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ICICI Securities Report
Muthoot Finance Ltd. and Manappuram Finance Ltd. witnessed sharp decline in their standalone yields (2.2%-4.6%) and return on equities (4.2%-10%) in FY22 over FY21 due to introduction of teaser (lower) rate schemes.
While such schemes have since been discontinued, a review of their history tells us that this was not the first time players resorted to such strategy to pull customers.
Muthoot Finance had offered teaser rate schemes in FY15/FY16. Yet, then as well as in FY22, the results were suboptimal as there was no meaningful volume growth to offset the decline in yields.
Yet, there were key differences in the teaser rate rationale and method of deployment between these two periods.
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