Q3 growth was driven by micro, housing finance: Manappuram Fin

Kapil Krishan, CFO of Manappuram Finance, says the company's cost of funds came down 50 basis points sequentially which aided to its net-interest margins (NIMS).
Manappuram Finance’s overall assets under management (AUM) growth year-on-year (YoY) stood at 20 percent for the quarter ended December (Q3), says Kapil Krishan, CFO of the company.
 
Speaking to CNBC-TV18, Krishan says the company's growth was driven by new areas like micro finance and housing finance. Its micro-finance subsidiary is scaling up well with a 30 percent growth, he says.
 
Further, the company's cost of funds came down 50 basis points sequentially which aided to its net-interest margins (NIMS), he says, adding, he expects NIMS to sustain at 14.5 percent.
 
Below is the verbatim transcript of Kapil Krishan's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
 
Sonia: Take us through what led to good quarter this time around and whether this growth that you are seeing both in terms of asset quality that is stable and net interest income (NII) growth whether it is sustainable?
 
A: Yes, basically we had restructured our product offering almost a year ago where we had started focusing on a shorter tenure loan. As a result of which our net yield has gone up by 200 basis points (bps) because now all the interest is received by us. Earlier in the longer-term products, some of the interest was accrued but not collected finally. So because of this 200 bps increase in our net yield, that is the main contributor. Also, we have diversified and entered into some new areas like microfinance and housing finance those businesses are also scaling up and now the new businesses constitute around little over 8 percent of our total AUM. So the growth in the book has come because of the diversification and the income growth has come because of the increase in net yield.

Latha: Generally, what has been the AUM growth and do you think Q4 will hold on in terms of AUM growth?
A: So our overall AUM growth as 20 percent year-on-year (Y-o-Y) and 3.5 percent sequentially and our gold holding, which is the underlying volumes are also up by 22 percent Y-o-Y and 2 percent sequentially. So the underlying fundamentals are strong and our microfinance subsidiary is scaling up very well. It grew 30 percent sequentially and 117 percent Y-o-Y. We expect that growth to continue to be very strong. So we expect to maintain this momentum.
Sonia: Microfinance you are seeing a strong 30 percent growth, what about housing finance? Can you throw some more colour on how much it has grown in this quarter and what is the sustainable rate of growth?
A: So the housing finance is a new business that we have set up. Therefore there is no Y-o-Y growth that we talk about but sequentially it has grown. We are just setting up the branches and it is around Rs 100 crore AUM as of today but as the new branches mature, the growth momentum will suddenly pick up which we expect in FY17 should be up substantially.

Latha: Your net interest margins (NIMs) has gone up significantly to 14.5 percent. You see it maintaining there?
A: Yes. Our cost of funds has come down again by 50 bps sequentially and the banks benefit was around 30 bps. Banks are around 75 percent of our total borrowing mix. So around 20 bps saving was because of the base rate cut and we are now negotiated much better borrowing rates from the banks so we are borrowing at base rate now and we have also increased the commercial vehicle component. So the cost of funds has also helped the NIM and as we discussed the yield also went up. So this will be sustained.
Latha: 14.5 percent margins and AUM of 20 percent you will be able to sustain?
A: Y-o-Y, we are expecting to maintain this figure.

Sonia: Since about Rs 90 crore of your portfolio comes from the commercial vehicle space and you did mention that you are planning to increase it, can you give us some colour on whether the worst is over as far as asset quality concerns are from that space itself and what the growth could be?
A: It is a very new business for us. So we do not have the legacy asset quality issues that some of the largest players have and we have adopted a conservative strategy. So we are not chasing business where we see any risk and our book is not matured but we do not expect any major issues.
Link:-http://www.moneycontrol.com/news/resultsboardroom/q3-growth-was-driven-by-micro-housing-finance-manappuram-fin_5473781.html