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Manappuram Finance Q3 Results Review - Microfinance Offsets Weaker Performance In Gold Loan: Systematix

Asset quality in gold loan continued to improve

<div class="paragraphs"><p>Gold jewellery. (Photo: Mariyam /Source: BQ Prime)</p></div>
Gold jewellery. (Photo: Mariyam /Source: BQ Prime)

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Systematix Research Report

Manappuram Finance Ltd.’s Q3 FY23 operating performance was in line with expectation, with net income/operating profit at Rs 3.9 billion/5.9 billion.

Though there was a decline in the gold loan portfolio (down 9% YoY, down 3% QoQ), it was compensated by a stronger growth in the non-gold loan portfolio (up 33% YoY, up 16% QoQ), driving 4%QoQ growth in consolidated assets under management.

Micro finance business business (25% of the AUM) contributed meaningfully with AUM growth at up 18% YoY (up 13% QoQ), improved asset quality (6.7% versus 8.8% in 2QFY23) and improved profitability (Rs. 706 million versus 566 million in Q2 FY23).

Asset quality in gold loan continued to improve with gross / net stage-III at 1.6%/1.4% from 2.0%/1.8% and credit cost also reduced by 30bps to 0.7%.

We estimate a 13% compound annual growth rate in Manappuram Finance’s AUM to deliver a 17% CAGR in earnings over FY22-FY25E.

With optimal product mix along with improving asset quality and expansion in the MFI business, Manappuram Finance should be able to improve their return on asset/return on equity to 4.6%/17.7% by FY25E from 4.1%/16.9% in FY22, respectively.

Click on the attachment to read the full report:

Systematix Manappuram Finance - Q3FY23 Results Review.pdf
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