I had purchased 200 equity shares of Manappuram Finance @ 203.90 per share. The price has fallen almost 30%. What should I do? Should I buy or Sell?

Key Highlights of the Company for the Financial Year Ended March 31, 2024: 📝

• Total Revenue from Operations: ₹88,480 Million Consolidated Revenue ↑ 32.1% during 2023-24.✅
• Consolidated PAT: ₹21,975 Million Consolidated PAT ↑ 46.5% during 2023-24.✅
• Consolidated AUM FY 23-24 ₹421 Billion Consolidated AUM ↑ 18.7% during 2023-24.✅

➡️ Current Fundamentals of the company- Manappuram Finance Ltd

• -Current Price: ₹145
• -Market Cap: ₹12,269 Crores

➡️ Return Ratios– (Benchmark >15%)

• -Return on Equity (ROE): 18.95% ✅
• -The Return on Capital Employed (ROCE): 49.09% ✅

➡️ Growth Indicators (Benchmark: Positive & Consistently rising)

• -Net Profit Margin (NPM): 24.73 ✅
• -Earnings per Share (EPS): 25.96 ✅

➡️ Leverage Ratios

• -Debt-to-Equity Ratio (D/E): 2.97 (Benchmark: between 0-1) ❌
• -Interest Coverage Ratio: 2.12 (Benchmark: above 1.5) ✅

➡️ Valuation Ratios– (Benchmark: Positive and less than industry average)

• -Price-to-Earnings (P/E) Ratio: 5.37 ✅ (Stock appears undervalued).
• -Price-to-Book (P/B) Ratio: 1.02 ✅ (Also suggests undervaluation).

Revenue and Net Profit Overview

➡️ Revenue

• -Annual Revenue: ₹8,920.09 Crores | Increase: 32.15% in the last year ✅
• -CAGR (3 Years): 12%
• -CAGR (5 Years): 16%

➡️ Net Profit

• -Annual Net Profit: ₹2,188.67 Crores | Increase: 46.3% last year. ✅
• -CAGR (3 Years): 8.3%
• -CAGR (5 Years): 18.4%

➡️ Key points about shareholdings along with the metrics:

1. Promoter Pledge: 0% of holdings ✅ (No promoter pledging, a positive sign).
2. Moderate Promoter Holding: 35.25% ownership ✅
3. High FIIs Holdings: 30.36% ✅ (Strong interest from foreign investors).
4. Domestic Investors: 10.97% ownership✅
5. Mutual Funds: increased holdings from 7.61% to 9.49%. (25 Schemes Invested)✅

Currently, Manappuram Finance shows strong financial performance with solid revenue growth and profitability. However, the high debt levels remain a key concern🚨.

While the stock may seem attractive due to its low price, investing solely on that basis could be risky, as it doesn't account for potential long-term financial risks associated with the company's leverage

Investment Choices: Averaging, Holding, or Exiting?

Buy More (Averaging Down):

• Undervalued stock with strong fundamentals (P/E, P/B ratios).
• Buying more can reduce costs if comfortable with long-term holding and short-term volatility.
• Risk: A high debt-to-equity ratio adds financial risk.

Hold:

• If uncertain about the company’s ability to manage its debt, hold and wait for further performance updates.
• The company's strong earnings and operational efficiency may lead to a recovery in stock price.

Exit:

• If risk tolerance is low or if you are concerned about high leverage, exiting could prevent further downside.
• Consequence: Exiting now will lock in a 30% loss on the position.

Given the high debt, the decision to buy more or exit largely depends on the comfort with risk. For long-term investors who can tolerate volatility, holding or buying more may pay off.

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