Presentation on Manappuram Finance as an Investment opportunity at TIA 2018.

1. TIA 20-20 Ideas Summit
- Ekansh Mittal
Mittal Consulting www.katalystwealth.com

2. About me
Ekansh Mittal
– Founder Katalyst Wealth
(www.katalystwealth.com)
– Registered with SEBI as Research Analyst
– Featured in Forbes and ET
Mittal Consulting www.katalystwealth.com

3. PE Ratio – 8.65 P/B Ratio – 1.56 Dividend Yield – 2.80%
Pledged shares – 4.56% Promoter Holding – 35.14% Chg. in Promoter holding – 2.83%
Mittal Consulting www.katalystwealth.com
Important numbers

4. Two important questions during downturns?
• Can the business survive?
• If it can survive, can it grow?
Mittal Consulting www.katalystwealth.com

5. – 2nd Largest gold loan NBFC in India
– Since FY 15 diversifying into other products like Microfinance, Home Loan, Commercial
vehicle finance, etc
– 74-75% AUM from Gold loan, 25% from new segments
Mittal Consulting www.katalystwealth.com
Business details

6. – 2nd Largest gold loan NBFC in India
– Diversifying into other products like Microfinance, Home Loan, Commercial vehicle finance,
etc
– Mostly secured lending
Mittal Consulting www.katalystwealth.com
De-risked gold loan lending
– Lower tenure gold loans against the previous policy of only 12 months product
– Lower LTV for higher tenures; Higher margin of safety

7. – Proof is in the pudding
– Significant reduction in auction losses with some gains in FY 18 (the company doesn’t
hold back the gains as it gives back the amount to customers)
Mittal Consulting www.katalystwealth.com
Auction details

8. – Unlike HFCs, there’s not much mismatch in asset and liabilities
– Short term nature of loans will help the company pass on increased cost of funds
Mittal Consulting www.katalystwealth.com
Asset-liability mismatch

9. – Reduce dependence on gold loan business
– Capitalise on its proven operational capability to process large volume, small ticket
transactions with semi-urban and rural customers
– Leverage the Strong Brand Equity, Existing Retail Customer Base and wide branch network
– Utilize surplus capital to build new products relevant to the existing customer base
– Low gearing levels and high capital adequacy leaving ample scope for increase in leverage
Mittal Consulting www.katalystwealth.com
Why new lending products?

10. – New lending products like Microfinance, home finance, commercial vehicle finance, etc driving the
AUM growth
– Gold loan AUM growth slow in FY 18 on account of the impact of demonetization, GST, etc
– However growth in gold loans is coming back with QOQ growth since last 2-3 quarters and 16% YOY
growth in Q1 FY 19
– Management is hopeful of sustaining around 15% growth in Gold loan AUM in the years ahead
– Blended growth in AUM could be around 20%
Mittal Consulting www.katalystwealth.com
New lending products – Driving growth

11. – With the impact of demonetization and GST behind, management is hopeful of double digit growth
in gold loan business
– Informal sector still accounts for 60-70% of gold loan market
– Even within organized gold loan market, PSU banks and Co-operatives together account for 50%
– Rural economy is picking pace
Mittal Consulting www.katalystwealth.com
Growth drivers for gold loan

12. – Security charges increased by more than 100 crore in FY 18 from average value of around 50-60
crore
– Management expects the same to again go down to around 60-80 crore in FY 19 with
implementation of technology to reduce theft and misplacement
– Provisions likely to go down with microfinance business returning to normalcy
Mittal Consulting www.katalystwealth.com
Operating levers

13. – Since the beginning of Jul’18, Promoter and Director, Mr. Nandakumar has bought shares
worth Rs 38 crore including purchase of shares worth Rs 26 crore in the month of Sep’18
itself.
– During FY 17 the promoters increased stake by 1%
Insider buying
Mittal Consulting www.katalystwealth.com

14. Holding of other directors – Skin in the game
www.katalystwealth.comMittal Consulting

15. • 8.65 times TTM earnings
• 1.56 times Book value
• Dividend yield of ~3%
Reasonable Valuations
Mittal Consulting www.katalystwealth.com

16. • Impact of Kerala Floods
• Margin contraction in the near term
• Regulatory changes
• Increasing proportion of unsecured lending
www.katalystwealth.comMittal Consulting
Risks/Concerns

17. Not an Investment advice
I own the stock in personal portfolio and have recommended it to clients as well
www.katalystwealth.com (here in referred to as Katalyst Wealth) is the domain owned by Ekansh Mittal.
Mr. Ekansh Mittal is the sole proprietor of Mittal Consulting and offers independent equity research
services to retail clients on subscription basis. SEBI (Research Analyst) Regulations 2014,
Registration No. INH100001690
The views expressed are based solely on information available publicly and believed to be true.
Investors are advised to independently evaluate the market conditions/risks involved before making
any investment decision
Mittal Consulting www.katalystwealth.com
Disclaimer

18. Whether the research analyst or research entity or his associate or his relative has any financial interest in the
subject company/companies and the nature of such financial interest – Yes
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership
of 1% or more securities of the subject company (at the end of the month immediately preceding the date of
publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of
interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months –
No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in
the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or
brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment
banking or merchant banking or brokerage services from the subject company in the past 12 months –No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the
research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject
company – No
Mittal Consulting www.katalystwealth.com
Disclosure (SEBI RA Regulations)

19. Mittal Consulting
7, Panch Ratan, 7/128
Swaroop Nagar, Kanpur – 208002
Ph.: +91-72-75050062
Mob: +91-98188 66676
Email: info@katalystwealth.com
Web: www.katalystwealth.com
www.katalystwealth.comMittal Consulting
Thank You