Manappuram Finance Limited - Fundamental Analysis | Intrinsic Value Calculation

In this post, let's analyse the basic parameters of Manappuram Finance Limited. As we know already, estimating a financial company is the most difficult part as there may be many hidden factors involved. But at the best, we check a few parameters that will check the health of the organization.

To make the valuation more defensive, we consider following conditions.

1. Calculate the income after tax averaged out for the past 4 years. The higher the number of years, the better.

Earnings calculation
Income from operations	4,116
- Expenses	2,751
Income before tax	1,365
- Tax	464
Income after tax	901
+ Depreciation and Amortization
+ 25% of Selling expense	0
- Maintanence Capital expenditure
Distributable cash flow	901

2. Regarding the free cash flow calculation, we use only the financial assets in hand for the Bank namely, Cash and cash equivalents, Investments and other bank balance.

3. To calculate the risk the bank poses to non performing assets, we consider following deductions from the cash available in hand.

    a. 5% of total Borrowings

    b. 5% of total Debt securities

    c. 10% of the total advances given by the company

    d. 10% of the Deposits in hand with the bank

Excess Cash Calculation
+ Fixed financial assets
	Investments
	Other financial assets
+ Current financial assets
	Other financial assets
	Cash and cash eq	840
	Other Bank balance	323
	Investments	173
- Total debt
	Borrowings	765
	NPA	1,247
	Deposits reduction	0.10
	Total	-676

So, when we calculate the capital needed at 7% cost of capital to earn the averaged out profit after tax + the free cash flow available in hand, we can arrive at an enterprise value for the bank. When we divide this value by the total number of shares in hand, we get intrinsic value of Manappuram Finance Limited.

Investment needed @	Capital needed	+ excess cash	Per share value
7.50%	12,012	11,336	134.64

To check the intrinsic value and complete fundamental analysis, please see the video below

https://youtu.be/5tsuVFKduug

Disclaimer: We are not SEBI approved Research Analyst or Investment Advisors. Please don't buy based only on our analysis. Do consult your financial advisor before investing.