Gold loan firm Manappuram Finance
may report a loss of Rs 50 crore in the current quarter as it may not
be able to recover Rs 250 crore of loans given to customer due to a
decline in gold prices, Managing Director I Unnikrishnan said in an interview to CNBC-TV18.
The stock has been sliding since Tuesday after the company selectively
briefed key investors that the value of defaults could be much sharper
than what the company had guided earlier.
Due to falling gold prices, many customers who had taken loans against gold jewellery found it profitable to default on the loan and then buy gold afresh at a cheaper rate from the market.
Quite a few brokerages have downgraded their ratings on the stock following the development.
"There is a perception that the gold loan business is secure as the underlying asset is highly liquid and the borrower has emotional attachment to the asset," brokerage house Espirito Santo wrote in a note to clients on Wednesday.
"However, the recent episode highlights that slippages are very high (15 percent of Q3 FY12 disbursements turning bad) and even in a stable gold price scenario the company may incur losses. This makes us believe that Manappuram has become a levered play on gold prices," the note said.
Due to falling gold prices, many customers who had taken loans against gold jewellery found it profitable to default on the loan and then buy gold afresh at a cheaper rate from the market.
Quite a few brokerages have downgraded their ratings on the stock following the development.
"There is a perception that the gold loan business is secure as the underlying asset is highly liquid and the borrower has emotional attachment to the asset," brokerage house Espirito Santo wrote in a note to clients on Wednesday.
"However, the recent episode highlights that slippages are very high (15 percent of Q3 FY12 disbursements turning bad) and even in a stable gold price scenario the company may incur losses. This makes us believe that Manappuram has become a levered play on gold prices," the note said.
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