3. If the borrower can't repay, sell his gold and recover the money. .
Unlike homes or other assets against which loans are given, gold is very easy to sell in the open market. The lender usually doesn't lose any money except in cases of fraud.
The only thing that I don't know is how reliable the promoters are.
What can be listing gains, as per different experts have said minimum 10 % gains, and at what price and full/half application to apply for as looking at bseindia bid pattern, bids have been uniform at all levels.
Is that the PE ratio or are you simply quoting the price?
Am planning to apply to this one as well from 2 accounts.
I was comparing net profit.Manappuram makes net profit of about 20%+ whereas read somewhere read Muthoot makes much lesser also there are 7000 cases regarding gold loans pending on Muthoot.
But if you see pe wise that too proves its expensive as at 175 price P/E is above 30 whereas Manappuram trades at 21 P/E.
But now after looking at two articles on this site and also no discount I feel like avoiding the issue all together.
I was comparing net profit.Manappuram makes net profit of about 20%+ whereas read somewhere read Muthoot makes much lesser also there are 7000 cases regarding gold loans pending on Muthoot.
But if you see pe wise that too proves its expensive as at 175 price P/E is above 30 whereas Manappuram trades at 21 P/E.
But now after looking at two articles on this site and also no discount I feel like avoiding the issue all together.
3. If the borrower can't repay, sell his gold and recover the money. .
Unlike homes or other assets against which loans are given, gold is very easy to sell in the open market. The lender usually doesn't lose any money except in cases of fraud.
Now Gold is at all time high & what if gold price crashes later.
Of course for listing gains we don't have to worry about that.
Now Gold is at all time high & what if gold price crashes later.
Of course for listing gains we don't have to worry about that.
Gold loan companies always keep a margin of safety.
From the RHP:
Quote:
We generally lend between 60% and 90% of the price fixed internally for per gram of gold, which is generally lower than the market price of gold at that time.
Unless the price of gold crashes 35%-40% within a few weeks, gold loan companies don't have much to worry about.
Even if the price of gold crashes, it doesn't mean people will start defaulting on their loan repayments.
The value of the gold jewellery for the borrower is always higher than the market value of gold.
Quote:
Originally Posted by rajivka
Why do these shares trade at such a high P/E.
Interest rates are varying from 7% to 10% in last 5 years. So if I invest in FDs, the P/E ratio will be 10 to 14.
Why will I invest in share which has P/E of 43? Are they expected to grow at exponential rates?
The PE is based on FY 2010 earnings. FY 2011 earnings would be higher and FY 2012 earnings would be still higher.
Market usually discounts the future and thus the current PE looks stretched.
About this IPO, he mentions all the above things which have been topic of discussion like court cases etc.
His closing remarks:
Quote:
Considering these, it is expected that promoters will be careful and transparent in dealing with public shareholders. Issue may give a 10% gain over the upper band of the issue price of 175.
I have been watching his show on CNBC Awaaz about new IPOs and their frauds in terms of price manipulation by promoters and operators.
What are the chances of allotment in this IPO in case of half-application? Also, why was 10% retail discount not given?
Last edited by zomzipp : 19th April 2011 at 09:13 PM.
Reason: important changes/additions
About this IPO, he mentions all the above things which have been topic of discussion like court cases etc.
His closing remarks:
"it is expected that promoters will be careful and transparent in dealing with public shareholders. Issue may give a 10% gain over the upper band of the issue price of 175."
I have been watching his show on CNBC Awaaz about new IPOs and their frauds in terms of price manipulation by promoters and operators.
What are the chances of allotment in this IPO in case of half-application? Also, why was 10% retail discount not given?
Well little off topic I tried to search cnbc awaaz video section I am not getting those video about ipo scam program. It was good but a bit bouncer at first take for me hence wanted to download and keep it for learning. But can't find it. If you can do share the link.
Even I am amused that after suggesting a big retail discount they are backtracking. It's happening all after CRISIL rated it higher. I now have the feeling it will turn SKS way though good fundamentals valuation-wise it will hit or won't give much listing gains. Also they getting anchor investor at high levels of 170 might be one of the reason.
I am really confused at the PE values all site suggesting something different.
Muthoot Finance is expected to list at a 15% premium to the IPO price. Today is the last day for QIBs to apply. Institutional demand will decide where the stock lists.
Quote:
Originally Posted by magnet
I am really confused at the PE values all site suggesting something different.
Just download the RHP and calculate the PE ratio yourself. Then there will be no confusion. .
