Expect 10-15% growth in FY16: Manappuram Gen Finance

Monday, March 14, 2016
Product restructuring will boost quality of earnings in the fourth quarter, says VP Nandakumar, MD & CEO of Manappuram General Finance. He expects a 10-15 percent growth in the current year.

The company has recently diversified into different verticals like commercial vehicles (CVs) and lending to medium and small manufacturing enterprises (MSMEs) that will add to the growth, he adds.

This year (first), Mannapuram expects CV portfolio to be at Rs 125-140 crore and grow to Rs 350-400 crore next year. MSME portfolio will be at Rs 50 crore in the first year and is expected to grow to Rs 150-200 crore in the subsequent year.

Adding to the growth will also be the company’s newly added Gold Loan facility, which ensures timely interest collection and comfort to the customers, he says.

Below is the transcript of VP Nandakumar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Last quarter was quite good, you saw a 15 percent disbursement growth quarter-on-quarter. What about Q4? How has it shaped up so far and what is the expectation on disbursement?
A: Q4 also, the quality of our earnings will be better, because of the product restructuring. Earlier, one year loan has been brought down to three year loan. So, the collections are better. And also because of the thrust we give to regular interest collection at monthly rests mostly. This has improved the quality of the asset. So, the earnings would be better. That is major reason.

Latha: Did I get you right? What you are saying is that now, you are giving more shorter term loans and instead of a bullet repayment at the end of the loan term, you are taking monthly or quarterly repayments?
A: No, monthly interest collection has been strengthened. For that, the technology is of help to us because we have introduced an online payment system whereby the customer can use his mobile and through his mobile, he is in a position to make payments from anywhere in the world 24x7. So, this has given comfort to the customers. So, because of this, the collections has become almost regular. That is the major reason.

And through this we are able to get growth also. We are expecting a growth of around 10-15 percent. Last quarter also, we are expecting almost the same growth. The other thing is our diversification . We have recently diversified into three areas either through subsidiary route or from our own books. These are also going well. These are the major reasons.

Sonia: The last time when we spoke with you, you said that the diversifications had just begun, so it would be too early to give us any details. But tell us a little bit about the commercial vehicle (CV) business, the housing and the microfinance business that you have diversified into and what kind of growth do you expect to see from those verticals over the next one to two years?
A: One diversification is into CV area. During the first year of operation, our portfolio would be expected to be around Rs 125-140 crore during the first year. And we expect that to grow to a reasonable size to around Rs 350-400 crore in the next year. And the quality of the assets so far is very good and our primary thrust is to maintain the quality.

Regarding the other diversification into home finance through a 100 percent subsidiary, that also is showing a reasonable growth with quality assets too. Our yield there is around more than 14 percent. We expect that to grow to around more than 15 percent with some small and medium enterprise (SME) lending also, which is permissible for a home finance company.

The other diversification is lending to micro, small and medium enterprises (MSME) with a collateral security option. That also is growing. It will be around Rs 50 crore during the first year. Next year, that is expected to grow to around Rs 150-200 crore. So these are all growing.

Then we are going to microfinance, through an inorganic route acquiring Asirwad Microfinance company. Since we took it over, that company has grown to around more than Rs 900 crore and next year, I hope the company can grow and reach as high as nearly Rs 2,000 crore. This is our expectation.

So these initiatives are going well. We provide them regular support. In microfinance we have the highest stake of 91 percent now. These are the areas. So, a few things I can shortlist.

One because of the collection efficiency, we have introduced even in gold loan, we have efficiently introduced monthly collection system, especially giving support to the customer through technology. And recently we have introduced online gold loan where our customer can park their gold in any of our branches and avail the loan at anytime of his choice.

Latha: If you can just give us two numbers. What is the kind of overall gold assets under management (AUM) growth you are seeing in FY17 and what percentage of your total AUM will be your non-gold business in FY17?
A: FY17, we have projected around 15 percent AUM growth in gold. In other areas, all put together would be around Rs 2,500-3,000 crore. These are our projections and we expect a bottomline also to grow at a rate of 20-25 percent.

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