The Manappuram General Finance stock has doubled in the last year and has been buzzing of late on news that the promoter has bought in the open market. There is also buzz of an M&A deal.
However, VP Nandakumar, MD & CEO of the company emphatically denied the news reports of promoters selling stake. He said there is no intention of selling stake and neither did they have any discussion with that regards with anyone.
He said, in fact, the news of promoters buying stock in open market because of his confidence in the company. Currently promoters hold 34 percent including himself and his wife. Going forward, they may up the stake further whenever liquidity is available, said Nandakumar.
Talking about business, he said the gold loan book which had declined in the earlier quarters is now coming back and he expected a 5-8 percent growth in second half of FY18.
In further said, in gold loan book there are no non-performing assets (NPAs) and the 1 percent NPA shown in the books is just a technical NPA, which will be cleared in the upcoming quarters.
However, he said the microfinance business (MFI) saw some losses in H1FY18 but expect an improvement in H2FY18.
Moreover, other businesses like commercial vehicle finance, home finance etc done through subsidiaries and them, have no asset quality problems.
Confident of reporting growth in asset under management (AUM) in Q3FY18, said Nandakumar.
Below is the verbatim transcript of the interview.
Anuj: There is a bit of dichotomy here, on one hand you are buying some stock from the open market, and there has been some report that promoters are looking to sell. Are you in the market to sell your stake, is that sort of report right or do you want to clarify that promoters are absolutely not looking at selling the company?
A: Yes, only the first part of the statement is right i.e. promoters are buying stock. The second part is absolutely wrong; there had not been any discussion. These are all false rumours in the market.
Latha: This talk that you and IDFC Bank are probably close to a strategic sale deal, or even Edelweiss, all these names were floated as people who are looking for a strategic stake in your company, is that right that you had talks but they were not fruitful?
A: Maybe, but we had no discussions and I have no intention to part with the stake also. So, from my side I totally deny that.
Latha: But you had discussions you are saying?
A: No, never.
Sonia: Currently the promoter stake stands at about 28.4 percent.
A: No it is more than 34 percent. I myself hold around nearly 29 percent, balance is held by my wife. Both we hold more than 34 percent.
Sonia: Do you plan to up the stake further?
A: Maybe. Whenever we have the liquidity, we may buy.
Sonia: Any reason why you are aggressively buying stake in the open market?
A: No. I have confidence in my company and also the prospects of the company, the future of the company, business of the company, that is the only reason.
Latha: There have been other instances of companies like for instance Bharat Financial getting bought by IndusInd, it looks like it will benefit both sides; there could be a positive expansion for Manappuram if it was a part of groups like say IDFC or Edelweiss or other companies. You are not even thinking or contemplating in the future some kind of a deal with these kind of groups?
A: The niche players have the capacity to do business in a better way and so that is the reason why Bharat Financial Inclusion is being acquired by a bank. Similarly, Manappuram is a niche player in gold loan industry, so, some of the other banks, etc. may have some interest. However, there have not been any discussion so far. As on day, I have no intention to merge or do such a deal.
Latha: The gold book declined in the last quarter, has it come back now in Q3?
A: It is coming back and I expect around 5-8 percent growth during the second half of the year in gold loan book.
Sonia: What about the asset quality, it has largely remained under controlled, but what do the trends look like for the New Year?
A: Gold loan there is no NPA. In fact, whatever is shown -- 1 percent NPA is only a technical NPA which will be cleared during the proceeding quarter. However, in microfinance, we had a loss, but everything is contained, mostly these are contained during the last quarter of last year and also the first half of this year. So the coming two quarters will be better, so, it is improving. The other businesses like commercial vehicles and home finance, etc. which are done through subsidiaries or from our own books, there is no problem with the asset quality. It is as per the market.
Latha: You are saying that this quarter, Q3 your AUM has grown because in Q2 there was a decline of about 5 percent, I mean loan growth declined, Q3 you will report a growth?
A: Yes, we will be reporting growth.
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