The PE ratio will vary depending on which earnings you use:
3. If the borrower can't repay, sell his gold and recover the money. .
Unlike homes or other assets against which loans are given, gold is very easy to sell in the open market. The lender usually doesn't lose any money except in cases of fraud.
The only thing that I don't know is how reliable the promoters are.
Quote:
Originally Posted by Alchemist
Gold loan companies always keep a margin of safety.
From the RHP: We generally lend between 60% and 90% of the price fixed internally for per gram of gold, which is generally lower than the market price of gold at that time.
Unless the price of gold crashes 35%-40% within a few weeks, gold loan companies don't have much to worry about.
Even if the price of gold crashes, it doesn't mean people will start defaulting on their loan repayments.
The value of the gold jewellery for the borrower is always higher than the market value of gold.
The PE is based on FY 2010 earnings. FY 2011 earnings would be higher and FY 2012 earnings would be still higher.
Market usually discounts the future and thus the current PE looks stretched.
This may be a business that makes a lot of money, but appears to be low on moral values.
Interest rates are supposed to be proportional to the risk of lending. If they lend against 60-90% of the value of the gold, that too at a rate that is lower than market, it appears to me that their risks are very low. In fact if the people don't pay, they could end up making more money by selling the gold.
In the Indian Psyche, keeping gold as collateral is generally the last resort. So people who avail these loans are probably in a state of desperation and the company seems to be ripping them off with high interest rates, which do not seem justified on the basis of their low risk.
I too read this before and wanted to share that link. You did it before I do.
Some points worth to note from that link
Quote:
With total of 7,075 litigations pending by and against the company, a lot of efforts, time and cost will be spent on fighting or defending them.
Quote:
Although not yet implemented, going forward, the company plans to pay royalty for using the ‘Muthoot’ trademark to its promoters at the rate of 1% of annual income, subject to maximum of 3% of PBT, as per agreement between the company and promoters. For FY11, this quantifies to an annual outgo of about Rs. 20 crore, which is not in good light, and may set a wrong precedence for India Inc.
Interest rates are supposed to be proportional to the risk of lending. If they lend against 60-90% of the value of the gold, that too at a rate that is lower than market, it appears to me that their risks are very low.
So people who avail these loans are probably in a state of desperation and the company seems to be ripping them off with high interest rates, which do not seem justified on the basis of their low risk.
Whether one wants a loan against gold, real estate, shares, fixed deposits or any other asset, the maximum loan that a lender would give is never anywhere near the asset value.
My brother has long-term fixed deposits with Indian Overseas Bank and wanted to take a loan against those deposits from the same bank.
In spite of it being a zero-risk loan, the bank was not willing to give him a loan of more than 80% of the value of the deposits.
(I don't remember the exact amount that the bank was willing to lend, but it was nowhere near the value of the deposits and so my brother decided not to take the loan).
Gold loans are not only for desperate people. Mostly gold loans are used as bridge loans - loans taken for short periods before other loans can be arranged for.
Most people repay the loans within 3-6 months.
From the RHP:
Quote:
All our Gold Loans have terms of 12 months. However, customers may redeem the loan at any time, and our Gold Loans are generally redeemed between 90 and 180 days. Interest is paid only when the principal is repaid. In the event that a loan is not repaid on time and after providing due notice to the customer, the unredeemed collateral is disposed of on behalf of the customer in satisfaction of the principal and all interest charges. In general, a collateral is disposed of only when the recoverable amount is equal to or more than the realizable value of the collateral.
Many people prefer gold loans because they need only a small amount of money for a short period and don't want to waste time with the banks.
Retail Individual Investors subscription is 1.34 times till now, so what should be the strategy now in terms of allotment and application, in this IPO.
I am planning to applying for 440 shares (Rs 77000), what can be the allotment in this case?
Retail Individual Investors subscription is 1.34 times till now, so what should be the strategy now in terms of allotment and application, in this IPO.
I am planning to applying for 440 shares (Rs 77000), what can be the allotment in this case?
It is difficult to say what will be the final subscription figure in the retail category.
Now suddenly after applying on news channel the people are picking George Muthoot for falsely claiming 10% retail discount on RHP and wants SEBI to take action.
Bid details @ NSE Website as of 2pm:
QIB: 22.94
NII: 17.25
Retail: 3.1
What's interesting is at the end of yesterday QIB showed 25.01 times subscribed. But, current bid details indicate 22.94. I guess if some of the QIBs withdrew or NSE is incorrectly showing the detail.
Muthoot Finance IPO
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