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Muthoot, Manappuram Finance - Signs Of Yield Improvement: ICICI Securities

Muthoot, Manappuram Finance - Signs Of Yield Improvement: ICICI Securities

<div class="paragraphs"><p>A gold bangle is place below a pen. (Source: pxhere)</p></div>
A gold bangle is place below a pen. (Source: pxhere)

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ICICI Securities Report

High informal share (~more than 60%) in the industry and expected growth outlook inline with the economy, keep the long-term growth prospects intact for gold loan industry.

Inherent strength of branch network and established brands provide strength to incumbents. However, intense competition (especially in H2 FY22) has led to lower yields and declining return on equities.

The change in profitability outlook has led to lower valuation multiples. As a result, current one-year forward price/book multiple for Muthoot Finance Ltd./ Manappuram Finance Ltd. have declined to 1.8 times/0.7 times respectively (versus five-year and 10-year average of 2.2 times/1.7 times and 1.8 times/1.4 times, respectively).

Our channel checks indicate some systemic improvement in yields for gold loan players and also some signs of stress for new competitors. Rising interest rates and improvement in competitive intensity can improve profits ahead.

Click on the attachment to read the full report:

ICICI Securities Gold_Loan Update.pdf

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