MANAPPURAMNSEQ4 FY22May 18, 2022

Manappuram Finance Limited

7,700words
135turns
10analyst exchanges
9executives
Management on call
V.P. Nandakumar
M.D. & CEO, MANAPPURAM FINANCE LIMITED
Bindu A.L.
CFO, MANAPPURAM FINANCE LIMITED
B.N. Raveendra Babu
M.D., ASIRVAD MICROFINANCE
Yogesh Udhoji
CFO, ASIRVAD MICROFINANCE
K. Senthilkumar
HEAD (VEHICLES &
Suveen P.S
CEO, MANAPPURAM HOME FINANCE
Bikash Kumar Mishra
CFO, MANAPPURAM HOME FINANCE
Pradeep Agrawal
PHILLIPCAPITAL (INDIA) PRIVATE LIMITED
Suveen
CEO Manappuram Home Finance; Mr. Bikash Kumar Mishra
Key numbers — 40 extracted
Rs. 13,260 crore
icrofinance subsidiaries did not see growth through the quarter. Our consolidated AUM stands at Rs. 13,260 crore, which represents a growth of 11% year-on- year but a dip of 0.5% quarter-on-quarter mainly due to
11%
hrough the quarter. Our consolidated AUM stands at Rs. 13,260 crore, which represents a growth of 11% year-on- year but a dip of 0.5% quarter-on-quarter mainly due to static performance in gold loan a
0.5%
idated AUM stands at Rs. 13,260 crore, which represents a growth of 11% year-on- year but a dip of 0.5% quarter-on-quarter mainly due to static performance in gold loan and microfinance portfolio. In g
Rs. 50,168 crore
sing phase because of unhealthy competition which means no one. Our gold loan portfolio stands at Rs. 50,168 crore, which has growth 6% year-on-year, but has come down by 1.5% sequentially due to a reason such as
6%
petition which means no one. Our gold loan portfolio stands at Rs. 50,168 crore, which has growth 6% year-on-year, but has come down by 1.5% sequentially due to a reason such as price competitions a
1.5%
loan portfolio stands at Rs. 50,168 crore, which has growth 6% year-on-year, but has come down by 1.5% sequentially due to a reason such as price competitions amongst the NBFCs which I mentioned earli
Rs. 261 crore
he NBFCs which I mentioned earlier. For the same reason, our consolidated quarterly net profit of Rs. 261 crore which is similar to that reported for Q3. Our microfinance subsidiary, microfinance loan have pos
3%
ported for Q3. Our microfinance subsidiary, microfinance loan have posted a sequential decline of 3% in the AUM which stands now at Rs. 6,653 crore. We continued to focus on prudent lend
Rs. 6,653 crore
bsidiary, microfinance loan have posted a sequential decline of 3% in the AUM which stands now at Rs. 6,653 crore. We continued to focus on prudent lending in this unsecured business due to the resid
8%
business benefited from the economic recovery and a reported a brisk quarter-on-quarter growth of 8% to Rs. 1643 crore while our housing finance subsidiary grew its book by 3.5% through quarter 2 to
Rs. 1643 crore
ss benefited from the economic recovery and a reported a brisk quarter-on-quarter growth of 8% to Rs. 1643 crore while our housing finance subsidiary grew its book by 3.5% through quarter 2 to Rs. 845 crore. Si
3.5%
r-on-quarter growth of 8% to Rs. 1643 crore while our housing finance subsidiary grew its book by 3.5% through quarter 2 to Rs. 845 crore. Similarly, our MSME and allied business grew sequentially by
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Guidance — 20 items
V.P. Nandakumar
opening
“However, going forward, we see this as a temporary or passing phase because of unhealthy competition which means no one.”
V.P. Nandakumar
opening
“We expect to receive focus on growth once the economic recovery is on firm ground.”
Bindu A.L.
opening
“From an accounting standpoint, we have prudently recognized the likely impact of RBI guidance.”
V.P. Nandakumar
qa
“We thought it will be somewhere around 21%.”
V.P. Nandakumar
qa
“So, currently, our disbursement will be around 21%.”
V.P. Nandakumar
qa
“So, these are realized during the next quarter.”
V.P. Nandakumar
qa
“So, it will be at same pricing of 24%, that would give us comfort.”
V.P. Nandakumar
qa
“The collections are more or less of the pre-COVID level, but we expect a credit cost of 1% extra.”
V.P. Nandakumar
qa
“So, that's why we have budgeted for next year's budget, etc.”
V.P. Nandakumar
qa
“And next year will be a full year as well as the business performance is concerned compared to pre-COVID level.”
