ISSN No.

2349-6622
A STUDY OF PERFORMANCE ANALYSIS OF GOLD
LOAN NBFCS BASED ON CAMELS MODEL
DEEPTI SHASTRI GUPTA
Assistant Professor
Institute of Business Management and Research
IPS Academy, Indore (M.P.)
Email:[email protected]

DR. VIVEK SINGH KUSHWAHA

Director
Institute of Business Management and Research
IPS Academy, Indore (M.P.)
Email: [email protected]

ABSTRACT

Industry 4.0 has also shown a major influence on the contemporary industrial
economy. Moreover, in the coming years, the potential effect of I-4 will become
immense, since virtually all industry and business sectors are making all their
effort to use industry 4.0 's strength.It is acknowledged that India is the world's
biggest importer of gold. Indians are highly intrigued and have heavy feelings
about gold. As a result, there has also been good growth over the past few years
in the gold loan industry. Looking to the India‟s economic growth and financial
inclusion perspective, gold lending NBFCs have, on the one hand, made a major
contribution by monetising the country's idle gold supply and on the other hand,
the NBFCs gold loan meets the customer funding needs particularly of rural and
unbanked communities of India. The vigorous growth and hostility of these gold
loans by NBFCs in penetrating the potential gold loan market demanded a
performance analysis of these Gold Loan NBFCs. The two giant gold loans
NBFCs Manappuram Finance Ltd. and Muthoot Finance Ltd have been
considered to analyse the financial performance based on elaborate and pertinent
ratios using CAMELS model. The present study found that, Muthoot Finance Ltd
scores better than Manappuram Finance Ltd in terms of Earnings Ratios; both the
companies have near similar Capital Adequacy Ratio; in terms of Net NPA Ratio,
Manappuram Finance Ltd scores better than Muthoot Finance Ltd. The study
also has evidence that the two companies have displayed proclivity in their
Liquid Assets Ratio and Debt to Equity Ratio.
Key Words: Gold, Gold Loan, NBFCs, CAMELS Model, t-test.

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 127

INTRODUCTION
Gold has always remained a centre of attraction for mankind since the beginning
of civilization. From the centuries mankind has strong impulse to own the
precious yellow metal. Gold is considered on the whole a valuable asset and an
emblem of wealth and prosperity. In India, the demand for gold is influenced due
to various factors such as socio-cultural and economic factors. As a custom, gold
is used and gifted in the form of jewellery on distinct social ceremonies such as
weddings and other auspicious occasions. For the centuries the Indian people
believes that gold has a 'store value' and has been the most preferred investment
avenue. Gold is a liquid asset, ability to beat inflation and the last resort in the
period of economic and financial distress. India has been the largest importers of
gold in the world. According to World Gold Council, India has more than10 per
cent of the total world's gold stock in its possession. A study of World Gold
Council reveals India's accumulated gold stock ranges in between 24000 to
25000 tonnes. In 2019, annual demand of gold is 690.4 metric tonnes which is the
third highest annual volume in the world.
Figure 1Annual demand volume of gold across India from 2010 to 2019 (in
metric tons)-

Source- World Gold Council

Due to huge gold stock in the country and greater than ever trend of borrowings
against gold have motivated and encouraged NBFCs to emerge as a 'specialized
gold loan companies'. These NBFCs plays an active role in the process of
economic growth of the country by monetizing the idle gold stock of the country
on one hand and fulfilling the short term financing needs of the people on the
other hand.

