V.P. Nandakumar, CEO, Manappuram Finance.

V.P. Nandakumar, CEO, Manappuram Finance.

Mumbai: Market turbulence has driven up borrowing costs at Manappuram Finance Ltd and the company expects it to rise further by up to 60 bps in the remaining part of this fiscal, said V.P. Nandakumar, the managing director and chief executive officer of the gold loan non-banking financial company (NBFC).

“Our borrowing costs have gone up by 11 bps and is around 8.88% now. Because of the current market turmoil, we expect it to go up by another 50-60 bps in FY19,” Nandakumar said.

The NBFC has assets under management (AUM) of Rs17,191 crore, of which around 75% is in gold loans with the rest in microfinance, affordable housing, commercial vehicles, two-wheelers and small and medium enterprise (SME) financing.

“Nearly 75% of the AUM is in gold loans and a majority of it is in three-month gold loans, which is redeemed in 50 days because of pre-closures. As our average borrowing period is over one year, our ALM (asset liability management) is positive,” Nandakumar said in a phone interview.

Loans in microfinance also tend to get repaid in 18 months, though the contract period is 24 months, he said.

“We have not faced problems in getting commercial papers (CPs) and bank funding renewed on time. The only thing is that we are getting it at a higher cost because of the market conditions,” said Nandakumar.

At present, of Manappuram’s Rs11,354 crore total borrowings, a majority originated from banks (57.4%), while the rest came from CPs (25.6%), subordinated bonds (0.1%) and non-convertible debentures (NCDs) at 16.7%.

The lender reported a consolidated net profit of ₹221.4 crore in the September quarter of FY19, up 40% year-on-year (y-o-y).

Its net interest income stood at ₹697 crore in Q2 FY19, up 18.7% y-o-y.

Manappuram also plans to reduce its dependence on gold loans and thereby reduce its gold loans as a share of total AUM to 50%.

“We are moving in a targeted manner and currently around 25% of our portfolio is non-gold and in another 10 years, we want to make it 50:50 between gold and the rest of the portfolio,” explained Nandakumar.



Manappuram sees borrowing costs rising

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