Manappuram Finance expects gold loan AUM to grow 10% annually: MD

VP Nandakumar, MD & CEO, Manappuram Finance, says “along with our gold loan portfolio, we are growing our secured MSME, commercial vehicles portfolios because we have a very large customer base both in Manappuram and the subsidiaries. In these secured segments, our penetration compared to our potential has come to only one-fifth.”

Manappuram Finance gold loan AUMs have seen an 8% growth in Q2. You have maintained that you are going to be maintaining the pricing discipline as well. How is this strategy going to fare with regards to growth, given the competition in gold loans now?
We expect gold loan AUM to grow around 10% annually and we expect that to grow because the coming quarters are usually better for gold loans. More importantly, we have other secured portfolios. We are growing those portfolios along with our gold loan portfolio like secured MSME, commercial vehicles etc. because we have a very large customer base both in Manappuram and the subsidiaries. In these secured segments like commercial vehicles as well as secured MSME, our penetration compared to our potential has come to only one-fifth. We have that opportunity along with gold. In gold, we expect that in the coming quarters, we will have targeted annual growth of around 10%.

You have also been able to pass on the higher costs of borrowings unlike what some of your peers have managed to do and who had to shed yields. Keeping in mind the kind of competition that we are seeing in the space, where do you see your spreads headed?
In the gold loan segment, there are many players but the segment we are into is small ticket size. The average ticket size is around Rs 50,000 and these are short-term loans in the sense that the average loan period is around 100 days. In this segment, what is most sought after is the quick delivery of service and also the service at the doorsteps wherever required. In these areas, there is enough headroom for us to play. So the competition is there in different segments of gold loan. In these segments, we feel like we have a lot of roles to play.

What is your outlook then on growth in the gold loan and the non-gold business?
Our target is to grow at a rate of 20% annually and deliver an ROE of 20%. We are going that path so we are on the track only. We have no issue there.

What is your plan for the IPO of your subsidiary, the Asirvad MFI? The DRHP was filed a month ago and a Rs 1,500-crore IPO was planned. When will it be out in the market and what kind of value unlocking can happen for Manappuram?
I cannot talk further on this as we have filed the DRHP because whatever has been filed that we can disclose is whatever has been already disclosed. Other than that, I have the constraints but what I can say is we have filed the DRHP around one month back and we are getting a few queries which have been promptly answered.

Usually from the market what we understand is the time usually taken is around 100 days. So we expect that to be cleared within 100 and 120 days but at the same time, I can only say that the decision is with Sebi only.

Sure we appreciate that you cannot talk much because of the regulatory requirements. Let us talk about the asset quality as a whole. RBI seems to have raised a red flag when it comes to the unsecured loan for the book of Asirvad and for yourself as well. What kind of asset trends are you witnessing? Anything that should be a concern?
RBI has not raised any red flag. Post Covid, the asset quality remains good. The asset quality is not at all worse than the peers. It remains strong.