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ICICI Securities Report
Muthoot Finance Ltd. and Manappuram Finance Ltd. started diversifying into other lending segments since FY14-FY15 due to regulatory intervention in the gold finance business and to effectively deploy excess capital.
Subsidiaries’ contribution to FY22 assets under management/pre-provision operating profit/profit after tax for Manappuram is 26%/19%/2% respectively, whereas it is 10%/~5%/1% for Muthoot.
Despite show of promise in FY19-FY20, especially in the micro finance institution business, the subsidiaries have not been able to show a right balance between growth, opex and credit cost since Covid. This has led to subdued return ratios, which are less than the cost of funds as also evidenced in the difference between consolidated and standalone return on equities.
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