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Q&A: Manappuram Finance Ltd

Modified on July 2, 2018

I have been asked by many readers of about my views on various aspects of Manappuram Finance Ltd. These queries have varied from:

  • Advice on entry price, holding or exiting the stock at certain prices,
  • Business assessment,
  • Impact of regulations and policy decisions like Gold Monetization Scheme
  • Allegations of insider trading and management assessment
  • Rationale for my investment and holding the exposure etc.

I have compiled these queries and their responses in form of this article, which would be helpful for other readers who might have similar queries in mind.Readers may ask any of their queries about stocks or investing in general by submitting their query by following the analysis related guidelines at the dedicated section on this website: “Ask Your Queries“. I would be happy to provide my inputs on the queries asked.

Queries on Manappuram Finance Ltd: Business assessment, Impact of Gold Monetization Scheme, Gold Bond Scheme, insider trading and management assessment


Manappuram Finance Ltd


Hi Vijay. I am an investor in Mannapuram Finance Ltd since it was trading at ₹22 last year. I bought the stock without realizing that you own it as well. I saw it go to ₹39 and back to ₹27. My reasons for investing are similar to yours and I do feel the company is poised for better growth rates going forward. However, bear market in Gold is hurting the sentiment and maybe the business as well. Wanted to know your views regarding the same.

My current assessment is that till the time Gold doesn’t bottom out, the stock would be under pressure as no big investor would want to take that risk at this point especially when there are many businesses available at attractive valuations. I am awaiting for the q1 results but my view remains slightly bearish in the short term and medium term bullish.

I would really appreciate your thoughts about this stock and gold loan business in general. Thank you

Author’s Response:

Thanks for writing to me and sharing your views!

I do not reassess my position/views about a stock based on short term change in operating environment including changes in gold price (which has been a cyclical event historically) or short term performance of the companies. I have the same views, which you have read on this website, as mentioned by you in your query.

All the best for your investing journey!


Dear Dr. Malik, thank you very much for posting your analysis & thoughts on so many companies & your investing style. They are comprehensive but easy to understand and therefore extremely helpful.

My queries are in regards to one of the Stocks in your portfolio – Manappuram Finance Ltd. I have followed your 5 Step Analysis Process (Financial, Valuation, Business, Management and Operating Efficiency) and gone through your blog but still had the following queries:

1) Financial –

You have mentioned that an investor must look for a company with Interest coverage of at least 3, while Manappuram Finance Ltd has an Interest Coverage of 1.53 (in regard to Operating Income). How do you gain comfort in investing in a company with such a low IC Ratio, is there a different benchmark for NBFCs?

2) Business –

How did you go about assessing if Manappuram Finance Ltd has a strong MOAT/Competitive advantage? The primary business of Manappuram Finance Ltd (Gold Loans) seems to be stagnating, the RBI has asked Gold Loan companies to diversify into other Financial Services, in line with this Manappuram Finance Ltd is diversifying into Micro-Finance (Asirvad Microfinance) & Home Loans (Manappuram Home Finance), while these are great initiatives, they are yet to show any results and the Home Finance sector although promising, seems to be crowded/ competitive. Given this scenario, how did you gain comfort in the business & industry prospects of Manappuram Finance Ltd?

3) Management –

You have cited the case of Manappuram Agro Farms & the Promoter Mr. V.P. Nandakumar’s response to the RBI ban as good management practice, however don’t you think it was unethical of Mr. Nandakumar to accept public deposits for this proprietorship entity through MFL branches in the first place? Although his subsequent steps to honour his commitments might be commendable, but isn’t this equivalent to a person making recompense once he is caught doing something unethical by a higher authority? What if this wasn’t detected by the RBI, what if there are other such instances which have been left undetected? Some investors like to say “There is never one cockroach in the kitchen” could that be the case here?

I am just playing the devil’s advocate here and would like to understand your thought process & research method to learn more. Thanks you for your time & the wonderful blog.

Disc. I am invested in the Stock for over 2 years now.

Author’s Response:

Thanks for your feedback & appreciation! I am happy that you found the articles useful!

I thank you for the time & effort spent in putting down your views and queries. Let’s address the specific queries raised by you.

1) Business assessment criteria for financial institutions are different from other sectors like manufacturing.