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 ISSN No.2349-6622
To capture the increasing demand of the gold loans, gold loan NBFCs are
expanding their operations at much faster pace by opening their new branches
throughout the country. This may drawinvestor‟s attentiontowards risk into these
types of NBFCs. Moreover, the recent financial crisis of IL&FS also point out the
need of more rigorous and frequent examination of non-banking entities. Present
study is an attempt to inspect financial performance based on CAMELS model
which similar to supervisory criteria followed for banking entities in India.
MANAPPURAM FINANCE LIMITED
Manappuram Finance Ltd. is the most popular gold loan provider NBFC
incorporated in 1992.It offers a variety of financial services including Gold Loan,
Micro Finance Loans, Vehicle and Equipment Finance, Housing Finance and
Other on-lending and insurance products. The above graph shows a well-
diversified portfolio including its core business of Gold Loan. Gold loan is the
highest contributing part in building AUM with 67.4% share in AUM for Q3 of
financial year2020.
MUTHOOT FINANCE
Muthoot Finance Ltd. is India‟s biggest gold financing company in terms of loan
portfolio. Its operations are pan-India in the gold loans sector. Muthoot Finance
Ltd It is the largest gold financing company in India in terms of loan portfolio.
Gross loans are around Rs.34,246 Cr comprising approximately 90% of total loan
portfolio.
Table 1 Comparison of Gold Loans Provided by Manappuram Finance Ltd
and Muthoot Finance Ltd
Comparison
Manappuram Muthoot
Criteria
Anyone above 18 years of age Anyone above 18 years of age
Eligibility with gold jewellery of 18 carats with gold jewellery of 18 carats
or more to pledge or more to pledge
Max/Min Loan
Up to Rs 1 crore Rs. 1,500 to Rs. 1 crore
Amount
Loan Tenure Up to 12 months Up to 15 months
Interest Rate Base rate + 3% onwards 14% onwards
Processing
Up to Rs. 200 Up to Rs. 500
Fees
Prepayment No penalty charges for
No prepayment penalty charges
charges prepayment
Penal interest rate depends on
Late Payment 3% on the outstanding principal
various factors and is printed on
Charges amount from the date of default
the loan agreement

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THE CAMELS MODEL
In the U.S., the CAMELS Rating System was developed as a supervisory rating
system to determine the financial health of a bank. CAMELS is an acronym
reflecting the six variables that are taken into consideration for the ranking. The
CAMELS ranking is not issued to the media, unlike other regulatory
measurements or scores. It is only used to consider and control future risks
through top management. On a scale of 1 to 5, supervisory authorities use scores
to rank each bank. The power of CAMEL lies in its capacity to recognise
sustaining and collapsing financial institutions.
The components of CAMELS are:
(C)apital adequacy
(A)ssets
(M)anagement capability
(E)arnings
(L)iquidity
(S)ensitivity
CAPITAL ADEQUACY
Capital adequacy assesses conformity of an organisation with minimum capital
reserves level legislation. Regulators determine a ranking by measuring the
existing and multi-year capital status of a financial institution. The future capital
state is estimated on the basis of future intentions of the institution, such as
whether they intend to offer dividends or buy another company. The CAMELS
inspector will also look at pattern research, capital structure, and capital liquidity.
ASSETS
The quality of assets is significant, when if they are high risk, the value of assets
will decline rapidly. Loans, for example, are a form of asset that can be
compromised if money is lent to a person at high risk. Along with credit threats
such as interest rate risk and liquidity risk, the investigator looks at the bank's
lending policy and loan activities. Consideration is given to the efficiency and
patterns of global properties. If a financial company has a history of losing value
from significant investments because of credit risk, they will earn a lower
ranking.
EARNINGS
Earnings help measure the long term sustainability of an institution. To be able to
expand its operations and sustain its competitiveness, a bank wants an acceptable
return. Specifically, the investigator investigates the stability of sales, the return

