Manappuram Finance Ltd Q2FY20 Result Update – Strong overall results in terms of AUM growth, operating efficiencies and PAT

06 Nov
Gold

Manappuram Finance Ltd Q2FY20 Result Update – Strong overall results in terms of AUM growth, operating efficiencies and PAT

Manappuram Finance Ltd Q2FY20 Result Update – Strong overall results in terms of AUM growth, operating efficiencies and PAT

Hits:­­

  • Manappuram reported strong set of result with AUM growth at 32% YoY, one of the highest in last 10 quarters to INR 22,677cr. The company reported significant growth in its overall book with gold loan growth at 20% YoY to INR 15,168cr while other loans increasing at 63% YoY to INR 7,509cr.
  • The gold loan growth was supported by 7% YoY growth in tonnage and high gold prices. Management expects 10-12% YoY  tonnage growth for FY20.
  • Microfinance / Housing Finance / Vehicle / Other loans saw healthy growth at 73% / 27% / 61% / 49% YoY respectively. The overall non gold loans now contributes 33% of the total loans.
  • Net revenue increased by 28% YoY to INR 909cr on back of more than 6 times growth in other income. Other income includes  one-time tax refund to the tune of INR 50cr as a consequence other income growth was high.
  • Cost to Income (C/I) ratio improved significantly by 825bps to 40.2% resulting in 48% YoY growth in operating profits. Operating profits during the quarter came in at INR 544cr.
  • Credit cost during the quarter improved by 21bps QoQ to 0.59%, however it increased 17bps YoY resulting in 49% YoY growth in PBT to 544cr.
  • Company paid lower tax this quarter at 21% as compared to 36% in Q2FY19 as a consequence of this PAT registered growth of 82% YoY to INR 404cr.
  • Manappuram reported marginal improvement in asset quality with GNPA / NNPA at 0.6% / 0.5% decreased by 10bps each QoQ respectively.

Miss

  • Manappuram’s cost of funds (calc.) increased by 29bps YoY while Yield on advances (calc.) decreased by 128bps YoY resulting in overall NIM compression of 159bps YoY to 16.4%.
  • Compression in NIM led to lower growth in NII at 18% YoY to INR 820cr

House View

·         We believe, Manappuram have reported strong set of numbers with respect to healthy overall AUM growth, improvement in C/I ratio, improvement in credit cost and asset quality on QoQ basis.

·         Overall other loans now contribute 33% of the total AUM and management reiterated that this segment to go up-to 50% of the total loans.

Valuation

  • At CMP of INR 168, the stock is trading at 2.4x FY21ABV
INR cr  Q2FY20  Q2FY19  % change  Q1FY20  % change
Interest income 1,244 1,014 22.7% 1,144 8.8%
Interest expenses 425 317 33.9% 380 11.8%
Net interest income 820 697 17.6% 764 7.3%
Other Income 90 13 585.1% 41 120.1%
Net revenue 909 710 28.0% 805 13.0%
Operating expenses 365 344 6.2% 354 3.3%
Operating Profit 544 366 48.5% 451 20.6%
Provisions 29 16 80.9% 37 -19.7%
PBT 514 350 47.0% 414 24.1%
Tax 107 126 -15.2% 142 -24.9%
PAT 408 224 82.0% 272 49.7%
Equity capital 84 84 0.1% 84 0.0%
Adj. EPS (INR) 9.7 5.3 81.8% 6.5 49.7%
Ratios (Calculated)  Q2FY20  Q2FY19  % change  Q1FY20  % change
C/I Ratio 40.2 48.4 -825 bps 44.0 -377 bps
Yield on advances 25.0 26.3 -128 bps 24.9 11 bps
Cost of funds 10.4 10.1 29 bps 10.3 12 bps
Spread 14.6 16.2 -157 bps 14.6 -1 bps
NIM 16.4 18.0 -159 bps 16.6 -16 bps
Balance Sheet  Q2FY20  Q2FY19  % change  Q1FY20  % change
AUM 22,677 17,191 31.9% 20,186 12.3%
Borrowings 18,346 14,392 27.5% 16,166 13.5%
Asset Quality  Q2FY20  Q2FY19  % change  Q1FY20  % change
GNPA (%) 0.6 0.7 -10 bps 0.7 -10 bps
NNPA (%) 0.3 0.2 10 bps 0.4 -10 bps
Provision Coverage Ratio 50.0 71.4 -2,143 bps 42.9 714 bps
AUM Break up (INR Crs)  Q2FY20  Q2FY19  % change  Q1FY20  % change
Gold 15,168 12,593 20.5% 13,292 14.1%
Microfinance 4,724 2,729 73.1% 4,198 12.5%
Housing 568 448 26.9% 542 4.9%
Vehicle finance 1,318 817 61.3% 1,227 7.4%
Other 899 604 48.8% 926 -3.0%
Total 22,677 17,191 31.9% 20,186 12.3%

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