Manappuram Finance stock zooms 9% to hit 52-week high; up 66% in a year

The anticipated cut in interest rates and geopolitical tensions will act as tailwinds for the gold rates, while the rapid conversion to organised business will keep the demand for gold loans robust, said Manappuram Finance MD and CEO V.P. Nandakumar, recently.

Shares of Manappuram Finance soared around nine percent on June 27 to hit a 52-week high of Rs 214 on the National Stock Exchange. It was the top gainer in the small-cap index intraday.

The anticipated cut in interest rates and geopolitical tensions will act as tailwinds for the gold rates, while rapid conversion to organised business will keep the demand for gold loans robust, said company MD and CEO V.P. Nandakumar, recently.

High gold prices foster gold loan business as customers can avail themselves of loans by pledging lower volumes of gold, he added.

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Earlier this month, Nandakumar told CNBC-TV18 that demand for gold loans has surged this year, driven by middle-income groups requiring funds post-Covid.

"Our average ticket size is around Rs 70,000-75,000 and the average life of the loan is for three months. The customers are mostly from the upper middle class and lower middle class, their requirement for money is the catalyst for our growth," he said.

He also discussed the planned IPO of Asirvad Microfinance, a non-banking microfinance subsidiary of Manappuram Finance. The draft red herring prospectus (DHRP) has been filed and the launch is expected in the next 2-3 months.

Motilal Oswal is bullish on Manappuram Finance and has a 'buy' rating on the stock with a target price of Rs 225.

According to the brokerage, an increase in the cost of borrowings because of the increase in risk weights on bank term loans to NBFCs could lead to a NIM compression for Manappuram Finance since there is not much room to increase the yields either in gold loans or non-gold products.

"We believe that there is scope for a re-rating in valuation multiples for a franchise that can deliver a sustainable return on equity RoE of ~19-20 percent," Motilal Oswal said in a May report.

"For a stronger re-rating in the valuation multiples based on business fundamentals, MGFL will have to consistently demonstrate healthy gold loan growth without the associated trade-offs with margins/spreads," it added.

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At 2:29 pm, Manappuram Finance shares were trading 7.2 percent higher at Rs 210.50 on NSE. The stock has grown significantly over the past few months, gaining over 66 percent in the last on year compared to 27 percent rise seen in benchmark Nifty 50.

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