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 ISSN No.2349-6622
on assets ( ROA), the net interest margin ( NIM) and the potential for future
profits under harsh economic circumstances. The key earnings are the most
important when determining earnings. The core earnings are an institution's long-
term and predictable earnings that are influenced by the cost of one-time
products.
LIQUIDITY
For banks, liquidity is extremely critical as a bank run might result from the
absence of liquid resources. The interest rate risk and liquidity risk are discussed
in this group of CAMELS. Interest rates impact benefit from the company
division of the financial markets of a bank. If the risk of the interest rate is high,
the value of the fund and the loan portfolio of the organisation would be
unpredictable. Current and potential cash flow conditions without impacting
every day activities are defined as the risk of liquidity.
SENSITIVITY
The last group is sensitivity and the organisation tests its business risk sensitivity.
The oil loan market, medical loan and agricultural lending can be measured, for
example. Sensitivity indicates the amount of benefit that can all be conveyed by
Beta that influences interest rates, exchange rates and product prices. A score is
given from one to five for each group. One is the highest score which reflects
good institutional efficiency with risk management practises. Five is the lowest
ranking, on the other hand. This means that the bank is very likely to default and
that urgent steps need to be taken to validate the situation. If the actual financial
position of an entity ranges from 1 to 5, it is considered a composite ranking.
A scale of 1 means a good result, a good performance and aligns with the concept
of risk management. A 2 scale means that there are modest vulnerabilities in a
financially stable organisation. A scale of 3 means that the organisation has many
dimensions of supervisory importance. Scale 4 suggests that an institution has
dangerous procedures and is thus vulnerable because of severe financial
difficulties. A ranking of 5 indicates that an organisation has insufficient risk
management procedures as a matter of policy.
INDUSTRY 4.0 AND THE GOLD LOAN MARKETS
Industry 4.0 has also shown a major influence on the contemporary industrial
economy. Moreover, in the coming years, the potential effect of I-4 will become
immense, since virtually all industry and business sectors are making all their
effort to use industry 4.0 's strength. The de facto goals of this new model are

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 131

fulfilled by all major countries and big corporations spending tremendously in the
R&D centre operations and the specialists of the software development team.In
order to have a positive effect on all industries, the fourth industrial revolution
unfolded. The financial services sector is also one of the industries which has
made extensive use of the influence of Industry 4.0. Because of the optimistic
direction of digital advancement and the transformation of financial processes all
countries of the word, the finance, insurance, loans and mortgages, foreign
exchange, scrip and many other financial sectors flourish.
Mobile devices have become a new banking norm worldwide. The world's
leading mobile banking drivers are in the emerging regions like Asia Pacific and
Africa. In the United States more than 70 percent of shares are determined on the
basis of computer algorithms, while human experts take only below ten percent
of shares. This saves a great deal of financial consultancy fees. In Bangladesh,
technology-driven micro-loans have opened a period of disadvantaged rural
people‟s fiscal empowerment. The modern block-chain dependent crypto-
banking technology is about to change the finance industry radically quite soon.
In the Gold Loan Segment of fin-services, IT is the foundation of organisations
that are mainly targeted at helping to improve the top and bottom lines. In all
stages of organisational life cycle, technology supports the business growth to
brand retention to more efficient customer involvement. In the principalgold loan
portfolio and broader NBFC market, companies lend to the sections of customers
where the traditional banks usually don't deal with. Rapidly issuing loans is
another advantage. Therefore, IT helps in rational decisions made quickly to
guarantee easy loans to clients that come with greater credit risk. Analysis of the
consumer using data and the required technology for accessing this data is also
paramount. Operations costs have also drastically reduced due to automation of
recurring manual tasks.
REVIEW OF LITERATURE
Thilakam and Saravanan (2014)the authors attempted a CAMEL criterion for
analysis of selected NBFCs. They selected 36 NBFCs in Tamil Nadu out of
which 4 Government Companies, 13 Small Companies and 13 Small
Companies and another 13 Top Companies were also selected. They evaluate
the financial performance and based on findings the suggestions were
offered.Akter, R., Ahmad, S., & Islam, M. S. (2018) they studied 33 NBFIs in
Bangladesh by using CAMELS model. After the study they found that out of 33
NBFIs 1 was “1 or Strong”, 15 were “2 or Satisfactory”, 13 were “3 or Fair” and

