Manappuram Finance Ltd. is one such company that has been established quite well in the NBFC segment of India. This company has grown continuously in the past and also made its shareholders happy with dividend payments at regular intervals. It is also highly expert in gold loans. Let us now discuss the company’s positives, negatives, technical research, and future prospect.
Company Overview
Manappuram Finance Ltd. was set up in 1949. Its headquarters is located in Thrissur, Kerala. The Company mainly used to operate in the business of gold loan but ventured into microfinance, vehicle finance, housing finance, and SME finance.
Manappuram Finance has one of the best business models worldwide. It is India’s largest gold loan finance company and caters to millions of customers.
Why Consider Investing in Manappuram Finance Ltd.?
Let’s dive into the pros and cons of investing in this stock.
Pros of Manappuram Finance Ltd. Stock
- Regular Dividend Payout:
The company’s commitment to paying regular dividends makes it one of the biggest benefits of investing in Manappuram Finance. This makes it an attractive option for investors looking for steady income. Dividend payouts indicate the company’s financial health and willingness to share profits with shareholders. - Steady Business Model:
The core gold loan business itself is not as risky because generally, more people are eager to take gold loans considering the very few documents or minimal documentation requirement and they are often easily disbursed. Hence it ensures customer demand constantly over Manappuram. - Market Leadership:
Manappuram Finance among the highest-positioned names in gold loans. From its spread and wide scale of operations that cover hundreds of areas spread across its branches it successfully caters to even distant rural and semi urban population.
Cons of Manappuram Finance Ltd. Stock
- Low Interest Coverage Ratio:
Interest coverage ratio is one of the low-level weaknesses of Manappuram Finance. The ratio shows how well the firm can pay interest on its outstanding debt. A high financial risk is reflected by low interest coverage ratio. - Market Competition:
The NBFC sector is highly competitive, and market share would be competed by players such as Muthoot Finance and other emerging fintech companies. This will have a negative impact on the company’s growth and profitability.
DISCLAIMER: Our post is only for educational purpose only. Not an investment advice. Consult your financial advisor before investing.
Technical Analysis of Manappuram Finance Ltd. Stock
Let’s break down the technical chart and understand the potential for this stock:
Cup and Handle Pattern
This is one of the classic Cup and Handle formations. The pattern is bullish, hence the stock may travel a long way upward as soon as it breaks above this resistance level. Breakdown is as follows:
- Cup Formation:
It suggests the formation of a cup-shaped bottom between mid-2021 and mid-2024, thus indicative of accumulation and recovery. The stock has established a good base. - Handle Formation:
The handle is now coming out of it, suggesting a consolidating phase before potentially breaking up.
Support and Resistance Levels
- Current Support: ₹170-₹180
This place acts as a safety level. If the price comes above this range, there will be support for bullish momentum. - Critical Support: ₹135-₹140
In case this stock breaks from the above-mentioned support, at ₹135-₹140, the price would likely to prevent falling anymore. - Neckline Resistance (ATH): ₹230-₹235
The neckline or all-time high (ATH) is the most important resistance level. If it breaks above this area, it can be seen to make a huge movement.
Potential Targets
When the stock breaks above ₹230-₹235, the following targets will be seen:
- R1 (First Target): ₹203.34
- R2 (Second Target): ₹230.40
- R3 (Third Target): ₹266.99
- R4 (Fourth Target): ₹350.00
These targets are the possible upside one for the investors.
Business Growth Potential
Diversified Portfolio
While gold loans are the core business, Manappuram Finance has done well to diversify into:
- Microfinance Loans:
This is a low-income group and financial inclusion area. - Vehicle Loans:
The company provides financing for two-wheelers and commercial vehicles. - Housing Loans:
This is an affordable housing segment with immense growth potential in India. - SME Loans:
The company supports small and medium enterprises, which form the backbone of the Indian economy.
Focus on Technology
Manappuram Finance is using digital technology to enhance customer service, improve operations, and expand its reach. Through the use of online loan disbursement and repayment portals, the company has increased customer convenience and operational efficiency.
Strong Financials
The company has maintained its dividend payouts which prove strong financial performance. Despite problems such as low interest coverage, Manappuram managed to stay profitable and continue growing.
Future Growth Drivers
- Increasing Gold Loan Demand:
As gold prices are increasing and economies are uncertain, the demand for gold loans is bound to stay high. - Rural Penetration:
More and more branches in rural areas where people use gold as a source of liquidity. - Government Initiatives:
Policies supporting financial inclusion and MSMEs (Micro, Small, and Medium Enterprises) may be useful for the company.
Risks to Consider
While the future looks bright, risks are to be watched:
- Regulatory Changes:
A change in government policies relating to NBFCs can cause a setback in operations. - Economic Slowdown:
The slightest economic slowdown can reduce loan demand and increase defaults. - Rising Interest Rates:
It can affect the borrowing cost and reduce profit margins.
Conclusion
Manappuram Finance Ltd. is good for growth and income as the company has a high market share in the gold loan business, has given a consistent dividend payout for all these years, and is a growth potential for a long time. Yet, the technical levels must be watched, and it does have low interest coverage and market competition.
If the stock breaks above the ₹230-₹235 resistance, then significant upside targets like ₹266 and ₹350 can be achieved. This would be a great opportunity for both short-term traders and long-term investors.
Explore other stock analysis articles on our website
Link to Manappuram Finance’s official website: Manappuram Finance
Ready to invest in Manappuram Finance Ltd.? Stay updated on stock trends and make informed decisions today!