Risks & concerns — 9 flagged
Our microfinance subsidiary, microfinance loan have posted a sequential decline of 3% in the AUM which stands now at Rs.
— V.P. Nandakumar
We continued to focus on prudent lending in this unsecured business due to the residual impact of the pandemic third wave.
— V.P. Nandakumar
From an accounting standpoint, we have prudently recognized the likely impact of RBI guidance.
— Bindu A.L.
First is relating to the pricing pressure in the gold business.
— Dhaval Gada
The pricing pressure, so we have decided that for this we believe to be prudent for us, we'll settle that.
— V.P. Nandakumar
So, we have seen a steady decline in delinquency, but the old, restructured portfolio from that, and now everything has come out that will flow to NPA.
— V.P. Nandakumar
Sir, while you explained that the recovery has been uneven in some of the unorganized sectors, and because of which the demand clearly, sir, looking at the kind of sequential degrowth that we saw in your whole AUM, I mean clearly suggests that the demand has been weak.
— Abhijit Tibrewal
You have answered this question even in the earlier part of the conference call, but still, sir, do you see the competitive intensity continue to flaring up and therefore, you will continue to take it on your views and therefore, the pressure on net interest margins in the stand-alone, especially on the gold loan side, will remain for a while?
— Shweta Daptardar
So, the challenge here is from the restructured portfolio, there as the industry as a whole.
— V.P. Nandakumar
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Q&A — 10 exchanges
Q
I had 3 questions. First is relating to the pricing pressure in the gold business. If you could update what is the current situation? And your outlook on lending rates in the gold loan business? The second question was regarding the tenure mix in gold loan, if you could provide how much is 3 months or below? And how much is above that? And the third one is, I see there is a Rs. 63 crore fair value gain during the quarter. Is it on account of assignment in the MFI book or any other portfolio? If you could just clarify that. Those were the 3 questions.
V.P. Nandakumar
The pricing pressure, so we have decided that for this we believe to be prudent for us, we'll settle that. We thought it will be somewhere around 21%. So, currently, our disbursement will be around 21%. So, we have decided that we will stick to that. We had a discussion with some of the players, and some of the players have already toe our line. Another large company has said they will toe our line of pricing, which is seen by the industry as reasonable, that is around 21%. So, we believe that gradually, the market will realize the necessity of a reasonable pricing and so a reasonable price wa
Q
I had some questions on Asirvad. So, firstly, sir, can you comment on what is the proportion of restructured loans in Asirvad? Secondly, when Bindu mentioned about the change in accounting policy for NPLs, has that impacted Asirvad too because their NPL is up 70 bps Q-o-Q. And lastly, how much of yield hike are we taking because of the removal of the spread gap?
V.P. Nandakumar
With the removal of this NIM cap, we have factored few things in pricing. One, we have factored around 3% credit cost because we have taken the past 5 years which include the demon period, then his pandemic, we have seen the credit cost on an average to be around 20%. So, that is factored in the new pricing. Now, it’s to Yogesh. So, on the restructuring, we have currently 12%, 12.5% book, which is still remaining at around Rs. 790 crore. We had followed this and for Asirvad, we never considered that collection. So, that way, we have not provided anything extra in net NPL. Sorry, I didn't get y
Q
Bindu ma’am, firstly, maybe for the benefit of all, if you could please explain what was that change in NPA recognition norms that you talked about in your opening remarks, which has led to such a sharp spike in your gross and net NPAs in the standalone business?
V.P. Nandakumar
So, as mentioned in the opening remark, earlier, we were taking 1 month collection post closure. And now we have stopped that. So, that is a spike to the NPA, which is only temporary. These are not real NPAs. These are all technical NPAs, where gold is there as security. So, these are realized during the next quarter. So, this is -- so this will not lead to any credit cost. So, it's only a timing issue, so it is deferred to this quarter and that will not be repeated. Sir, my second question was on the MFI business, how do we explain the plan that we talk about collection efficiencies of 99%. A
Q
The first question would be on the yield. So, we've seen a yield compression. Alongside we've also seen the online gold loan proportion going back to what we were around 3 years ago. So, are these the normalized levels going forward at around 19%, 20%? And if you're looking at the ROAs from 5.5% to 6%, are these the normalized levels of ROAs and yields going forward? That's the first question. Second is on Asirvad. Are we looking out for a strategic investor in the microfinance business or for some incremental capital deployment? That's the second. And third of the data keeping question. What’
V.P. Nandakumar
So, as I mentioned earlier, we are currently settling down at 21% yield in gold loan. So, we feel like other NBFCs will also slowly come back. We are targeting a yield not less than 5% ROA. So, this is our target. So, our consolidated ROE is down primarily for one reason -- major reason is not only the reduction in the ROA, but also microfinance sector, which is substantial for us. It is important. Some startups reporting profit as the reason. So, the micro finance growth you said for the capital requirement. Yes. We are targeting a growth of around 20% in the MFI business. So, for that we pre
Q
A couple of questions. The first one is on Asirvad Microfinance. So, ma'am, you mentioned that post the removal of interest rates from the regulator, what are the current yields and what were it prior to that? And therefore, what is the leg up on the ROA, if any?
