Fund-costs low; Rao report boosts bank-loans: Manappuram

VP Nandakumar, CMD, Manappuram General Finance explains on CNBC-TV18 that the cost of funds which is currently at 13 percent, will come down as banks reduce rates further. He expects yields to improve going forward and has a visibility of raising additional funding of Rs 1,000 crore. Nandakumar estimates the erosion of customers to be a short-term problem.

Below is an edited transcript of the interview on CNBC-TV18 Q: What are the margins for this quarter and how much more pressure do you foresee on yields through the course of the year?
A: There was a reduction in yields by 1 percent which are nearly currently 22.8 percent now and is stable. This reduction in yields was due to the auction of some items which were booked before the second quarter of the previous fiscal last year. At that point of time the disbursals were around Rs 9000 crore which fell due lack of availability of funding caused by a regulatory overhang up to January which has diminished after the release of the Rao Committee report.
Now there is some stability with regard to availability of funding and the possibility of yields is all set to improve with successive quarters. Q: Your cost of funds has also gone up quite a bit to 120 bps?
A: No. it has not gone up. It is around 13 percent and is now coming down because banks have begun to reduce lending rates to the company. With the emergence of a positive attitude towards gold-loan companies after the release of the Rao Committee report, the debt market has stated to showing some tendency to reduce interest rates which will be of great help to the company in the coming quarters. Q: In the last couple of quarters your assets-under-management have come down and your customer base has also shrunk. Do you now see a turnaround over the next two-three quarters with these new guidelines?
A: There was some uncertainty due to the regulatory overhang till the release of Rao Committee report. The uncertainty caused banks to hold-up proposals for finance which affected us significantly along with the drought in the commercial paper market. Fortunately, both the adverse situations have passed. Now banks have started to sanction loans from banks and the commercial paper market is becoming active.
This allows us a visibility of additional funding of nearly Rs 1,000 crore to take care of our lending needs. Since we had to repay some of our obligations, we had to string our assets-under-management and this led to some erosion on our customer-base, the affect of which is limited to the short-term of one or two quarters only. Q: So what kind of growth and rise in disbursements do you expect to post through FY13-14?
A: The disbursement of around Rs 5,000 crore improved during the quarter to Rs 5,700 crore. With the availability of funds through sanction from various markets, the disbursal is expected to grow. Q: What are your observations on the final recommendations for gold NBFCs? Do you see it as positive and supportive?
A: Yes, the final Rao Committee report that was released on Wednesday added more positive suggestions than what was originally recommended. So the importance of gold companies has been clearly recognise and this has changed the attitude in lending by banks and other financial institutions. From here onwards, the growth and performance of gold loan companies will be more sustainable.