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MANAPPURAM Finance India¶s 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 a
week, 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, NBFC¶s 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 µBalance 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

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