Growth Strategy
Manappuram Finance Limited is focusing on a multi-pronged growth strategy to strengthen its market position:
- Gold Loan Expansion: The company aims for a 15%-20% annual growth in its gold loan business by increasing customer acquisition, optimizing ticket sizes, and leveraging online platforms (currently 79% of the total gold loan book). The relaxation of RBI restrictions on branch openings is expected to further fuel growth.
- Diversification Beyond Gold Loans: While gold loans remain a core business, the company is expanding into vehicle finance, home loans, and MSME loans. Vehicle finance AUM grew by 41.4% YoY, while home loans increased by 25.7% YoY.
- Operational Efficiencies: Enhancing underwriting processes, cost optimization, and better risk management, especially in subsidiaries like Asirvad Microfinance, are top priorities.
- Regulatory Compliance and Stability: The company has actively implemented changes to comply with RBI’s gold loan guidelines, including enhanced LTV monitoring and stricter rollover practices, ensuring sustainable growth.
Future Outlook
- Gold Loan Business Growth: With India’s organized gold loan market projected to reach ₹15 trillion by 2027, Manappuram sees significant opportunities for scaling up.
- Microfinance Recovery: Asirvad Microfinance is expected to stabilize within the next 2-3 quarters, focusing on disciplined underwriting, cost rationalization, and improved collection efficiency (targeting 99%). Growth is expected at a moderate 10%-12% per year.
- Tech and Digital Lending: Increased adoption of digital processes in loan disbursement, customer onboarding, and risk assessment will drive operational efficiencies.
- Market Positioning Amidst Competition: The company plans to gradually reduce the pricing gap with competitors to sustain and enhance market share in the gold loan sector.
Challenges
- Regulatory Uncertainty: New RBI norms on gold loan LTV monitoring and loan rollovers require constant adaptation, potentially impacting short-term growth.
- Rising Borrowing Costs: The cost of funds has increased due to MCLR repricing, leading to pressure on margins.
- Asset Quality Risks: The microfinance portfolio (Asirvad) has faced stress, with a 5.8% GNPA in MFI loans, requiring strong corrective actions.
- Competition from Banks and Large NBFCs: Players like Bajaj Finance, Aditya Birla Capital, and L&T Finance have intensified competition in the gold loan segment.
Key Advancements
- Enhanced Risk Management: The company has introduced stricter underwriting processes, improved customer due diligence, and limited exposure to unsecured loans.
- Increased Focus on Secured Lending: Shifting towards secured MSME loans and vehicle finance to balance risk and return.
- Automation and IT Investments: Upgrades in cloud-based infrastructure, automation, and digital lending channels to improve efficiency and customer service.
- Branch Expansion Plans: With potential RBI approvals, Manappuram expects to open more branches, strengthening its offline presence.
Conclusion
Manappuram Finance remains committed to sustainable growth, regulatory compliance, and operational improvements. By focusing on its core gold loan business while diversifying into secured lending, the company aims to navigate industry challenges and maintain a competitive edge in the NBFC sector.