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 ISSN No.2349-6622
3 were “4 or Marginal” according to the CAMELS rating at end of the
June2016.Attarwala, A. A., & Balasubramaniam, C. S. (2020) they identified
the NBFCs working in areas such as hire purchase, financing physical assets,
commercial vehicles and infrastructure loans. Their research study examined the
role of Reserve Bank of India (RBI) in protecting the public deposits with NBFCs
and for fostering overall financial stability in the economy.Sarker, A. (2005)
their study throws light on the collapse of Lehman Brothers. They study its
financial particulars of the last five years (2003-2007) using the CAMELS ratios.
Nimalathasan, B. (2008) they studied the banking sector of Bangladesh and
divided into four categories of scheduled Banks. These are Nationalized
Commercial Banks (NCBs), Government Owned Development Financial
Institutions (DFIs), Private Commercial Banks (PCBs), and Foreign
Commercial Banks (FCBs).They useddifferent statistical methods such as Data
Envelopment Analysis (DEA) and the Stochastic Frontier Approach (SFA).They
examined 48 Banks in Bangladeshfrom Financial year 1999-2006using
CAMELS rating system and showed that 3 banks was 01 or Strong, 31 banks
were rated 02 or satisfactory, rating of 07 banks was 03 or Fair, 5 banks were
rated 4 or Marginal and 2 banks got 05 or unsatisfactorily
rating.Venkateswaran (2012)found that organized gold loan market in India
grew at CAGR of 40 per cent during FY 2002-10.Sibi, M. S. (2014) their paper
covers the gold loan protection practices among borrowers in financial
institutions. The purpose of this paper was to collect the borrowers‟ opinion
towards protection practices followed by Banks and NBFCs. The objective was
achieved through primary data which was not the scope of our study. Mary
(2013) analysed that the demand for gold as an investment option was gaining
attraction among consumers of Cochin and Delhi. The research found that gold
ispriced sensitive at low prices but insensitive when price increases. Roy (2013)
using CAMEL model analysed that the gold loan NBFCs (Manappuram Finance,
Muthoot Finance and Muthoot Fincorp) used huge debt in their capital structure
formation, used aggressive lending policies and their lower liquidity policy put
them on the edge of high risk. Gupta (2014) in his study compared the Economic
value added (EVA) with the CAMEL indicatorsas an independent variable of
financial health of all public sector banks and 20 top private sector banks during
2003 to 2008. Their results revealed that EPSand Return on Net Worth were
better predictor of financial health of banks followed by EVA over the other

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indicators.Kumar and Sharma (2014) studied and analyzed the performance of
the top 8 market capitalized banks by using CAMEL approach during the period
2006-10. The study showed that SBI was top performer followed by PNB and
HDFC bank. Malhotra and Aspal (2014)studied the financial performance of
the private sector banks in India by using the CAMELS model during 2008-2012.
The study identified no significant difference in CAMELS ratios among the
selected private sector banks. The study found that Kotak Mahindra bank
hasbetter performance followed by Axis bank and lastly ICICI bank in terms of
performance.
OBJECTIVE OF STUDY
The financial condition and performance of two the chief gold loans NBFCs -
Manappuram Finance Limited and Muthoot Finance Limited using the CAMEL
model are analysed and compared.
HYPOTHESIS
Manappuram Finance Ltd. and Muthoot Finance Ltd. have no sizeabledifference
in their results based onthe CAMELS Models.
RESEARCH METHODOLOGY
CAMELS model is widely accepted ratio-based model commonly used to
measure the efficiency of the banks. CAMELS model covers financial
performance ratios i.e. capital adequacy, asset quality, management efficiency,
earning capacity, liquidity and sensitivity ratios of a particular financial
institution. CAMELS model has been used by RBI as supervisory criteria to
evaluate the financial soundness of the NBFCs. The two biggest gold loan
NBFCs namely- Manappuram Finance Limited and Muthoot Finance Limited are
selected on the basis of their market share in the gold loan market. To achieve the
stated objective, CAMELS model has been used to evaluate the financial
performance of the two selected companies. The study is focused on the
secondary data collected from the annual reports of the companies, distinct
journals, articles and websites. The data is analyzed with the help of arithmetic
mean. Independent t-test also used to check the significance difference in the
mean scores of various ratios of the two selected companies.
ANALYSIS AND FINDINGS
This section contains the ratio analysis for the two companies based on the
various metrics and ratios analysed under the CAMELS framework of ratio
analysis for banks and NBFCs. The ratio analysis is displayed; a test for

