MANAPPURAM FINANCE LTD; STOCK CALL

                              

         CMP 49.3                          BSE 17707

• Purely on TECHNICALS, on the upside, resistances at 52 followed by 55 and then at 60 levels.
• On the downside, supports exist  at 45 followed by 42 levels.
• Corporate financial performance in general and in the past two Quarters, in particular, has been good and pretty ambitious growth guidance has been given by the Company.
• So purely on the above basis the Scrip seems a value buy. However, there are two major boo-boos which are material here ; one, the recent ban by RBI on the basis of the Company accepting deposits in the name of  an unlisted entity called Mannapuram Agro Farms followed by the rather unconvincing reasoning given by the Management that the deposits were accepted 'under the customers' own volition' and that 'it was an error of judgement' and two, the nascent sector that the company operates in with minimal and rather hazy regulation currently which could at some time in the future make the Sector perhaps go down the same path as did the Microfinance Sector.

The above two reasons are enough for the conservative in me to NOT look at the Company as a long term portfolio pick. Sure, there could be a short term bounce which could take the Scrip to 60 or thereabouts but as an investment idea for Retail Investors, the Scrip is an AVOID, in my opinion.