Financial Express

Shrugging off the temporary slowdown market conditions, gold loan major Manappuram Finance has said that demand is picking up steadily, and gold loans will continue to be attractive in the long run. VP Nandakumar, MD & CEO, Manappuram Finance tells Sajan C Kumar that expects growth in gold loan AUM, going forward, though the company experienced a decline in the third quarter. Excerpts:

Manappuram has reported a second consecutive quarter of decline in gold loan AUM? What are the reasons for it and going forward, what is your outlook on the same?

There was a slight dip of 3% in the consolidated gold loan AUM. But we are not unduly worried about it as this is the rebuilding phase after Covid-19 cast its shadow in all spheres. In our experience, demand is picking up steadily and once it returns to pre-Covid levels, especially at the bottom of the pyramid, we will go full steam ahead. As you would have observed, gold prices increased during the previous quarter and this will also stand us in good stead. Gold loans will continue to be attractive in the long run and we expect growth in gold loan AUM, going forward.

Is it fair to assume that Manappuram focused on its non-gold product segments and transforming into a diversified NBFC to reduce dependence on deep cyclicality in gold loan growth? Or the pressure on competition and pricing is playing spoilsport?
Though competition is there, I do not agree with the reasoning that it plays spoilsport. There is enough unsatiated demand for gold loans in India which will ensure that all players can co-exist without erosion of profitability as this is a hassle-free means of availing a loan. But as an NBFC, we have taken a conscious decision to diversify into other areas. For instance, we are now targeting small businesses and niche areas such as the healthcare sector more aggressively. Our corporate loan book has crossed Rs 500 crore. Non-gold book is now 42% of the total portfolio. We are well and truly on our way to be a well-diversified NBFC.
Now, non-gold segments contribute 42% to the consolidated AUM mix? Going forward, when do you think the split between the two will reach 50:50?
Yes, exactly this is the kind of portfolio mix we are looking at and we are getting closer to that target with every successive quarter. But it is important to understand that this does not mean that our gold loan AUM will decline. What it means is that you will see the non-gold portfolio expand quite significantly. In another three years, we should see this kind of business mix fructify.
How has been the overall third quarter in terms of performance?
Q3 has been quite good. Profitability increased by 50.5% year-on-year. For the nine months ended December 2022, we closed with a net profit of Rs 1,100 crore. We have increased the share of non-gold portfolio from 37% in Q2 to 42% in Q3 which is in line with our diversification strategy. The MFI subsidiary Asirvad posted a net profit of Rs 70 crore and an AUM of Rs 8,653 crore. Capital adequacy continues to be strong at 32.86%, well above the minimum norm of 15%. Overall financial metrics look good.
Outlook for FY24? AUM and disbursement growth targets?
FY24 is expected to be a year of global slowdown and this may have a limited impact on India as well. One of the consequences could be that the demand for gold will go up as it is a safe-haven asset. So, our AUM finds support on account of an increase in gold prices as well as demand for gold as a commodity. We expect a reasonable increase in gold loan AUM during FY24. Disbursements will also go up by a similar proportion.
Any major expansion plans for non-gold segment, like MFI, vehicle finance and housing loans?
As said earlier, we continue to expand our non-gold portfolio. The MFI segment is clearly doing well and grew by 22% compared with the previous year’s quarter. Similarly, the home loan book has grown by 23% and vehicle finance portfolio by 39.9% year-on-year. The MSME and allied portfolio is another sector where we have recorded maximum growth. We are also carefully assessing the evolving macro-economic situation in terms of demand and consumption patterns and will take informed decisions on target locations to expand the business.

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