 "Muthoot Finance at new high on strong Q2 show; Manappuram also shines")
Shares of gold loan financiers Manappuram Finance and Muthoot Finance hit their respective record highs and rallied up to 10 per cent on the BSE in Monday’s intra-day trade after Muthoot Finance reported a strong growth in gold loan for the quarter ended September 2021 (Q2FY22).
Muthoot Finance hit a record high of Rs 1,683, surging 10 per cent after gold loan finance major posted a 8 per cent jump in consolidated net profit at Rs 1,003 crore in Q2FY22 compared to Rs 931 crore in Q2FY21, owing to an improved performance on gold loans. The stock surpassed its previous high of Rs 1,638.50 touched on August 4, 2021.
The company’s total income rose by 9 per cent to Rs 3,065 crore during the quarter under review, up from Rs 2,824 crore during the second quarter of 2020-21. Compared to last year, the company’s gross loan assets grew by 17 per cent to Rs 60,919 crore during the quarter as against Rs 52,286 crore in the year-ago period.
The company’s gold loan division posted an increase in net profit by 11 per cent, at Rs 994 crore for Q2FY22 as against Rs 894 crore for Q2FY21. Interestingly, gold loan assets stood at Rs 55,147 crore as compared to Rs 47,016 crore in the previous year, posting a growth of 17 per cent. During the quarter, gold loan assets increased by Rs 2,613 crore, an increase of 5 per cent over the previous year quarter.
The management said, the demand environment remains strong and as in the festive season the company remains optimistic about growth momentum in gold loan over the second half of FY22. “We are optimistic about growing our gold loan book further and maintain 15 per cent growth guidance for FY22. We are witnessing improved collections across micro finance, vehicle finance and home loans,” the management said.
Despite higher-than-estimated provisions, lower-than-estimated interest expenses (driven by lower CoB) and lower opex led to an in-line performance. Average monthly disbursements of Rs 8,500 crore in Q2FY22 against Rs 7,700 crore in Q4FY21 suggest either gold loan demand has remained muted or aggressive pricing from non-banking finance company (NBFC) peers in high-ticket size gold loans has led to select customers migrating from Muthoot to peers, Motilal Oswal Securities said in result update.
Although Muthoot has reported deterioration in asset quality over the past two quarters, this does not pose significant concerns. Muthoot has, until now, avoided the aggressive auctioning of gold. This, we believe, is driven by Muthoot’s inherent philosophy of giving its customers time to repay their loans rather than rushing to auction their gold. Gold prices have remained broadly stable for the last two quarters, but the risk from customers (who would have borrowed at the peak of gold prices in August 2020) defaulting persists. Customer attrition to competition and gold loan demand would be key monitorables, the brokerage firm said.
Meanwhile, the stock of Manappuram Finance too hit a record high of Rs 219.55, up 5.5 per cent, surpassing its previous high of Rs 218 touched on July 30, 2021. The company will announce its Q2 results and interim dividend on Saturday, November 13, 2021.
Last month, the international credit rating agency S&P Global Ratings had upgraded the outlook of Manappuram Finance to stable and affirmed the 'BB-/B' ratings. “We upgraded Manappuram because we expect the company to continue to perform better than its NBFC peers over the next 12 months. This would be reflected in the company's lower credit costs, above-average profitability, and strong capitalization,” S&P Global Ratings said in rationale.
Stress will likely remain high in Manappuram's non-gold portfolio, especially in the micro finance business. The asset quality of the non-gold loan portfolio has deteriorated sharply over the past two years. However, billing and collection efficiency are increasing back to close to pre-COVID-19 levels, hinting at improving asset quality trends. Also, the company has pre-provisioned for the micro finance business. Therefore, we believe any residual impact can be largely absorbed by the company's earnings, the rating agency said. CLICK HERE FOR FULL RELEASE
Muthoot Finance hit a record high of Rs 1,683, surging 10 per cent after gold loan finance major posted a 8 per cent jump in consolidated net profit at Rs 1,003 crore in Q2FY22 compared to Rs 931 crore in Q2FY21, owing to an improved performance on gold loans. The stock surpassed its previous high of Rs 1,638.50 touched on August 4, 2021.
The company’s total income rose by 9 per cent to Rs 3,065 crore during the quarter under review, up from Rs 2,824 crore during the second quarter of 2020-21. Compared to last year, the company’s gross loan assets grew by 17 per cent to Rs 60,919 crore during the quarter as against Rs 52,286 crore in the year-ago period.
The company’s gold loan division posted an increase in net profit by 11 per cent, at Rs 994 crore for Q2FY22 as against Rs 894 crore for Q2FY21. Interestingly, gold loan assets stood at Rs 55,147 crore as compared to Rs 47,016 crore in the previous year, posting a growth of 17 per cent. During the quarter, gold loan assets increased by Rs 2,613 crore, an increase of 5 per cent over the previous year quarter.
The management said, the demand environment remains strong and as in the festive season the company remains optimistic about growth momentum in gold loan over the second half of FY22. “We are optimistic about growing our gold loan book further and maintain 15 per cent growth guidance for FY22. We are witnessing improved collections across micro finance, vehicle finance and home loans,” the management said.
Despite higher-than-estimated provisions, lower-than-estimated interest expenses (driven by lower CoB) and lower opex led to an in-line performance. Average monthly disbursements of Rs 8,500 crore in Q2FY22 against Rs 7,700 crore in Q4FY21 suggest either gold loan demand has remained muted or aggressive pricing from non-banking finance company (NBFC) peers in high-ticket size gold loans has led to select customers migrating from Muthoot to peers, Motilal Oswal Securities said in result update.
Although Muthoot has reported deterioration in asset quality over the past two quarters, this does not pose significant concerns. Muthoot has, until now, avoided the aggressive auctioning of gold. This, we believe, is driven by Muthoot’s inherent philosophy of giving its customers time to repay their loans rather than rushing to auction their gold. Gold prices have remained broadly stable for the last two quarters, but the risk from customers (who would have borrowed at the peak of gold prices in August 2020) defaulting persists. Customer attrition to competition and gold loan demand would be key monitorables, the brokerage firm said.
Meanwhile, the stock of Manappuram Finance too hit a record high of Rs 219.55, up 5.5 per cent, surpassing its previous high of Rs 218 touched on July 30, 2021. The company will announce its Q2 results and interim dividend on Saturday, November 13, 2021.
Last month, the international credit rating agency S&P Global Ratings had upgraded the outlook of Manappuram Finance to stable and affirmed the 'BB-/B' ratings. “We upgraded Manappuram because we expect the company to continue to perform better than its NBFC peers over the next 12 months. This would be reflected in the company's lower credit costs, above-average profitability, and strong capitalization,” S&P Global Ratings said in rationale.
Stress will likely remain high in Manappuram's non-gold portfolio, especially in the micro finance business. The asset quality of the non-gold loan portfolio has deteriorated sharply over the past two years. However, billing and collection efficiency are increasing back to close to pre-COVID-19 levels, hinting at improving asset quality trends. Also, the company has pre-provisioned for the micro finance business. Therefore, we believe any residual impact can be largely absorbed by the company's earnings, the rating agency said. CLICK HERE FOR FULL RELEASE
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