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Axis Securities: Non Gold Segment Weighs On Overall Performance Of Manappuram Finance

Axis Securities: Non Gold Segment Weighs On Overall Performance Of Manappuram Finance

An agent weighs a gold necklace on a digital scale during the processing of a customer’s gold loan application in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
An agent weighs a gold necklace on a digital scale during the processing of a customer’s gold loan application in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Manappuram Finance Ltd.’s Q1 FY21 performance was impacted by asset quality impairment in the non-gold business.

Consolidated asset under management growth came in at 25.6% YoY and 0.5% QoQ led by 33% and 5% growth respectively in the gold loan business.

Growth in vehichle finance, micro finance institution and housing finance declined sequentially by 6%, 8% and 0.4% respectively.

Growth in the gold loan business was mainly driven by a higher ticket size (up 30.3% YoY and 10.6% QoQ). Tonnage volume fell by 4.7% QoQ (up approximately 1% YoY).

We expect once the lockdown eases, demand should pick up, resulting in better volume growth for the company.

Loan to value on the gold loan portfolio stands at approximately 57%, providing comfortable margin of safety against gold price correction.

Opex declined 12% YoY and 18% QoQ leading opex to AUM improvement to 4.9% from 7% QoQ. Provisioning was higher than expected at Rs 145 crore (Covid provisions at Rs 130 crore).

Asset impairments in non-gold businesses inched up with vehicle finance non-performing assets at 9.9%, home finance at 5% and MFI at 2%. Nearly the entire increase in vehicle finance NPAs came from revoking the moratorium on the entire book.

Overall gross non-performing asset came at 1.3% from 0.9% a quarter ago. Cost of borrowing fell by 10 basis points QoQ to 9.4%.

Profit after tax was up 38% YoY and down 8% QoQ. Balance sheet liquidity remains comfortable with no funding challenges.

Click on the attachment to read the full report:

Axis Securities ManappuramFinance Q1FY21 Result Update.pdf

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