No dearth of bank funding for Manappuram despite tightening reports

Gold loan major’s Q3 profit grows 63 pc to 398 crore

KOCHI: Despite the general belief that banks have tightened their purse strings to non-banking finance companies (NBFCs) in the aftermath  of the IL&FS defaults that triggered panic in the financial services industry, banks and financial institutions have been supportive to Manappuram Finance with increased funding during the last year.

The Thrissur-headquartered gold loan company has reported 63 per cent growth in its consolidated net profit to Rs397.8 crore for the quarter ending December 31, 2019 even as its total assets under management (AUM) increased from Rs19,438.44 crore to Rs24,099.94 crore year on year.

The company could also achieve healthy ratios with the return on assets (ROA) reaching 6.3 per cent and return on equity (ROE) crossing 30 per cent, one of the industry’s best efficiency ratio duo.

Though the company’s MD and CEO, VP Nandakumar sometime back expressed industry’s concerns about the ability to maintain a healthy liquidity after most banks having gone on back foot as far as funding to NBFCs is concerned, Manappuram surprisingly could improve its funding from the banks in the last one year.

During this period, the company could also bring down its cost of borrowing, to 9.1 per cent. Borrowings from banks and financial institutions during the past one year have increased by five percentage points, from 49 per cent of the total borrowings to 63 per cent as of December 31, 2019.

On absolute terms too, the growth has been so evident to prove the trend. During the said period, the borrowings from banks and financial institutions grew from Rs6606.14 crore to as high as Rs10,350.88 crore – an increase of about 57 per cent.

When Muthoot and Manappuram went for overseas borrowing during the last two months as part of their ECB programmes, there were whispers in the market that these companies are preparing for ‘rainy days’ ahead as banks in general in India had decided to go slow on funding to NBFCs.

The banks’ stand was further vindicated by the new developments when a couple of housing finance companies (HFCs), where banks have huge exposure, too started developing unhealthy signs with payment defaults.

Manappuram Finance, which is synonymous with gold loans, has slowly been establishing itself as a strong micro finance company too with the backing of Ashirvad Finance that the company took over recently.

While the gold loan increased by 25.3 per cent from Rs12,961.52 crore to Rs16,242.95 crore during the year to date, microfinance loans surged by about 31 per cent during the period as they increased from Rs3840.78 crore to Rs5022.14 crore during the said period.


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