Manappuram Finance Limited
Manappuram Finance Limited

As wedding season goes in full swing, families in India are making a beeline for gold shopping. A couple of days ago, gold prices dipped by Rs 150 and fell from Rs 26000 to Rs 25,850 per ten gram at the bullion market.

This has further boosted the spirit of consumers, and gold jewellery shopping will continue to see ‘Achchhe Din’. But what about investors who want to invest in bullion market? Silver too has seen downward trend in price as the metal’s new price is Rs 33,700 per kg, reduced by Rs 150.

In this scenario, traditional bullion investors can shift their focus to one company that is performing better. Manappuram is one of the leading money-lending companies active in India for the last many decades. Manappuram started its journey way back in 1949 in Valapad, Kerala; it was established by V.C. Padmanabhan.

Over the years, Manappuram made tremendous progress; by 2015, the company has reached length and breadth of India with around 3,300 branches across 26 states. However, Manappuram faced tough times in 2012, when RBI introduced some stricter guidelines for companies who offer loan against gold. This move was to support other sectors also.

Due to change in policies, Manappuram’s profit decreased from Rs 590 crores in 2012 to Rs 225 crores in 2013. But under the dynamic leadership of V P Nandkumar, who is now CEO of Manappuram, company registered growth despite the troubled times. In fact, Nandkumar converted challenge into opportunity. The company took over two companies; one deals in Micro Finance and other in Housing Finance. Manappuram also started vehicle finance venture of its own.

This master stroke fetched good results as the company is generating revenue of Rs 114 crores and profit of Rs 16 crores from non-gold financial instruments per year. By 2020, company has plans to generate 50% revenue from non-gold finances. Its current revenue from gold loan is Rs 1900 crores.

About Manappuram’s stock, it is undervalued. The stock price is Rs 28.80 (on December 18, 2015); this price is lower than its book value of Rs 32. Money lending companies of some repute should be traded at 3-5 times of its book value.

Take a look at statistics that explain company’s strong performance in past and opportunity we discussed above.

For the Fiscal Period Ending   12 months
Mar-31-2011
12 months
Mar-31-2012
12 months
Mar-31-2013
12 months
Mar-31-2014
12 months
Mar-31-2015
Currency – INR            
Total Revenue Million 11654.2 26155.48 22595.92 21004.28 19757.33
Net Profit Million 2826.64 5914.61 2084.32 2260.11 2707.32
Book Value 23 28.31 29.04 29.62 31.23
Stock Price (as on April) 65 35 17 20 33

Once non-gold revenue will contribute significantly, then it should be traded at least 3 times of its book value. So it is a good stock for both short term and long term investment.

If you are looking for other investment opportunities, Hindustan Tin Works is also a good option for you.

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Jayesh is a writer by design. Alphabets create same impact on him as cheese would create on Jerry the Mouse. His romance with words dates back to the twilight years of 20th century when he lost his heart to Miss British Lingo. He loves to write on Digital Marketing, Advertising, Branding, Language, and Entertainment.