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comparison of means is also applied to find out whether, based on a particular
ratio there is substantial difference amongst the two companies.
Table 2: Mean Values of the Ratios
Muthoot Finance Manappuram Finance
Metric
Ltd Ltd
Return on assets (%) 5.7 4.6
Return on equity (%) 22.0 21.1
RoCE 23.9 21.8
PAT (Rs Billion) 17.8 8.4
Basic EPS (Rs.) 43.8 8.4
EV/EBITDA 7.5 5.7
Enterprise Value („000 Crore) 38.6 18.2
Net NPA 2.9 0.7
PBDIT Margin (%) 77.0 69.1
PBIT Margin (%) 75.8 66.7
PBT Margin (%) 39.5 34.2
Net Profit Margin (%) 25.8 22.9
CAR 25.5 24.5
Liquid Assets to Total Assets 4.99 4.42
Debt to Equity (Proxy for
2.7 2.8
Sensitivity)
Table 1, above shows the mean values for the metrics and ratios presented in
column 1 along with their values in column 2 and column 3 for Muthoot Finance
Limited and Manappuram Finance Limited respectively.
Table 3 Earnings Ratios
Muthoot Finance Ltd Manappuram Finance Ltd
201 201
6 2017 2018 2019 2020 6 2017 2018 2019 2020
Return
on assets
(%) 3.3 4.5 6.4 6.3 8.1 3.0 5.4 4.0 4.9 5.9
t-test t- calculated = 1.09; p value = 0.30, Result - Accept Null of H0: Mean Diff
=0
Return
on
equity
(%) 15.1 19.4 24.8 22.4 28.3 12.8 24.7 17.8 22.1 28.2
t- calculated =0.25; p value = 0.80 , Result - Accept Null of H0: Mean
Diff = 0
RoCE 6.7 36.9 16.3 28.7 30.7 8.5 39.4 13.1 24.0 24.2
t- calculated = 0.26; p value = 0.79 , Result - Accept Null of H0: Mean
Diff = 0
PAT (Rs
Billion) 8.1 11.8 17.8 19.7 31.7 3.5 7.6 6.8 9.4 14.8
t- calculated = 2.11; p value = 0.0757 , Result –Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.03)

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 Basic
EPS
(Rs.) 20.3 29.6 44.5 49.3 75.3 3.5 7.6 6.8 9.4 14.8
t- calculated = 3.68; p value = 0.017 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.0087)
EV/EBI
TDA 5.4 7.1 7.7 9.3 8.1 4.7 5.3 6.5 6.7 5.4
t- calculated = 2.4; p value = 0.044 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.022)
Enterpris
e Value
(„000
Crore) 20.0 30.2 36.9 49.7 56.0 10.3 16.0 18.9 22.8 23.2
t- calculated = 2.9; p value = 0.02 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.01)
We apply t- test on the ratio, Return on Assets for the two companies i..e.
Muthoot Finance Limited and Manappuram Finance Limited for the period 2016
to 2020, to test whether there exists substantial difference between their Return
on Assets. As the calculated t value is less than the critical t value and therefore
the null hypothesis that the mean difference is equal to zero cannot be rejected
implying that there is no substantial difference between the Return on Assets for
the two companies.
We apply T test on the ratio return on equity for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016-2020 to
test whether there exists a substantial difference between the return on equity. as
the calculated t value is less than the critical t value and therefore the null
hypothesis that the mean difference is equal to zero cannot be rejected implying
that there is no substantial difference between the return on equity for the two
companies.
We apply T test on the ratio return on capital employed for the two companies
Muthoot Finance Limited and Manappuram Finance Limited for the period 2016
to 2020 to test whether there exist a substantial difference between the return on
capital employed. as the calculated t-value is less than the critical P value and
therefore the null hypothesis that the mean difference is equal to zero cannot be
rejected implying that there is no substantial difference between the return on
capital employed for the two companies.
We apply t-test on the metric, profit after tax in billion rupees, for the two
companies Muthoot Finance Limited and Manappuram Finance Limited for the
period 2016 to 2017 to test whether there exist a substantial difference between
the profits after tax for the two companies. As the calculated t- value is greater
than the critical t value, therefore we cannot reject the null hypothesis that the

