Manappuram’s bond pricing surprises market

Notes priced at 5.9 pc against Muthoot’s 6.125 pc

KOCHI: Manappuram Finance, which has always been playing second fiddle to the much celebrated Muthoot Finance in the gold loan space, has pulled off a coup by pricing its recently launched dollar-denominated bond at 5.9 per cent – at 22.5 basis points (bps) discount to the one issued by its bigger rival more than two months back.

According to experts, Manappuram could strike a favourable pricing as the company has been able to tap the market in the very first week of the year itself. “The pricing is market driven and the company could cash in on the timing,” a source close to the company said.

Manappuram Finance, the leading gold loan non-banking finance company (NBFC), raised on Monday $300 million by way of senior secured fixed rate notes issuance with tenure of three years.

“The success of the issue and its attractive pricing enables us to further diversify our funding sources,” said VP Nandakumar (seen in the picture), managing director and CEO of Manappuram.

When Muthoot Finance raised $450 million as part of its $2 billion overseas borrowing programme early November at 6.125 per cent, no one would have even guessed any other gold loan company from Kerala could borrow in the overseas market at a better rate, and more so because Muthoot is much larger, older and well placed to flaunt its better international ratings compared with that of Manappuram.

While both the companies are rated AA by Crisil in the domestic market, the international agencies S&P and Fitch have rated Manappuram at BB-, whereas Muthoot has been rated BB by S&P and BB+ by Fitch Ratings, a notch or two above that of Manappuram in both cases.

An official at Manappuram attributed the shade better international ratings enjoyed by Muthoot to the sheer scale of operations. “It’s true the assets under management (AUM) by Muthoot are far larger than ours, but our efficiency measures are not worse than that of Muthoot or could be even better,” he stressed.

One of the top officials at Manappuram said its performance, especially in the second quarter (Q2), when the profitability surged by 82 per cent to Rs 407.65 crore and the Rs2000 crore topline growth have likely impressed the international institutional investors this time around.

Almost 74 per cent of the issuance has been lapped up investors from Singapore and Hong Kong, according to Manappuram sources.

Talking to, TS Anantharaman, leading financial expert and former chairman of CSB Bank also hailed Manappuram’s pricing of the dollar borrowing as an acknowledgement to the strong standing of the company.

“The leadership of Nandankumar has certainly helped the company achieve a spectacular growth in a relatively short period,” he added.

Interestingly, the recent overseas borrowings by the leading gold loan NBFCs are not likely to bring down their cost of funds as these borrowings ultimately come at a price given the 5 per cent or more hedging cost these dollar borrowings have to carry to cover the exchange risks.

But these issues will certainly help the companies diversify their funding sources at a time when the domestic credit market is going through one of its most trying times.

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