Mumbai, Mar 20(): Manappuram Finance which lost 20% of shares yesterday recovered by 10% after an early loss of 12% in today’s morning trade. The gold loan provider told BSE that the profit for the fourth quarter of March 31 would see the profits decline due to under recovery on some gold portfolios.
This scared investors who are expecting huge losses in the last quarter of the this fiscal. The finance company has told in a filing with the BSE that losses were due to correction in gold prices. Rating agencies which had put the company on buy list have put it on negative. BSE was also informed of its board member’s resignation who was in charge of remuneration committee.
Rating agencies say that around Rs 9-10 billion gold loans have to be auctioned and with the global prices being on the downside, the future of the company does look bright. The company’s valuation and assets are still the best but the regulatory controls and increasing competition in the gold loan market is driving investors away from buying.
In a chain reaction, the Kerala-based Muthoot Finance shed around 9% in the stock market. Global agency BoFa- ML rated it as under-performing while Ambit, the Indian agency put the company rating under review since the earlier estimated loses in February 2012 due to interest lost on gold loans were expected to be much higher than before. A re-rating by agencies has scared the stock market.
Exchange traded funds in gold is losing its sheen globally and in India too. Those in the stock market find that equity and bonds are giving more returns than gold funds. Since June, Indian gold funds are for the first time losing investors who sold around Rs 8 crore as per the Mutual Funds Association. This comes as a surprise as India is the biggest gold-consuming nation.
Billionaire George Soros recently took back his investments in gold related funds. The economic recovery in USA and the gold slid by 4% while rupee bonds giving 2.4% profit has led to increase of Rs 446 crore in the sovereign debt funds.