Gold loan firms keeping their ‘powder dry’ for a busy season ahead
KOCHI: Manappuram Finance, the leading gold loan company, is busy building a strong backstop, despite a large cash balance, for the post-COVID period when the demand for gold loan is set to soar as an imminent economic downturn could make many poorer than before needing for immediate money.
The company, which sits on a fairly large cash balance of Rs3645.94 crore as of March 31, 2020 compared with Rs1164.20 crore a year ago, has decided to raise Rs500 crore more through a private placement of NCDs.
With most businesses going through one of their toughest periods in history and tens of thousands of overseas workers making beeline to return to India for good due to the COVID 19, income source for tens of thousands of daily wage workers and private sector employees coming to a grinding halt, there are clear indications that demand for gold loans will zoom in the coming months as a last resort for those who are left in dire straits.
VP Nandakumar, the managing director and chief executive of Manappuram said at the portfolio level the average loan-to-value (LTV) of the existing customers is less than 60 per cent against the RBI limit of 75 per cent giving further headroom to borrow more without the need for additional collateral.
The total consolidated borrowings of the company stood at Rs21,817 crore, but the cost has gone up. The standalone average cost of fund in Q4 has increased to 9.46 per cent from 9.12 per cent in Q3, thanks to the liquidity crisis the NBFCs are exposed to.
“During the fourth quarter, we raised Rs3,978.8 crore, through US bonds, made NCD private placement of Rs1,350 crore and raised term loans of Rs500 crore,” said the company’s chief financial officer.
The CFO also said the company’s maturities will be Rs1,800 crore over the next two months, which will be basically from the commercial paper (CP).
Nandakumar said the loan guarantee scheme of Rs75,000 crore for NBFCs and the MFIs announced by the Union Finance Minister Nirmala Sitharaman would help in easing the liquidity challenges faced by the NBFCs.
“Both the government and RBI are fully committed to do whatever it takes in addressing the challenges of the pandemic. Going forward, we expect demand to rise once restrictions come off and the businesses are let off to grow,” he added.
The company reported a full year consolidated profit after tax of Rs1,461.8 crore, a sharp increase of 55.7 per cent over the previous year’s figure of Rs938.9 crore.
Consolidated net profit for Q4 ended March 31, 2020 stood at Rs392.7 crore compared with Rs274.6 crore recorded in the year-ago quarter.