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 ISSN No.2349-6622
mean difference is equal to zero consequently we accept the alternative
hypothesis that the mean difference is greater than zero. Implying that Muthoot
Finance Ltd. has a substantially higher PAT than Manppuram Finance Ltd.
We apply t-test on the metric, Basic EPS, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exists a substantial difference between the Basic EPS for the
two companies. As the calculated t- value is greater than the critical t value,
therefore we cannot reject the null hypothesis that the mean difference is equal to
zero consequently we accept the alternative hypothesis that the mean difference is
greater than zero. Implying that Muthoot Finance Ltd has a substantially higher
Basic EPS than Mannauram Finance Ltd.
We apply t-test on the metric, EV/EBITDA, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exists a substantial difference between the EV/EBITDA for
the two companies. as the calculated t- value is greater than the critical t value,
therefore we cannot reject the null hypothesis that the mean difference is equal to
zero consequently we accept the alternative hypothesis that the mean difference is
greater than zero. Implying that Muthoot Finance Ltd has a substantially higher
EV/EBITDA than Mannauram Finance Ltd.
We apply t-test on the metric, Enterprise Value, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exist a substantial difference between the Enterprise Value
for the two companies. as the calculated t- value is greater than the critical t
value, therefore we cannot reject the null hypothesis that the mean difference is
equal to zero consequently we accept the alternative hypothesis that the mean
difference is greater than zero. Implying that Muthoot Finance Ltd has a
substantially higher Enterprise Value than Mannauram Finance Ltd.

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 137

 Figure 2: Mean Earnings Ratios

Mean of Earnings Ratios

50 43.8
45 38.6
40
35
30 23.921.8
25 2221.1
17.8 18.2
20
15
8.4 8.4 7.5 5.7
10 5.7 4.6
5
0
Return on Return on RoCE PAT (Rs Basic EPS EV/EBITDA Enterprise
assets (%) equity (%) Billion) (Rs.) Value (‘000
Crore)

Muthoot Finance Ltd Manappuram Finance Ltd

Figure 02 above displays a comparison of the means of the earnings ratios for the
two companies.
Table 4 Profitability Ratios
Muthoot Finance Ltd Manappuram Finance Ltd
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
PBDIT
Margin
(%) 76.8 74.4 76.9 77.8 79.0 65.7 72.3 65.2 67.4 74.8
t- calculated = 3.9; p value = 0.02 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.0042)
PBIT
Margin
(%) 73.5 73.5 76.2 77.2 78.5 63.3 70.4 63.2 65.4 71.2
t- calculated = 4.5 ; p value = 0.002 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.001)
PBT
Margin
(%) 27.0 33.5 45.3 44.7 46.5 23.4 37.0 36.0 35.6 38.9
t- calculated = 1.09; p value = 0.30 , Result - Accept Null of H0: Mean
Diff = 0
Net
Profit
Margin
(%) 16.6 20.5 28.3 28.6 34.6 15.2 24.1 23.5 23.1 28.5
t- calculated = 0.7; p value = 0.47 , Result - Accept Null of H0: Mean
Diff = 0

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 ISSN No.2349-6622
Figure 3: Mean of Profitability Ratios

Mean of Profitability Ratios

90
77 75.8
80
69.1 66.7
70
60
50
39.5
40 34.2
30 25.8 22.9
20
10
0
PBDIT Margin (%) PBIT Margin (%) PBT Margin (%) Net Profit Margin (%)

Muthoot Finance Ltd Manappuram Finance Ltd

Figure 03 above displays a comparison of the means of the profitability ratios for
the two companies.
We apply t-test on the metric, PBDIT Margin, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exist a substantial difference between the PBDIT Margin for
the two companies. As the calculated t- value is greater than the critical t
value, therefore we cannot reject the null hypothesis that the mean difference is
equal to zero consequently we accept the alternative hypothesis that the mean
difference is greater than zero. Implying that Muthoot Finance Ltd has a
substantially higher PBDIT Margin than Mannauram Finance Ltd.

We apply t-test on the metric, PBIT Margin, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exist a substantial difference between the PBIT Margin for
the two companies. as the calculated t- value is greater than the critical t
value, therefore we cannot reject the null hypothesis that the mean difference is
equal to zero consequently we accept the alternative hypothesis that the mean
difference is greater than zero. Implying that Muthoot Finance Ltd has a
substantially higher PBIT Margin than Mannauram Finance Ltd.
We apply t-test on the metric, PBT Margin, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exists a substantial difference between the PBT Margin for
the two companies. As the calculated t- value is less than the critical t value,

