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MANAPPURAM FINANCE A GOLD DERIVATIVE

MANAPPURAM Finance Indias largest listed and Highest Credit Rated gold loan

company from kerala is touching new heights on daily basis. In terms of growth this is

the only company in India which expands in overall terms. Take the case of branches -

it is increasing on week to week basis , the company is adding 15 to 25 branches in aweek, for a Retail finance company which gives loan against gold , no. of branches

and the value of the underlying asset are very important, and if the asset are of

nature which grows on daily basis then the bottom line will be full of colours.

Compare to other NBFC which deals in vehicle finance, property finance etc, NBFCs like

Manappuram Finance have upper edge as it deals in Gold loan. As the price of gold is

going up , valuation of this company is also touching new heights , it is right to put in

that Balance sheet of Manappuram grows on daily basis than any other finance

company . If you analyse the company in terms of financial terms , it is further

interesting RONW will be close to 28% to 30%, NPA almost to zero%, Consistent in

dividend payout, bunch of corporate actions, and so on.

Gold Loan NBFCs should be given a special status in the economic setup, these

companies can withstand recession and can over perform in boom, in addition to that,

these type of NBFCs satisfies the charactestics of micro finance companies, viz.

branch network in rural areas, small ticket loans, customers belonging to the category of

individual in nature, plain and simple interest, etc, the time has arrived that RBI should

think about granting a special status to NBFCs. This will help RBI to ensure the

development of rural economy, as the co-operative and district banks and socieities are

struggling due to political intervention and mismanagement, NBFCs having a solid track

record viz Manappuram etc should be permitted to extend its arm to rural and semi

rural sectors with a liberalised policy.

As the gold price is going up on daily basis, in short the gold loan will take the

characterstic of long term loan and even will be used as seed capital. Take the price

of gold per gram in 2000 which was close to 600 has touched to Rs.1800 in 2010, if

the price shoots to range of 4000- 5000 per gram, then the gold loan will have

charasterstics of long term loans.

The growth of Gold ETF, E-receipts of gold, Gold deposit schemes etc are the other

flavours which favours the growth of this industry. In India, household sector holds

gold ornaments close to 10000 - 15000 tonnes, and even with RBI gold reserve is

only close to 1000 tonnes of gold taking the rank of RBI at 56th Position in the

world among the Central banks and other Financial instituitions.

Similar to growth price potential, this sector has risk too, viz. default risk, Quality risk,

Internal threats such as pilferage, collussion among the employees and looting the

assets, External Threats such as Robbery, Pledging theft items and over all the

PRICE RISK, . So a detailed analysis and subject knowledge is necessary for the

success of this business, and MANAPPURAM FINANCE is a pioneer in this industry

and possess a strong fundemental structure to promote this product, a sound Risk

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Management System, a Strategic Marketing positioning and an intellectual management

and Human Resource are the their strength.

Author : RAGHU.G, AGM, Manappuram Finance, Published on 04.07.2010