Over the last three to four months, the Reserve Bank of India (RBI) has brought in some controls on loan value and bank exposure to gold loan companies. Taking these into consideration, I Unnikrishnan, Managing Director of Manappuram General Finance & Leasing is not hopeful of any significant growth in FY13. According to him, this fiscal is going to be flat.
The company is not able to meet the demand and is losing customers because of loan-to-value ratio (LTV) and the lack of funding sources, Unnikrishnan explained in an interview with CNBC-TV18. Although, Manappuram Finance is not expecting any stress on margins for this quarter, they are anticipating reduction in NIMs to the extent of 2% for the calendar year.
Unnikrishnan is also of the view that gold prices will not come down substantially in the near term and market participants therefore, continue to be bullish on gold prices.
Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.
Q: You have seen about one quarter of the regulations being imposed by the Reserve Bank of India (RBI) in terms of LTV and in terms of consumer protection rules, how has demand faired, are you seeing that your churn out of loans has gotten reduced, what does FY13 look like to you?
A: FY13 is going to be flat. We are not guiding any growth during this year, thanks to some of the controls brought in by RBI over the last three-four months, especially on the loan value and the bank exposure to gold loan companies. So this year we may not see any significant growth.
Q: Do you expect to see some unfair competition or at least huge competition from banks, would that be a big threat for you?
A: As of now, what we are seeing is that we are not able to meet customer demands and losing customers. We are not able to meet demands as of now.
Q: Is it because of capital, deposits or liquidity?
A: Both. Not as such in terms of liquidity but, because the LTV and the funding sources have also come down. I am not talking about liquidity asset because of the change that has taken place in the securitization guidelines and that avenue is no longer available. That is putting some stress on the availability of funds.
Q: Do you think the regulation risk is now out or there is another report that is coming up in July, the working groups report. What is anticipated of that, has the industry given any recommendations?
A: The industry has given its recommendations mainly on the LTV front and we don't have any indication whether they will exit or not but what we believe is that the worst is behind us. Things cannot be worse than this.
Q: What would you therefore, be able to report by way of margins in the current year?
A: We are not expecting any stress on margins for this quarter. For the full year, there should be some stress to the extent of some 2% reduction in NIM for next nine months.
Q: What about the price of gold itself, its attraction as an investment, it being in the center of investor focus was because of this extraordinary rally we saw in global and Indian markets. For 2012, itself we have seen gold underperforming other asset classes, do you think in some sense the entire business will shrink?
A: We have not factored any substantial reduction in gold price going forward. At least for this year we have not factored any reduction in gold prices and we do not expect gold prices to substantially go around given the world where it is now. There will be a lot of confusion in the finance markets etc. Therefore, there is lot of people who are still bullish on gold.
Q: What about disbursements then, last quarter you did something around Rs 4,800 crore, can we expect something similar this quarter as well?
A: This quarter will not be different from Q4 of last year.