Bang Institutional Equities Research
1.9
FY15
FY16
No of Customers - Total
Source: Company, Nirmal Bang Institutional Equities Research
Despite fall in ticket size, gold loan portfolio rebounded Even after easing of regulations on LTV and the rise in gold prices, the management was very careful in increasing loan ticket size. Despite this, its gold loan portfolio grew 24% over FY14. Gold prices have continued to strengthen. Incremental lending is happening at ~Rs2,100 per gram, whereas its current gold loan book is at Rs1,691 per gram. As a result, ticket size is bound to increase and it will support healthy growth in gold loan portfolio. The company has introduced online gold loans for the first time in India, whereby customers have to deposit gold in MFL lockers and can avail a gold loan any time and any where in the world. This initiative should help in revival of gold loan portfolio. Exhibit 21: Ticket size set to increase
Exhibit 22: Gold holdings rebounded sharply
(Rs) 45,000 40,000
(Rs) 2,000
38,582
35,000
37,462 1,933
1,950 31,681
30,446
32,463
30,000
1,850
25,000 20,000 15,000
1,900
1,790
1,759
1,737
5,000 0 FY12
FY13 Ticket Size
FY14
FY15 FY16 Loan per gram (RHS)
Source: Company, Nirmal Bang Institutional Equities Research
9
60
40 30
53
51 46
50
1,750 1,650
66
60
1,800 1,700 1,691
10,000
(Tonnes) 70
20
1,600
10
1,550
0 FY12
FY13
FY14 Gold Holding
FY15
FY16
Source: Company, Nirmal Bang Institutional Equities Research
Manappuram Finance
Institutional Equities Non-gold portfolio to be growth driver The non-gold portfolio constitutes 12% of AUM against 4% last year. In line with the management’s guidance, we expect non-gold portfolio to increase to 25% of total AUM in FY18E. We expect non-gold loans to grow 81% CAGR on an insignificant base with major contribution coming from microfinance. Gold loans along with microfinance will constitute 92% of total AUM in FY18E. Exhibit 23: Non-gold loans to drive AUM growth (%) 100
8.7
90
12.4
17.2
80 70 60 50 40 30 20 10 0
99.0
99.0
98.9
95.9
88.2
82.0
74.9
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
Gold
MFI
Home
CV
Mortgage/LAP
Others
Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 24: Product offerings AUM (Rsbn) FY16
% of AUM
Average ticket size (Rs lakhs)
Average Yield (%)
No of states covered
Branches
Just above bottom of pyramid
100.8
88.6
0.3
24
23
3,293
MFI
Bottom of pyramid
10.0
8.7
0.2
24
13
346
Housing
Affordable housing to low & mid-income bracket
1.3
1.1
14.8
14
4
24
CV
First-time buyers having prior driving experience
1.3
1.1
6.2
18
8
36
LAP
SME
0.4
0.4
25.0
14
-
-
Loan segment
Target audience
Gold
Source: Company, Nirmal Bang Institutional Equities Research
10
Manappuram Finance
Institutional Equities Microfinance
Acquired a majority stake (85%) in Asirvad Microfinance Private Limited, one of the leading microfinance institutions in Tamil Nadu, in February 2015.
Eight-year old NBFC–MFI with operations in Tamil Nadu, Kerala and Karnataka prior to acquisition.
Credit rating Improved from BBB-to A- post acquisition.
Expansion in another eight states, viz; Madhya Pradesh, Chhattisgarh, Punjab, Haryana, Chandigarh, Uttar Pradesh, Bihar and Jharkhand post acquisition by leveraging on MFL’s network. New states contribute 22% to total AUM.
AUM rises to Rs10.0bn in FY16 against Rs3.2bn in FY15.
Branch network expands to 346 in FY16 against 141 in FY15.
Active customers increase to 6,20,000 in FY16 against 2,77,000 in FY15.
RoA of 3.9% in FY16, the same as in FY15.
Exhibit 25: Asirvad Microfinance Financial Summary FY09
FY10
FY11
FY12
FY13
FY14
FY15
GLP (Rsmn)
151
624
1,011
793
1,025
1,888
3,220
Growth (%)
420.7
313.2
62.0
(21.6)
29.3
84.2
70.6
PAT (Rsmn)
5
30
36
13
21
47
104
Growth (%)
900.0
500.0
20.0
(63.9)
61.5
123.8
121.3
48
126
219
173
113
211
277
Growth (%)
700.0
162.5
73.8
(21.0)
(34.7)
86.7
31.3
Ticket size (Rs)
3,146
4,952
4,616
4,584
9,071
8,948
11,625
Cost-to-AUM (%)
18.2
11.9
12.7
13.4
10.8
7.5
7.1
RoA (%)
4.9
7.6
4.3
1.5
2.5
3.0
3.9
RoE (%)
11.6
28.7
18.7
5.1
8.2
16.0
20.4
PAR > 30 days (%)
0.00
0.00
0.02
0.63
0.00
0.02
0.03
PAR > 90 days (%)
0.00
0.00
0.07
0.01
0.00
0.01
0.01
Credit costs (%)
0.58
0.57
0.94
1.64
0.24
0.54
0.62
19
49
85
78
64
94
141
130
327
531
416
280
351
553
90
235
365
266
145
185
315
Active clients ('000)
Branches Employees Loan officers
Source: Company, Nirmal Bang Institutional Equities Research
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Manappuram Finance
Institutional Equities Exhibit 26: RBI regulations for microfinance institutions Qualification for MFIs Microfinance loans/total assets
>85%
Loan for income-generating purpose *
>50%
Annual income of household*
15% ACCUMULATE -5% to15% SELL < -5% This report is published by Nirmal Bang’s Institutional Equities Research desk. Nirmal Bang group has other business units with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. Reports based on technical and derivative analysis may not match with reports based on a company's fundamental analysis. This report is for the personal information of the authorised recipient and is not for public distribution. This should not be reproduced or redistributed to any other person or in any form. This report is for the general information for the clients of Nirmal Bang Equities Pvt. Ltd., a division of Nirmal Bang, and should not be construed as an offer or solicitation of an offer to buy/sell any securities. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. Nirmal Bang or any persons connected with it do not accept any liability arising from the use of this document or the information contained therein. The recipients of this material should rely on their own judgment and take their own professional advice before acting on this information. Nirmal Bang or any of its connected persons including its directors or subsidiaries or associates or employees or agents shall not be in any way responsible for any loss or damage that may arise to any person/s from any inadvertent error in the information contained, views and opinions expressed in this publication. Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited. NBEPL has registered with SEBI as a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014. (Registration No: INH000001436 19.08.2015 to 18.08.2020). NBEPL or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst. NBEPL or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. NBEPL /analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market-making activity of the company covered by Analyst. The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.
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Manappuram Finance