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.
(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.
(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%.
(D) Number of Branches
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
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.
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(G) Sales and PAT Growth %
(H) Key Performance Indicators
(I) Strengths
Muthoot Finance Strengths
- 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.
- 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.
- 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.
- 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.
- 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.
Manappuram Finance Strengths
- 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.
- Experienced promoters and management team.
- Good asset quality though witnessed moderation in FY21 on account of impact of COVID-19.
- 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
- Geographical Concentration - As major presence in South India
- Increasing competition from banks in gold loan business
- Asset quality challenges associated with non-gold loan segments
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References: Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications.
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