2) My assessment of moat is from assessment of past performance. You would have already read about it in the article on business analysis.

How to do Business Analysis of a Company

I believe that company has done well and faced the competition from other players successfully. RBI has not mandated gold loan companies to diversify. The companies, including Manappuram Finance Ltd, are doing it on their own initiative.

3) Management assessment is highly subjective. It is the same way like we choose our friends. I appreciate your views and do not refute your logic. An investor should take her decisions as per her own conviction.

Hope it helps resolving your queries.

All the best for your investing journey!



Hi Sir…I’m holding Manappuram Finance Ltd of ₹18.I wish to sell it at ₹54 but plans to hold it till ₹100/-. What’s your view on Manappuram?

Author’s Response:

Thanks for writing to me! However, I do not provide any price based stock calls.

You would have to decide the exit point yourself. I plan to write an article about when to think about selling your stocks, however, that might take some time. Nevertheless, market price should not be the only factor to decide about selling a stock.

All the best for your investing journey!

Follow-up Query

Hi Sir, thanks a lot for the prompt response! Can you please share your opinion on Manappuram Finance Ltd?

Author’s Response:

I feel positive about the Manappuram Finance Ltd. I expect it to grow its different business divisions and earn good returns for its shareholders. How much time that is going to take, is anybody’s guess.



Hello Vijay sir, I went through the framework provided by you and checked couple of stocks from your portfolio. I would like to know your perspective for holding Manappuram Finance Ltd. It actually fails on Company Analysis Framework parameters which you recently commented in reply to few questions asked.

I checked one of the stock XYZ that I am holding, which passes the analysis framework except that the ratio of cumulative CFO with cumulative Net Profit is less than 1 which is not good sign.

Request you to elaborate more on this.

Author’s Response:

Thanks for writing to me!

Manappuram Finance Ltd is a company with good business which is going through a very bad phase since Feb 2012. This phase with strong headwinds has given investors a very good opportunity to buy its stocks at some very attractive levels. Now the clouds seem to be clearing up a bit. I expect that Manappuram would be able to grow its existing business as well as newly acquired businesses and would be able to create wealth for shareholders.

Regarding a company not able to collect its profits in cash, multiple companies discussed in this page have faced this issue. I would suggest you to go through the other companies discussed on this page. The most common result of such issue is that companies rely more on debt to run their operations and their debt keeps on increasing year on year.

Hope it clarifies your queries.


Sir, Just saw your analysis of Ambika Cotton Mills Ltd and I am thoroughly impressed by your analysis and the article was very valuable and informative. Just need some information and appreciate your valuable time

  1. Where do we get the data as you had done analysis for 10 years?
  2. Did you do similar analysis of your other portfolio stocks and will you be able to share them. I am specially looking for Manappuram Finance Ltd. I was under the impression that their governance and integrity is questionable. But since you have done the analysis, I started getting interested in the stock. Can you share and also let me know, if the current price is reasonable?
  3. Also Ambika Cotton Mills Ltd has run up and is ~₹800 level. Do you still think it has the margin of safety?

Appreciate your effort and thanks for the service rendered to the genuine investing community. I pray to God to give you good health and prosperity to continue the good work

Author’s Response:

Thanks for the feedback and good wishes! I am happy that you found the article useful.

1) The financial data was sourced from the websites:,, ACML annual reports. The same has been mentioned in the article on Ambika Cotton, as well.

2) I have not documented my analysis of other stocks. I would publish it on the website, if I write detailed analysis of any other stock (including in my portfolio), in future.

Entry price of Manappuram Finance Ltd:

Entry price criteria differs from investor to investor. The fact that trading is happened in Manappuram today, means that there were people buying it at today’s prices.

Everyone should have their own criteria for buying stocks and take decision accordingly. You may find my criteria/checklist for buying stocks here:

Final Checklist for Buying Stocks

I would request you to take decision as per your criteria/checklist.

In case you have not yet prepared your checklist, then I would suggest you to read through the article series “Selecting Top Stocks to buy”. By the time you would complete this series of articles, you would have your stock selection checklist ready. You may read this series here:

Selecting Top Stocks to Buy – A Step byStep Process of Finding Multibagger Stocks

3) Ambika’s current price and margin of safety (MoS):

I have discussed the calculation of MoS in the article on valuation analysis:

How to do Valuation Analysis of a Company

Request you to use the method described in the above article and decide whether the current price offers Margin of Safety.

