Manappuram Fin hits lower circuit on RBI bar on deposits

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Manappuram Fin hits lower circuit on RBI bar on deposits

Trading in Manappuram Finance shares were frozen at the lower end of 20% a day after the RBI accused the gold loan company of violating the rules for a non-deposit taking NBFC and banned it from accepting deposits.

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Moneycontrol Bureau

Trading in Manappuram Finance shares were frozen at the lower end of the 20% intra-day circuit filter at Rs 45, a day after the Reserve Bank of India (RBI) accused the gold loan company of violating the rules for a non-deposit taking non-banking finance company (NBFC), and banned it from accepting deposits.

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"The RBI clamp-down on the company is more of corporate governance issue," an analyst from a Delhi-based brokerage, who did not wish to be quoted, told Moneycontrol.com.

"The way RBI pulled up the company on regulatory issues suggests a lapse in the company's internal operations. However, its impact on Manappuram's financials would be negligible," the analyst said, adding that a view on the stock would be taken after the NBFC's officials met up with the RBI.

The RBI clearly said that the Thrissur-based NBFC was not permitted to accept/renew deposits from the public.

"It has come to the notice of the Reserve Bank that Manappuram Finance has been accepting deposits from the public in its branches and offices has been issuing deposit receipts in the name of Manappuram Agro Farms (MAGRO), a sole proprietary concern of Shri V.P Nandakumar who is the Executive Chairman of the company," it said.

MAGRO is an unlisted subsidiary company belonging to the Manappuram group. The RBI circular further said that in some cases instead of repaying the matured deposits, the amount was rolled over as a fresh deposit with the receipts being issued in the name of MAGRO.

"It is an issue related to procedural irregularities," I Unnikrishnan, Managing Director, Manappuram Finance told Moneycontrol.com, adding that the RBI had not raised any question on its retail borrowings through issue of non-convertible debentures.

Before converting itself into a non-deposit taking NBFC last year, the company had public deposits worth Rs 1.23 crore. Later, an amount of Rs 32 lakh was rolled over as a fresh deposits with MAGRO.
"The encashment happened through our (Manappuram Finance) branches instead of MAGRO's," Unnikrishnan explained.

The company is expected to meet the RBI officials here in Mumbai shortly to request for more clarification on the issue. The company is yet to get any appointment with the RBI officials.

In September last year, the company had raised Rs 442 crore through a public issue of secured NCDs offering interest rates in the range of 12-12.56%. It is again planning to raise Rs 500-600 crore in March through a similar like issue. The interest rates are not yet decided. The company's retail borrowing book stood at Rs 640 crore as on December 31 as against Rs 312 crore in March 31, 2011.

"We accept investments in the form of unsecured non-convertible debentures issued to our customers. We normally pay interest rates of 12.5-13% on those NCDs. The ticket size of those investments varies from Rs 5,000 to one lakh. We majorly raise funds through public issues of secured NCDs," an official from the NBFC said on condition of anonymity.

Saikat Das

saikat.das@network18online.com