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In a chat with ET Now, VP Nandakumar, MD & CEO, Manappuram Finance, says very optimistic about maintaining a steady growth
ET Now: What to your mind is the outlook on gold finance right now? What do you think is the opportunity and size here and what is the current market share that you are working with?
VP Nandakumar: The demand appears to be robust. I see an opportunity to grow at a rate of 20 per cent CAGR in the coming years and the gold being bought to the country never got reduced. It is around 1000 tonnes a year and around 80 per cent is going to the jewellery sector. So that demand will be always there. This is our expectation. This year also, we are able to cross our gold AUM to more than Rs 10000 crore. It is a reasonable growth.
ET Now: Q3 AUM growth was about 20 per cent. Can we expect better trends in FY17 because analysts see growth of Rs 16,000 crore for AUM from Rs 10,000 crore odd at present. Is that a fair estimate?
VP Nandakumar: Yes, I hope that consolidated AUM grows to more than Rs 14,000 crore. This is our expectation for the year 2016-2017. Out of that, the gold would be more than Rs 11000 crore.
ET Now: In our recent interactions with the management not just you, with the management at large you have suggested a product mix change as well can you elaborate a bit on that?
VP Nandakumar: Microfinance is around 1000 crore now the home loans would be around 140 crore similar would be the size of commercial vehicle loan segment also. The SME sector we have just started it would be around 50 crore because we have just started so the three put together will be more than 300 crore and gold AUM would be more than 10000 crore this is the position of various segments as of now. So this year also we were able to grow at a reasonable pace in the next two-three years my assumption is the other segments would be around 25 per cent of the consolidated AUM. Recently we have hiked our share in Asirvad Micro Finance to 91 per cent through further infusion. These segments are growing at a steady pace and next year I am very optimistic about maintaining a steady growth.
ET Now: What is the kind of growth that you see for MFI vehicle finance as well as mortgages? What we are trying to gauge here is what is the customer profile here?
VP Nandakumar: For gold loans, the customer profile will remain the same. For microfinance also, we will be continue with that JLG model. In home finance, we are more into affordable housing. Our average ticket size remains around Rs 15 lakh, so it will continue in the same way. SME also is around Rs 15 lakh. It will continue the same way. So, I do not anticipate much change in the customer profile in the coming years.
ET Now: So over the next one or two years, how will your AUM mix look like between gold and the non-gold loan book?
VP Nandakumar: 25 per cent would be non-AUM assets and 75 per cent will be gold assets. This is our expectation.
ET Now: Because of the above changes, will you see margin expansions kicking in?
VP Nandakumar: No, it is a reasonably good net interest margin.
ET Now: Analysts have been estimating that your ROA can improve to about 2.5 to 3 per cent. Is this a fair assumption? If so, how will the key drivers for the improvement in return ratios kick in?
VP Nandakumar: The major reasons have bee product restructuring and interest collections. Because of the product restructuring into short term products, the possibility of the laws on account of auction has been considerably reduced. The other factor is that like EMIs, we are collecting interests monthly so the receivables which are the interest receivables are accrued but not collected. It is below 3.5 per cent now which was around 7 per cent one year back. That means the interest collection has considerably improved. There are theories that the loss on account of auction will be much less and we were able to bring down the auction to around one-fourth which is the major reason for improving the ROA. I hope the ROA can be maintained at a rate of above 3.5 per cent.
Link: http://articles.economictimes.indiatimes.com/2016-04-01/news/71977270_1_vp-nandakumar-gold-loans-manappuram-finance