Manappuram plans to buy Fintech co, enter SME space

Tuesday, August 30, 2016
By Sumit Moitra, DNA India

Kerala firm is trying to reduce dependence on key business of loans against gold

Manappuram Finance, one of the largest gold loan companies, is on the acquisition prowl again. This time, it is looking for fintech companies, particularly those in the lending space.

Kerala-based Manappuram is now trying to reduce its dependence on its key business of loans against gold and had earlier acquired a micro-finance company and a housing finance outfit in 2014 to diversify its business.

“We are keen to acquire a fintech company by acquiring majority stake in a company that provides loans. This would help us to get into new-age technology-based lending. We are interested in looking at existing companies having good RoE (Return on Equity). Few proposals have been received and are being evaluated,” V P Nandakumar, managing director and CEO, told dna.

The gold loan business, which by FY17 would continue to contribute 85% of Manappuram’s revenues, is also getting transformed, for which it needs a strong technology base, he said.

Fintech companies like LoanTap or Deal4loans are NBFCs providing loans from their own funds while there are some acting as aggregators.

“Entry into non-collateralised lending would be assisted through better data gathering, their accurate analysis on a timely basis which can happen only if we have a strong technology base,” Manappuram’s founder Nandakumar said on the sidelines of Indian Chamber of Commerce Banking Summit.

Nandakumar has been trying to convert a legacy business to a new-age financial services provider and has already prepared its own in-house fintech capabilities. But to exploit available technologies to its fullest, Manappuram needs to have a dedicated fintech outfit, which, in the long term, would help the current gold loan provider become a full-fledged digital bank of the future.

“Our in-house team has developed an app which can be used to avail instant loans against gold anytime of the day,” he said.

Manappuram head believes technology would be increasingly playing a crucial role in banking and lending activities. Many of the new-generation banks for which licences are being given out by the Reserve Bank of India would be heavily dependent upon technology platforms.

Manappuram also sees opportunities in the SME lending space and exploring the opportunity in investing in such NBFCs.

“We were earlier insisting on having a majority stake in such lenders which turned out to be difficult as promoters weren’t willing to give away control. We are now planning to invest and pick up stake in these companies,” Nandakumar said.