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 139

therefore we accept the null hypothesis that the mean difference is equal to zero
consequently there is no substantial difference between, PBT Margin between
two companies.
We apply t-test on the metric, Net Profit Margin, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exists a substantial difference between the Net Profit Margin
for the two companies. As the calculated t- value is less than the critical t
value, therefore we accept the null hypothesis that the mean difference is equal to
zero, consequently there is no substantial difference between, Net Profit Margin
between two companies.
Table 5 Capital Adequacy Ratios
Muthoot Finance Ltd Manappuram Finance Ltd
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
26.1
CAR 24.5 24.9 26.3 26.05 25.5 24 2 27 23.65 21.7
t- calculated = 0.95; p value = 0.37 , Result - Accept Null of H0: Mean
Diff = 0

We apply t-test on the metric, CAR, for the two companies Muthoot Finance
Limited and Manappuram Finance Limited for the period 2016 to 2017 to test
whether there exist a substantial difference between the Capital Adequacy Ratio
(CAR) for the two companies. As the calculated t- value is less than the critical
t value, therefore we accept the null hypothesis that the mean difference is equal
to zero, consequently there is no substantial difference between, CAR between
two companies.
Figure 4: Mean Capital Adequacy Ratio

Mean Capital Adequacy Ratio

25.6 25.5
25.4
25.2
25
24.8
24.6 24.5
24.4
24.2
24
Muthoot Finance Ltd Manappuram Finance Ltd

Figure 04 above displays a comparison of the mean of the Capital Adequacy

Ratio for the two companies.

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Table 6 Asset Quality
Muthoot Finance Ltd Manappuram Finance Ltd
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Net
2.46 1.69 6.16 2.35 1.93 0.76 1.72 0.33 0.32 0.54
NPA
t- calculated = 2.52; p value = 0.050 , Result – Reject the Null of H01:
Mean Diff = 0 and H01: Mean Diff> 0 ( for p = 0.025)
We apply t-test on the metric, Net NPA Ratio, for the two companies Muthoot
Finance Limited and Manappuram Finance Limited for the period 2016 to 2017
to test whether there exist a substantial difference between the Net NPA Ratio for
the two companies. As the calculated t- value is greater than the critical t
value, therefore we cannot reject the null hypothesis that the mean difference is
equal to zero consequently we accept the alternative hypothesis that the mean
difference is greater than zero. Implying that Muthoot Finance Ltd has a
substantially higher Net NPA Ratio than Mannauram Finance Ltd.
Figure 5: Mean Net NPA Ratio

Mean Net NPA Ratio

3.5

2.5

1.5

0.5

0
1 2

Figure 05 above displays a comparison of the mean of the Net NPA ratio for the
two companies.
Table 7 Liquid Assets
Muthoot Finance Ltd Manappuram Finance Ltd
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Liquid
Assets
to Total 2.5 5.08 1.59 4.6 11.2 4.1 3.13 3.01 2.5 9.4
Assets
(%)
t- calculated = 0.25; p value = 0.79 , Result - Accept Null of H0: Mean
Diff = 0

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 141

 We apply t-test on the metric, the Liquid Assets To Total Assets, for the two
companies Muthoot Finance Limited and Manappuram Finance Limited for the
period 2016 to 2017 to test whether there exist a substantial difference between
the Liquid Assets To Total Assets for the two companies. As the calculated t-
value is less than the critical t value, therefore we accept the null hypothesis that
the mean difference is equal to zero; consequently there is no substantial
difference between, LIQUID Assets to Total Assets between two companies.
Figure 6; Mean of Liquids Assets to Total Assets

Liquid Assets to Total Assets (%)

5.1
5
4.9
4.8
4.7
4.6
4.5
4.4
4.3
4.2
4.1
Muthoot Finance Ltd Manappuram Finance Ltd

Figure 06 above displays a comparison of the mean of the Liquid Assets to Total
Assets Ratio for the two companies.
Table 8 Sensitivity
Muthoot Finance Ltd Manappuram Finance Ltd
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Debt
to 2.43 2.61 2.71 2.74 3.21
2.88 2.48 2.69 2.9 3.27
Equity
t- calculated = -0.56; p value = 0.58 , Result - Accept Null of H0: Mean
Diff = 0

We apply t-test on the metric, the Debt to Equity Ratio, for the two companies
Muthoot Finance Limited and Manappuram Finance Limited for the period 2016
to 2017 to test whether there exists a substantial difference between the Debts to
Equity Ratio for the two companies. As the calculated t- value is less than the
critical t value, therefore we accept the null hypothesis that the mean difference is
equal to zero;consequently, there is no substantial difference between, Debts to
Equity Ratio between two companies.

