Expect loan book to grow by 15% in FY16: Manappuram

Krishnan: Basically our average cost of borrowing is 12.2 percent for the third quarter and incrementally we are borrowing from banks at between 10.5 to 11 percent. So, as this lower cost pool becomes larger in percentage, we expect the declining trend to continue at the similar pace that we have seen in the past as this is without taking into account any benefit from base rate cut because so far only two of our lenders have cut their base rates. So, that would be on top of the other savings that we get.

Reema : So, is it possible to quantify, say by the end of six months what your cost of funds could be? The cost of borrowing from the 12.2 percent?

Krishnan: As I said, I would expect them to continue to come down by around 20-25 basis points per quarter, so totally we could get about 50 basis points more.

Anuj: What’s your call on Mannapuram Finance and what’s the kind of price targets you have?

Haria: Gold finances have gone through a very rough patch in the last two years and firstly it was because of RBI tightening the regulations and second leg of weakness came in when the gold price started collapsing from something like Rs 3,300 per gram to Rs 2,700 per gram where it has settled over the last one year. So this resulted in a lot of turbulence in these gold finance companies.

A lot of that turbulence is out; the regulator is now fine with the ways these companies are operating. Gold price has more or less stabilized and these companies are going out for the first time, going out of their branches to get more customers. So, better days ahead for them.

One more thing which has happened is all the weak players, the new entrants which saw the boom of 2009-2012 and entered; all those weak players are getting wiped out. So, the ones who are very serious, some one like a Mannapuram, Muthooot, these guys definitely they stand to benefit and going ahead growth should pick up with the economy. These guys should do around 10-15 percent kind of growth over the next two years. So, I am quite positive on them. Mannapuram our price target is Rs 46 which is a good 35-40 percent upside from here .

Reema: What also stands out is how your company has managed to improve the loan book purely on the back of efficiency. Can you give us a few numbers what the loan growth will look like in FY16 as well as what the net interest margins will be?

Krishnan: As you rightly pointed out, we have been reaching to customers and what we call the new book which we get from new customers, in the whole of FY14 was just Rs 500 crore and in the first three quarters of FY15, it is Rs 1,600 crore which shows that our book is now growing due to our efforts and we expect this trend to continue. We expect the total book to grow by around 10-15 percent in FY16. And the net interest margins also should improve not only on account of the interest rate savings but also on account of improvement in our net yields. So in FY16, we expect our NIMs also to move up by at least 50-100 basis points.