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There has been a healthy growth in profitability, sequentially as well as on a YoY basis, while a steady AUM was maintained.
Manappuram Finance expects the momentum in profitability to continue in the next two quarters. Margin pressures are likely to come down going forward, VP Nandakumar, MD & CEO, tells Sajan C Kumar.He says there is always space for banks, fintechs and non-banks to coexist by complementing each other amid healthy competition as the credit market in India is far from reaching saturation. Excerpts:
How was the second quarter in terms of performance? There has been a decline of 6.54% in gold loan disbursements. Is it an industry trend or anything specific to the company ?
There has been a healthy growth in profitability, sequentially as well as on a YoY basis, while a steady AUM was maintained. For the six months ended September, our profitability stood at Rs 700 crore. The profit after tax grew 10.7% on a YoY basis and 45.2% sequentially. We have also increased headcount by 6,000 during Q2 to ensure better customer service. A marginal fall in gold loan disbursals is an industry trend and as the economy revives, we hope to put up an improved performance in coming quarters. Also, we are not interested in going for unhealthy competition.
Will there be margin pressure going forward due to competition from banks and fintechs?
We do not anticipate further margin pressure as we do not intend to undercut interest rates or indulge in unsustainable and unhealthy competition. The sense we get is that inflation has probably peaked and the pace of interest rate hike is set to slow down. This will have a positive bearing on cost of funds. Moreover, there is always space for banks, fintechs and non-banks to coexist by complementing each other even amid healthy competition, as the credit market in India is far from reaching saturation.
What is the outlook for the quarter and the fiscal? What kind of an AUM and gold loan growth do you expect for the whole of FY23?
We expect the momentum in profitability to continue in the next two quarters as well. As stated earlier, margin pressures are expected to come down in ensuing quarters. Fiscal 2023 should end on a very good note as we will reap the full impact of the economic revival by the close of this fiscal. Having seen the industry trend and considering the demand pick up that is underway, we expect 5-10% growth in AUM and profitability.
How has the new customer acquisition been during Q2FY23?
Compared to Q1, we have added more than 1 lakh customers during Q2 across verticals. As demand is expected to be healthy, we expect this momentum to continue.
What about the cost of funds?
Our cost of funds declined to 7.80% for Q2, from 7.94% in the year-ago period. However, compared to Q1FY23, our cost of funds increased by 33 bps as interest rates remained elevated during this period. However, we do not expect cost of funds to incrementally rise as interest rates seem to have more or less peaked.
How are your non-gold businesses doing? Will the share of non-gold businesses increase in coming quarters?
Our non-gold businesses are doing very well. Microfinance AUM is now at Rs 7,661 crore. Commercial vehicle portfolio has seen a growth of 49% YoY while our home loan portfolio grew more than 25%. Non-gold AUM share in the total business has increased from 34% to 37% in Q2. This is a conscious strategy of diversification that we are following to arrive at a balanced portfolio.
What about expansion of branches, immediate fundraising plans, NCDs, etc?
We would like to expand branch network and have sought permission from the RBI. As and when we get the required permissions, we would initiate this process. Our capital and liquidity position is robust at present.
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