We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.

INVESTING RATIONALE

• AUM marginal uptick: In Q4FY19 AUM has grown by 23% YoY led largely by ~60% growth in non gold segments while gold loan business growth was moderate (~11%). Loan growth in MFI/Housing/CV was robust at 58%/39%/78% respectively. Gold holdings have grown by 5% YoY to 68 tonne and loan per gram is steady at Rs1,920. About onethird of the portfolio is non gold which the management plans to increase to half of overall AUM. In the backdrop of liquidity concerns in NBFC segment, impact on company has been minimal since their assets are short-tenure in nature and there is an ALM surplus.

• Non Gold Business picks up: The non-gold business constitutes ~33% of the total consolidated AUM. During the quarter, Asirvad MFI posted a 58% YoY growth in its AUM to ~Rs3840cr, CV division increased its AUM by 78% to Rs1100cr and Home-finance subsidiary reported AUM growth of 38% to Rs520cr. MGFL management intends to divide the book equally between Gold and Non-Gold AUM.

• Asset quality stable: Overall GNPA has eased to 0.5%. GNPA in gold/MFI/housing/CV has eased by 10bps/30bps/100bps/50bps sequentially to 0.5%/0.5%/3.9%/1.9% respectively. Pick-up in AUMs, stable asset quality, and favorable regulatory environment will be positive for the company. Focus on shorter tenor of product has helped MGFL in containing asset quality pressures.

• We maintain a BUY with a target of Rs. 160