Manappuram Finance – Buy the Shares at Rs.41 for Good Gains

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Manappuram Finance

Good Q1 results

Manappuram Finance has produced good Q1 results compared to Q4 results. Its revenue has increased from Rs.329.63 crore to Rs.492.90 crore. Net profit has increased from Rs.74.53 crore to Rs.107.83 crore. Operating profit margin increased handsomely from 64.39% to 70.10%. Net profit margin, however, decreased marginally from 22.61% to 21.88%. The shares of Manappuram Finance are traded in the stock markets at Rs.52 now. In November 2010, the share price was at a high of Rs.95.

NCD issue

In order to reduce its dependence on bank loans, the company has come out with an issue of Non Convertible Debentures (NCDs) amounting to Rs.400 crore with an option to retain oversubscription upto Rs.350 crore. The coupon rate is 12%. The maturity period is 400 days. The face value of the NCD is Rs.1000. Manappuram Finance’s gold loan assets amount to Rs.9000 crore. The company has set a target of reaching the figure of Rs.12500 crore this fiscal. I. Unnikrishnan is the Managing Director of the company. The company is a Kerala based Non Banking Finance Company and is in the operation of lending money against pledge of gold jewellery. The company has a paid up equity capital of Rs.160 crore. In 2010-11, Manappuram Finance disbursed gold loans amounting to Rs.18000 crore. It plans to raise this figure to Rs.30000 crore this financial year.

More branches in the offing

Manappuram Finance has gold holding of 62 tonnes. Gold loan market is a Rs.70000 crore industry in India. The market share of Manappuram Finance is 13%, offering it more potential to grow. Nearly 90% of the company’s operations are in South India. 30% of the company’s equity is held by private equity investors and foreign institutional investors (FIIs). The company has 2200 branches now in 22 States in India. Another 200-300 branches will be added this year.

India, the largest consumer of gold

India is the largest consumer of gold in the world. Indian women’s appetite for gold is unquenched. Indian households have roughly 18000 tonnes of gold. Only 10% of this huge stock of gold has been pledged with banks and finance companies like Manappuram Finance. There is a huge potential for growth in gold loans in India. In terms of value, gold loans account for only 1.2% of the value of total gold stock in India. Manappuram Finance has plans to enter travel and tourism related business shortly.

Buy the shares at around Rs.41 for good gains

The company’s shares touched the lowest value of Rs.41 in the last 12 months’ period. Now they are trading at Rs.52. As the stock markets are in declining trend, investors should wait and see whether the shares of Manappuram Finance again touch its lowest price of Rs.41 in the last one year. If so, that will be the time to buy the shares of the company for medium term investment for decent gains. Short term profits are also not ruled out.

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