Meet the first 200-bagger of 2016, which almost doubled profits in June quarter

Wednesday, August 10, 2016
Economic Times.
It has been part of the most bullish trades on Dalal Street and there has been no let off.

The Thrissur-based Manappuram Finance, a non-banking finance company, is the year's first and only 200-bagger so far with returns of 200.69 per cent through August 9.
The NBFC space has been winner this year, as investors ditched ailing banks to seek profits in the best big bets on Dalal Street.

"The rally has got a lot to do with the fundamental outlook turning for the better, and that has got to do with many of these NBFCs being consumer-centric. All of them would actually start seeing better traction in terms of credit growth going ahead," Mahantesh Sabarad, Deputy HoR, SBI Cap Securities, told ETNow.

As investors turned bullish on the space at the turn of the year, shares of Manappuram Finance have risen sharply, making investors a lot of money.

"The stock has had a fairly good runup over the past few months. Those who have bought it at lower levels have made good money on the stock," said Deven Choksey, MD, KR Choksey Investment Managers.

The company has managed to provide stellar growth quarter after quarter as it moved from being just a gold finance company to a microfinance company.

During the quarter ending June 2016, Manappuram Finance reported a 170 per cent jump in net profit at Rs 160.40 crore with asset under management swelling 28.8 per cent to Rs 13,014 crore.

"Asirvad, their microfinance arm, has got a microfinance loan book of Rs 1,000 crore and that is a high return on asset (ROA) business. Going forward, we estimate 3.6 per cent RoA for Manappuram Finance as a whole," said Dharmesh Kant, VP-Head Retail Research, Motilal Oswal Securities.

That said, the company still remains heavily concentrated on the bullion business which, for Deven Choksey, is a point of concern.

"Manappuram has diversified further and started getting into other segments. However, a large part of the portfolio still stays in the bullion business, which is not giving me much comfort," he said.

For Mahantesh Sabarad, the good days for NBFCs like Manappuram Finance are far from over, as they stand to benefit from further rate cut, which may aid their fight to win away retail consumers from ailing PSU banks.

"A fall in interest rates will support their ability to compete with the PSU banks and that is good news," he said.

According to Deven Choksey, Manappuram may not fully benefit from that bullish sentiment in the space as the stock may be bracing for a huge correction.

"We believe some profit booking can be done on the stock and one may re-enter the counter at a lower level if the time or the opportunity permits," he said.