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Brief Business Model

Manappuram Finance is a Non-Banking Finance Company (NBFC), which provides a wide range of fund based and fee based services including gold loans, money exchange facilities, etc.Manappuram has diversified their product streams from a pure gold lending company to a more diversified financial company. Their current product segments include gold lending, microfinance, home loan finance and CV finance, with gold loan accounting for 73% of AUM in Q3FY21.Manappuram acquired Asirvad in 2015 [4] to venture into microfinance at a cost of 110 cr. Ashirvad’s current AUM stands at 5,358 Cr. as of Q3FY21. Manappuram was the first company to start online gold lending in 2015 [6], online gold loans account for 59% of overall gold loans as of Q3FY21.Housing finance division focuses on mid to low income self-employed customers (80% customers are self employed). The loan AUM has grown at 19% CAGR, from 310 Cr. in FY17 to 630 Cr. in FY20. 42% of outstanding loans are for home loans, 32% for individual home construction and 26% for loan against property. Gross NPA stood at 4.9% (Q3FY21).Vehicle loans division grew very fast (45% CAGR) from 306 Cr. in FY17 to 1344 Cr. in FY20. Since COVID outbreak, AUM has reduced by 26% to 988 cr. in Q3FY21. 70% of the outstanding loans are for CV financing, 19% for two wheeler and 11% for passenger vehicles. Gross NPA stood at 8.3% (Q3FY21)

Megatrend/Trend driver

Gold loan demand expected to grow at 18-20% CAGR YOY.Vehicle loans division grew very fast (45% CAGR) from 306 Cr. in FY17 to 1344 Cr. in FY20. Since COVID outbreak, AUM has reduced by 26% to 988 cr. in Q3FY21. 70% of the outstanding loans are for CV financing, 19% for two wheeler and 11% for passenger vehicles. Gross NPA stood at 8.3% (Q3FY21).the gold loan AUM for Manappuram will continue to account for around two-third of the consolidated AUM and over 80% of consolidated profit over the medium term.rofitability has remained strong with a consolidated RoMA being over 4.0% over past 6 fiscals, driven by the large profit generated by the gold loan segment. The consolidated net profit for the company stood at Rs 1,329 crore in fiscal 2022 as against Rs 1,725 crore in fiscal 2021.

Competitive Advantages

1.Established market position in the gold finance business : Reputation and trust play a significant role in this segment as these give the customer an assurance of getting back personal gold ornaments once the loan is repaid. After shifting towards shorter tenure gold loans of three months in 2015 to de-risk the portfolio from sharp fluctuations in gold prices, the company has witnessed stability in business with an increase in customer base and gold holdings.

2.Sound capitalisation and strong profitabilty : Profitability has remained strong with a consolidated RoMA being over 4.0% over past 6 fiscals, driven by the large profit generated by the gold loan segment. The consolidated net profit for the company stood at Rs 1,329 crore in fiscal 2022 as against Rs 1,725 crore in fiscal 2021.

3. Stable funding profile: As on December 31, 2022, the company’s consolidated borrowings (including external commercial borrowings – ECBs) from banks (public and private) and financial institutions stood at around 66%; higher than the 57% as on March 31, 2022. For the same period, the share of CP marginally reduced to 0.2% from 4%. Because of its legacy and highly secured asset class, MAFIL is able to roll over existing bank lines/ CP and continue to raise fresh funds from diversified sources. Between April 1, 2022, and March 15, 2023, the company raised fresh borrowings of around Rs 6,300 crore through CC/WCDL, term loans, and NCDs. The standalone cost of borrowing was 8.2% during 9M 2023 as compared to 7.8% in fiscal 2022 (9.7% in fiscal 2021). The increase in the cost of funds have inched up in line with the rising interest rate environment. The consolidated cost of borrowing during 9M 2023 stood at 8.3% as compared to 8.6% in fiscal 2022 (10% in fiscal 2021).

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