Know More About The Gold Finance Stocks

Because of the lower gold price and high valuations, gold finance businesses like Muthoot Finance NSE 0.24 per cent and Manappuram Finance NSE 1.01 per cent have lagged the broader market during 2021. 

CLSA initiated covering Muthoot Finance and Manappuram Finance with ‘buy’ ratings and forecasts of 24% and 33% gains within the next 12 months, respectively. CLSA claims that a high PB multiple is justified because of the company’s good profitability and low balance sheet risk.

Muthoot Finance and Manappuram Finance are up 25% and 8% in 2021, respectively, compared to the Nifty500’s gains of almost 30%.

The area had lost a lot of the traction it had in 2020 when it was growing. Thanks to Indians pawning their gold assets to get through the economic hardship caused by the nationwide lockdown for limiting the spread of the Covid-19 outbreak.

Analysts feel that, with industry-leading return on equity and return on assets, shares of gold financing businesses could be suitable long-term investments, for investors wanting to profit from India’s growing formalization of the gold loan market.

Due to the sentimental value linked with the collateral of Indian people, gold lending companies have always been resistant to asset quality, volatility, unlike banks and other non-bank borrowers.

In India, organized gold loans account for only 35% of the total gold loan industry. Muthoot Finance is the single-largest corporation in the legal gold loan industry, followed by Manappuram Finance. While banks dominate 75% of the formal gold loan business, Muthoot Finance is the single-largest corporation.

Last week, the brokerage company CLSA Global Markets mentioned that they believe there is an opportunity for Muthoot Finance and Manappuram Finance to increase at a 10-12 per cent CAGR within the next five years, irrespective of gold prices. 

Unlike Muthoot Finance, Manappuram Finance has lagged the market by a significant margin due to concerns about the corporation’s micro-lending business. Because of the consequences of the COVID-19 pandemic on receivables and asset quality.

Manappuram Finance’s excellent asset quality in the primary gold finance industry, according to brokerage company Equirus Securities, considers it a rerating contender, as it looks to profit from India’s rising formalization of the gold lending market.

Because of their low expenses and good asset quality, gold finance companies have consistently delivered industry-leading returns on equity of 25% and 6-7% of assets. 

CLSA anticipates medium-term ROE compression and believes that the ROE will remain higher than other NBFCs. Asset quality, asset-liability mismatch, interest rates, and leverage are all low-risk areas for the company.

About Muthoot Finance

Muthoot Finance Ltd. was founded in 1997. It is a Large Cap corporation in the NBFC sector with a market capitalization of Rs 61,188.93 crore.

Interest, Income from Sale of Shares & Securities, Service Fees, Sale of Services, and Dividend are the primary products/revenue divisions for Muthoot Finance Ltd. for the year concluding 31-Mar-2021.

The company reported a Consolidated Cumulative Income of Rs 2,963.42 Crore for the quarter ended June 30, 2021, down 4.99 per cent from the previous quarter’s Total Income of Rs 3,118.98 Crore but up 13.68 per cent from the same quarter last year’s Total Income of Rs 2,606.82 Crore. 

In this recent quarter, the company stated a net profit after tax of Rs 978.59 crore.

About Manappuram Finance

Manappuram Finance Ltd., founded in 1992, is a Mid Cap business in the NBFC sector with a market capitalization of Rs 15,636.59 crore.

Interest, Additional Operating Revenue, Dividend, Charges & Commission Income, and Income from Sale Of Shares & Securities are some of Manappuram Finance Ltd.’s important products/revenue segments for the year ending 31-Mar-2021.

The company stated a Total Income of Rs 1,573.74 Crore for the quarter ending on June 30, 2021, down 3.47 per cent from the previous quarter’s Total Income of Rs 1,630.25 Crore but up 3.78 per cent of the same quarter last year’s Total Income of Rs 1,516.47 Crore. 

In this quarter, the company generated a net profit after tax of Rs 436.85 crore.