Manappuram Shares Collapsed


Manappuram Finance is an aggressive NBFC in the country. It is one of the rare companies given historic value appreciation for the investors.  The shares of the firm have been collapsed near 15% last day. Main reason was the RBI opposition to block public deposits to the company. The share of the Kerala giant fallen near 15% in the one trading session. It was really shocking news for investors because Manappuram was a safe destination for conservative investors and it has been acting as a defensive bluechip in these years.

The core business of Manppuram Finance is giving gold loans. Since the gold price is increased in each year, their sales are also getting increased.  Manappuramn Agro Farms is a sole proprietorship of Nandakumar, the Executive Chairman of Manappuram. Company has been accepting public deposits through their branches and giving the receipt of Manappuram Agro Farms. In some cases, company is rolling over the deposits in the name of Manappuram Agro Farms. In September last year, company raised an amount of Rs 442 Cr by issuing Secured NCDs with an interest rate of 12% to 12.5%.

As stated by the company, they are not receiving deposits from the public but it is only Non Convertible Debentures. As per the latest quarterly results, company has received Rs 640.6 Cr as retail borrowing. Company is silent in the role of Manappuram Agro Farms in the deposit issue. Company’s growth is mainly through debt financing. Since the gold price is getting increased in each year, it is a risk free lending.  Income of the company was a grown by 110% in between Dec 2010 and Dec 2011. Interest outgoes was also increased by 210% in that period. It is the second largest lender of gold loans in the country. The depositors are very fine with the company. According to RBI, Manappuram Finance and Manappuram Agro Farms cannot take deposits from public and it will be the violation of government rules. Company has founded in 1949. The total retail deposits are 3% to 4% of the total liabilities of the company. The RBI norms will not affect the company, but the specialty of stock market is the discounting of future. So the share price is aggressively collapsed in Tuesday. It is the duty of the management to clear the situation and to remove the investor fears. The management meeting on February 2010 will discuss the entire matter.

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