Muthoot, Manappuram Finance Unlikely To Do Co-Lending; May Revert To High-Yield Segments: ICICI Securities

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .ICICI Securities Report.In our view, Muthoot Finance Ltd.’s and Manappuram Finance Ltd.’s businesses are likely to continue with own-book lending (against co-lending practices started by some peers) and prefer the high yield/low ticket size buckets compared to low yields as seen in FY22. This is irrespective of demand recovery or improvement in competitive intensity. We present comparative arguments for these strategies below. In FY22, there was not only higher competition but also lower demand for gold loan in low ticket size segment (this was underappreciated). This resulted in Muthoot, Manappuram to make changes in yields and ticket sizes in terms of target segments. For example, Muthoot, Manappuram’s yield to assets under management declined to 19.5%/21% in FY22 from 21.7%/25.6% in FY21, respectively. Expect opex ratio to moderate. This is especially applicable for Manappuram as its ‘opex to AUM’ ratio jumped to 6.3% in FY22 from 5.4% in FY21. Covid made gold loan space extremely competitive as it was looked as a relatively safer asset class. Hence, to compete, Manappuram hired more employees, increased salaries to incentivise employees and spent on advertisement etc. .Click on the attachment to read the full report:.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Muthoot, Manappuram Finance Unlikely To Do Co-Lending; May Revert To High-Yield Segments: ICICI Securities

High (own) balance sheet cash and lower leverage in Muthoot Finance and Manappuram Finance limit them to do co-lending.

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