Saturday, July 11, 2015

Manappuram Leads in Emerging Asset Diversification

While almost all NBFCs are on an asset diversification path as directed by RBI, gold loan provider Manappuram Finance is leading the sector with rapid diversifications into microfinance, home finance, and commercial vehicle loans. The firm led by ex-banker VP Nandakumar is also planning to apply for a universal banking licence.

Manappuram Finance has started diversifying at the most opportune time, when the banking and financial services sector is again entering a growth period. The firm’s main advantage is its 3200 branches across India, where many of the new lending businesses can be started without much investment on the infrastructure side.

Manappuram Finance has been synonymous with gold loans in Indian capital markets, as it was the first loan-against-gold provider to be listed, and for many years, the only listed player in the space. During this period, Manappuram stock was also one of the largest wealth creators in the Indian small cap / mid cap space.

But since the last couple of years, heeding the call for asset diversification by sector regulator, RBI, Manappuram’s promoter, MD, & CEO, VP Nandakumar, himself an ex-banker, started the first steps in diversifying Manappuram’s asset base from just gold ornaments to a wider variety of assets.

The first in this series was into the booming home loans segment by acquiring a home finance company from Jaypee Group. This was followed up by getting into the buzzing microfinance scene, by acquiring Asirvad Microfinance.

Nandakumar is not done yet, and is eyeing commercial vehicles loan companies having around Rs. 1000 crore of loan book, to acquire.

The Kerala headquartered lender has also tied up with Tata Teleservices nation-wide to offer mobile based repayment solutions to its customers.

Manappuram which once eyed a small bank or payment bank licence has scrapped that plan for now, and is planning to apply for a Universal Banking Licence through its microfinance arm, Asirvad Microfinance.

It already has a small CV loans business which it is planning to grow multi-fold by acquiring a CV loan firm, as CV loans come under priority sector lending, which will come in handy when it applies for a Universal Banking License with RBI.

On the home finance front, Manappuram is focusing on the higher margin segments of affordable home loans and loans against property.

Among its new diversifications, the largest currently is microfinance where its unit the Chennai based Asirvad has a loan book of over Rs. 300 crore.

Managing Director Nandakumar’s vision is to scale up these three new ventures - microfinance, CV loans, & home loans - to around 25% of its loan book within the next 3 years, and eventually to scale it up to 50% of its loan assets. The remaining 50% will remain gold loans, which now dominates the book.

Here also, the outlook is currently good, as after two years of de-growth in its gold loan AUM, Manappuram has bounced back to loan book growth as well as profit growth in FY‘15.

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