142 UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020

 ISSN No.2349-6622

Figure 7: Mean Debt to Equity Ratio

Debt to Equity
2.82
2.8
2.78
2.76
2.74
2.72
2.7
2.68
2.66
2.64
Muthoot Finance Ltd Manappuram Finance Ltd

Figure 07 above displays a comparison of the mean of the Debt to Equity Ratio
for the two companies.

FINDINGS
Based on the findings of the t-test, the return on assets (ROA) of the two firms is
not substantially different.
Based on the findings of the t-test, the return on equity (ROE) of the two firms is
not substantially different.
Based on the findings of the t-test, the return on capital employed (RoCE) of the
two firms is not substantially different.
Based on the findings of the t-test, Profit After Tax of the two firms are
substantially different. The PAT reported by Muthoot Finance Ltd is higher than
that of Manappuram Finance Ltd.
Based on the findings of the t-test, Basic EPS of the two firms are substantially
different. The Basic EPS reported by Muthoot Finance Ltd is higher than that of
Manappuram Finance Ltd.
Based on the findings of the t-test, EV/EBITDA of the two firms are substantially
different. The EV/EBITDA reported by Muthoot Finance Ltd is higher than that
of Manappuram Finance Ltd.
Based on the findings of the t-test, Enterprise Value of the two firms are
substantially different. The Enterprise Value reported by Muthoot Finance Ltd is
higher than that of Manappuram Finance Ltd.

UNNAYAN | Volume-XII | (Conference Special Issue) Dec.2020 143

Based on the findings of the t-test, PBDIT Margin of the two firms are
substantially different. The PBDIT Margin reported by Muthoot Finance Ltd is
higher than that of Manappuram Finance Ltd.
Based on the findings of the t-test, PBIT Margin of the two firms are substantially
different. The PBIT Margin reported by Muthoot Finance Ltd is higher than that
of Manappuram Finance Ltd.
Based on the findings of the t-test, the Profit Before Tax Margin (PBT Margin) of
the two firms is not substantially different.
Based on the findings of the t-test, Net Profit Margin of the two firms are
substantially different. The Net Profit Margin reported by Muthoot Finance Ltd is
higher than that of Manappuram Finance Ltd.
Based on the findings of the t-test, the Capital Adequacy Ratio (CAR) of the two
firms is not substantially different.
Based on the findings of the t-test, Net NPA Ratio of the two firms are
substantially different. The Net NPA Ratio reported by Muthoot Finance Ltd is
higher than that of Manappuram Finance Ltd.
Based on the findings of the t-test, the Liquid Assets to Total Assets Ratio of the
two firms is not substantially different.
Based on the findings of the t-test, the Debt to Equity Ratio of the two firms is
not substantially different.
CONCLUSION
This study aims at evaluating and contrasting the two NBFC gold finance
companies namely- Manappuram Finance Ltd and Muthoot Finance Ltd,
explicitly based on the CAMELS model. Based on the findings of the study we
may conclude that – Muthoot Finance Ltd has scored better in terms of
Profitability Ratios compared to Manappuram Finance Ltd. Although in terms of
ROA, ROE and ROCE the two companies have proclivity in trends, yet Muthoot
Finance Ltd has scored better in terms of PAT in absolute terms, Basic EPS (in
rupee terms), EV/EBITDA Ratio and Absolute Enterprise Value. In conclusion,
Muthoot Finance Ltd scores better than Manappuram Finance Ltd in terms of
Earnings Ratios. Both the companies have near similar Capital Adequacy Ratio.
In terms of Net NPA Ratio, Manappuram Finance Ltd scores better than Muthoot
Finance Ltd. The two companies have finally displayed proclivity in their Liquid
Assets Ratio and Debt to Equity Ratio.

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 ISSN No.2349-6622
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