VP Nandakumar, Chief Executive Officer and Managing Director of Manappuram Finance, on Thursday said that there was no truth to market buzz about a deal with Equitas Holding being in the works.
Speaking to CNBC-TV18, Nandakumar said his earlier links with Equitas had perhaps given rise to speculation, but said that no discussions were underway. He added, however, that Manappuram would evaluate acquisitions and strategic partnerships at face value.
Manappuram Finance surged 13 percent in early morning trade after the company registered strong third quarter earnings. It recorded an over two-fold jump in its consolidated net profit at Rs 202.54 crore for third quarter ended December, 2016. Its net profit in the corresponding October-December quarter of 2015-16 was Rs 100.34 crore.
Nandakumar said that while collections from Asirvad – its microfinance arm - were affected by the note ban last November, but it was only a lag and he expected almost 100 percent collections. He said that many customers still preferred cash over digital.
The gold loan financier also registered a healthy 27.3 percent growth in its gold loan asset under management (AUM) to Rs 12,267 crore, up from Rs 9,639 crore a year ago. Consolidated AUM increased by 37.6 percent to Rs 14,555 crore, against Rs 10,579 crore a year ago.He said cost to AUM ratio had come down from 8 percent to 6.5 percent, and might eventually dip to 5 percent, while Gross Non-Performing Assets would reverse after the fourth quarter.
Nandakumar said that he expected 20 percent compounded growth annually for next three to four years, adding that moderated gold prices would be key. He expressed confidence that the company would not face much competition from banks that lend against gold.Below is the verbatim transcript of V P Nandakumar’s interview to Sumaira Abidi and Nigel D’Souza on CNBC-TV18.Sumaira: Your AUM has gone up 40 percent odd despite the fact that your operating expenses are just up about 9 percent odd. Is this a kind of performance that we can now expect from Manappuram going ahead as well? A: What I expect in the business is a 20 percent compounded growth annually for the next three to four years; this is my expectation. During some period, there may be some ups beyond the normal rate but this is what I can -- about my budgeting, my plans about my business. So, the times have been good. The one advantage we had in the past is gold prices have actually gone up. Now, it has moderated by another 5-6 percentage. I just hope this gold price will stay for some time. So, I hope last quarter also we will be able to report the same profit or even slightly better. Next year also I hope so. Sumaira: Your cost to AUM ratio is now at about 6-6.5 percent and it has come down all the way from those 8 percent plus odd levels. What is the optimum ratio for a company like you and is there scope for it to come down still? A: It has to come down. We have not opened any branches during the last two years. So, AUM per branch has gone up. So, that is the reason why the operational expenditure (Opex) has come down. So, all our efforts are to increase the AUM per branch and I expect the opex to go down below 5 percent in another one to one and a half years. It will gradually come down. So, the optimal level will be around 4 percent, but it takes time. Nigel: Your numbers are looking good, the street likes it for sure, your NII is 50 percent up, profitability has doubled as well, gross NPAs have increased by around 140 basis points approximately at around 2.3 percent. Will it fully get reversed in Q4, is there a chance that it can get pushed to FY18 as well. You were telling us in the past quarter the reason that it went up was because volatility in gold prices as well as in shortage of liquidity, so, can that get reversed in Q4, do you believe that otherwise it could go on to FY18? A: It will get reversed to the previous level in this quarter itself. Nigel: So Q4 the auction will take place and that will be done and dusted, so, your gross NPAs will improve from there? A: Absolutely. Nigel: I also wanted to speak about your microfinance institution, Asirvad, that has grown by a good bit, on a very small base I think it contributes hardly 8-9 percent of your total book. Could you help us out with the collection efficiency over there and also if you could tell us what is the model you are following, it is a group lending model? A: We are following a group lending model and our collections, there is some delay in collections. So, November collection has reached almost 99 percent and December collection is around 95 percent now. So, it is only a lag but it will get almost fully collected. Nigel: Is there a deal in the works with Equitas, if you could clarify on that front? A: No, there is no deal as such. The thing is I was a promoter along with other promoters in Equitas. That may be the reason perhaps some rumours emerge in the market. There are no discussion or thoughts about that. Sumaira: Is there any other small bank, is there any plans to acquire any other small bank, any such plans on a strategic level for you? A: So far there is no proposal before our consideration. However, if we see some synergy somewhere, not only in the banking space, even the NBFC space, we will be interested for some acquisition or merger, etc.
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