Hope it clarifies your queries!

All the best for your investing journey!


In addition to my earlier question on Manappuram Finance Ltd, I have more point in mind before investing that can government’s Gold Monetization Scheme have a disruptive effect on business model of Manappuram Finance Ltd and can that be attributed for sudden fall in Manappuram share prices.

Please help with your views sir.

Author’s Response:

Thanks for writing to me!

You may read about the management’s assessment of impact of these schemes in the latest conference call transcript (available on Manappuram Finance Ltd website). I agree with what management says about it.

I do not have any opinion on the reasons of fall/change in Manappuram Finance Ltd share price. I do not know what factors the market is taking into account to assign it the price it has assigned currently or for that matter at any point in time.


Dear sir

How would you react to the robbery case at one of Manappuram’s branches in Tamil Nadu where the manager was complicit with the robbers?


Author’s Response:

Thanks for writing to me!

An investor should go through the various company communications where the company talks about/informs about the various risks being faced by the business and the steps which the management takes for mitigating those risks. By reading such communications an investor would be aware of the challenges and companies responses to them.

I suggest that investors read the annual report in details and make their own opinion about the risks of gold loan business and the steps taken by Manappuram Finance Ltd to counter them.


Hello Doc, I came across this news item regarding insider trading by Manappuram Finance Ltd directors.

Does this make us review our assessment about the integrity of the management?

Author’s Response:

Thanks for writing to me!

I believe that an investor should base her decision on the primary source of information and not on the media reporting.

Request you to read the SEBI order in this case and present your views about the order and the reasoning given by SEBI for the settlement amount. Your inputs would be helpful for other readers as well.

Follow-up Query

Hello! I read the SEBI order and can make out that the director is guilty. But I do not think that one director acting on his own can be counted as a negative for the promoters’ integrity.


Author’s Response:

Thanks for your inputs.


Vijay Sir, I have read all the steps (All steps 15) thoroughly, I was analyzing the Manappuram Finance Ltd, its sales is not increasing since 2012. Below is sales (in ₹ Cr.) from 2012 to 2015 in the same order — >2645, 2259, 2100, 1975, 2034. Then it is discarded at financial analysis step itself so I was wondering its presence in your portfolio. Please help to share the reason.

Author’s Response:

Thanks for writing to me!

The guidelines for buying a stock for first time and those for holding it in the portfolio are different. I advise that an investor should select a new stock based on the steps mentioned in the article:

Selecting Top Stocks to Buy – A Step byStep Process of Finding Multibagger Stocks

However, how long an investor should keep any stock in her portfolio or alternatively when one should sell the stock is based on different criteriAuthor’s Response:

When to Sell a Stock?

I believe in holding a stock until the time I am positive about its future. Times of trouble which an investor believes to be temporary in nature, are the best times for accumulating stocks.

I am holding Manappuram since 2011.

Hope it clarifies your query.


Sir, Ashish Dhawan buying Manappuram Finance Ltd adds to the conviction level?

Author’s Response:

Thanks for writing to me!

It depends upon each investor what she wants to derive from each piece of information like any HNI buying into any stock. As far as I am concerned, I am indifferent to this event.

I suggest readers to do their own stock research and not follow/depend upon other investors to make their investment decisions.

Hope it clarifies.

Follow-up Query

Thank you sir. This is precisely what I wanted to hear.

Let me re introduce myself, again. The one who had sent query related to Deep Industries. 🙂

Author’s Response:

You are welcome!

It is advised that an investor should rely on her own analysis and opinion rather than getting confirmation from others like getting confidence from HNIs buying into any stock or third party like me re-affirming your views.

An investors should have her own views irrespective of the views of Ashish Dhawan or Vijay Malik.





  • The above discussion is only for educational purpose to help the readers improve their stock analysis skills. It is not a buy/sell/hold recommendation for the discussed stocks.
  • I am registered with SEBI as an Investment Adviser under SEBI (Investment Advisers) Regulations, 2013.
  • Currently, I do not own stocks of the companies mentioned above, except Manappuram Finance, in my portfolio.

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