Manappuram Finance looks to acquire microfinance companies in North and East

Tuesday, August 09, 2016
South-based gold loan provider Manappuram FinanceBSE -4.38 % is on the prowl for acquisition of microfinance companies as it looks to grow its share of non-gold loans, riding on the sector's success story.

Manappuram said it is currently in talks with a few entities in the north and east, but is yet to zero in on its preferred candidates.

"We want to acquire MFIs in the north and east," Manappuram finance managing director VP Nandakumar told ET over the telephone.

The acquisitions will help Manappuram reduce its share of gold loans, which account for 88 per cent of the consolidated portfolio, and raise priority sector loan books even as it keeps its eyes firmly on universal banking licence.

Its total assets under management stood at Rs 11,433 crore at the end of March, according to a recent presentation to investors.

Reserve Bank of India has put up bank licences on-tap, and said that new banks should maintain 40 per cent priority sector target from the beginning. Gold loans does not come under priority sector.

"At first, we would like to come as an investor or promoter. And eventually, these entities can be merged with Asirvad Microfinance to create a bigger one," the chief promoter of Manappuram said.

"We are looking at MFIs outside south India to eliminate geographic concentration and the risks associated with it. The risk in MFI business is mainly political," he said.

Manappuram took over south-based Asirvad in February last year and has an 85per cent stake in it. Nandakumar said that the acquisition has proven to be successful one with the MFI nearly trebling its loan portfolio to Rs 998 crore at the end of March 2016 from a year ago. Its net profit also trebled to Rs 14 crore in FY16.

The microfinance sector has come out of the woods since the disastrous 2010, and has been growing steadily ever since. The aggregate gross loan portfolio of all MFIs stood at Rs 53,233 crore, reflecting an 84 per cent year-on-year growth, with banks and investors loosening their purse-string.

Manappuram is also planning to enter the micro housing loan segment to grow non-gold loan business.

"The banking licence guidelines seem to be more positive for us than expected," Nandakumar said, adding that the company has gone back to the drawing board to examine it thoroughly.