Buy recommendation of Motilal Oswal (Target Price: Rs. 114)
Motilal Oswal has given convincing reasons in support of its buy recommendation. It says:“Manappuram is today geared up to tap financing opportunities across the spectrum and has realigned its business model to derisk it from volatility in gold prices as well as to sustainably grow its AUM at over 20% in coming years. This shall be achieved by: (i) Focusing more
on shorter term products (3 months) which eliminates the risk of any steep fall gold prices impacting the company; (ii) Adopted push approach instead of pull earlier by reaching out to customers through enhanced marketing and branch activation efforts and linked employee incentives to sourcing business, timely recovery and default rates; (iii) Foray into synergistic non-gold businesses -Microfinance, Home Loans and CV Loans (to form 25% of AUm by FY18 from 12% in FY16. Company aspires to reduce its good AUM to less than 50% of the total AUM by focusing on growing its Microfinance AUM to 20% of total and Home Loans AUM to 30% of total in the long run.”
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