The gold loan portfolio of Manappuram Finance is likely to de-grow in the fourth quarter on account of a decline in gold prices. However, the NBFC expects to achieve a growth of 20% in the current fiscal and is targeting a growth of 10-15% in the gold loan AUM during the next fiscal.
In the third quarter, the company’s gold loan AUM, which constitutes 73.1% of consolidated AUM, increased 24.43% to Rs 20,211.58 crore, from Rs 16,242.95 crore in the year-ago quarter.
The Kerala-based lender, which also operates a home loan, microfinance and commercial vehicle leasing subsidiary, expects the share of non-gold loan business to increase in the coming quarters.
VP Nandakumar, MD & CEO of Manappuram Finance, said gold prices are likely to come down further. “Many vaccines are in the pipeline and the pandemic is seen coming down. There will be a short-term impact on business due to the decline in gold prices. The gold loan portfolio will come down in Q4. Even then, we will achieve the projected growth of 15% in gold loans and a consolidated growth of 20%.”
According to him, the demand for gold loans is stable at around 10-15% despite stiff competition from banks. He said banks are likely to come under pressure on gold loans with higher loan-to-value (LTV) becoming a problem when gold prices fall.
Manappuram’s weighted average LTV stands at Rs 2,963 per gram or 63% of the current gold price. For the standalone entity, the average borrowing cost during the quarter decreased 18 bps to 8.95%. Gold loan customers stood at 26.24 lakh in Q3 – a net increase of 67,000.
Nandakumar said lending is back to normal in the microfinance, home loan, and vehicle financing subsidiary. “Coming to the microfinance business, Asirvad MFL’s AUM stands at Rs 5,358 crore, up by 7.8% QoQ. The collection efficiency from the MFI business was at 99% in December and the disbursement during the quarter was Rs 1,306 crore. We are confident that COVID impact is largely behind us and we foresee improved performance for Asirvad in the coming quarters.”
Nandakumar said the NBFC had approached the RBI a year back for sanction to start an insurance company, but there has been no response so far.