V.P. Nandakumar
We are and ROE of around 20%, not less than 20% of the microfinance business. So, every year, there are certain frequencies, we see such challenges here like natural calamities, et cetera, which is actually disrupting. Taking all these into account, yes, we are pricing the product around 24%, yes, for which the rationale is already published. So, in the past, the cost of borrowing was 10.3% and with margin gap, our lending rate was 20.35%. Under the new regulations our idea is to charge 24% considering this increased credit cost scenario. And do you believe this increase in yield, the entire b
Q
Sir, a couple of follow-ups. So, one is on gold branches. So, on the presentation, you've restated the third quarter gold branches. So, I just wanted to reconfirm is this the Asirvad branches, which now get classified under gold branches? And then the other question was on advertising and promotion expense if you could provide that for fourth quarter and the full year.
V.P. Nandakumar
So, the parent company, there is no increase in the branch network. In gold loan, we have opened branches in Asirvad. Because yes, there is an opportunity to take the unsecured loan up to (inaudible) (0:44:20) now because of the changes to regulation. So, for that, old MFI branches may not be (inaudible) everything is already there. So, we started in 300 places, with 300 new branches there. So, that was additional branches. As we discussed in the last quarter, Q3, we were aggressive in advertisement spend because we were not spending much in the past. And that we could get the benefit during t
Q
A quick question on the standalone business here. Historically, if you look at the ROEs that we have been doing on standalone business, it's been in excess of 20% or so. What is the management stance on taking this number, which is now probably at 13%, 14%, back to 20% level? And how far -- or how quickly should we be in those numbers on the standalone ROE side?
V.P. Nandakumar
This is the effect of the pandemic. The economy has gone to a standstill situation. Now we see the recovery. So, expecting a recovery, so the lockdown situation is not expected to recur. Because of that, we are expecting 10% growth there. And other businesses are expected to grow over 20%. And the asset quality also would be good. In MFI, we are expecting ROE of over 20%. So, the other businesses also which has already established a strong footing is likely to grow and report would follow. The MFI has come back, so that can help ROE definitely move to 20%. I was looking more on the standalone
Q
Sir, the question was what is the revised lending rate in the MFI segment post the spread cap removal? And what's the range now?
V.P. Nandakumar
It is 24%. 24%? 24%, right. It has been around 24%. Earlier that would be? It was around 20.5% Sir, the second question was what is the disbursement in the MFI segment for the fourth quarter? MFI, new revised rate lines outcome, our software has to be updated, et cetera. Now we have lending under the new regulatory regime. So, we are disbursing around Rs. 500 crore per month, and our collections are around Rs. 360 crore principal. So, the monthly net growth is expected around Rs. 150 crore. So, the 4Q disbursement would be close to Rs. 1,500 crore, is it? RS. 1,126 crore. Yes, it is expected t
Q
Sir, firstly, what is the current minimum rate for gold loans in our branches say for a low-ticket loan of Rs. 50,000 to Rs. 1 lakh and taking a 65% LTV, what will be the minimum rate he'll be offered in our branch?
V.P. Nandakumar
So, the rates starts from just 10% to 24%. This is the rate. Small ticket for short term, 24%. And large ticket, it starts with 10%. We take into account of the disbursal yield on a daily basis, taking into consideration the trend of closure, etc. which is tracked by the system on a daily basis. On that basis, the disbursal yield count is around 21%. That's the blended yield. And what is now the customers response to the now higher rates for gold loans, say, in typically urban or semi-urban branches because we stopped that 6.9% scheme in March. And now I believe the minimum rate you spoke abou
Q
Thank you, Rutuja. On behalf of Phillip Capital, I would now like to thank the entire senior management team of Manappuram Finance and all the participants for joining us on the call today. Thank you and have a good day.
V.P. Nandakumar
Thank you. Thank you for your questions. Thank you.
Speaking time
V.P. Nandakumar
45
Bindu A.L.
14
Aalok Shah
13
Moderator
12
Dhaval Gada
8
Shreepal Doshi
7
Rajiv Mehta
7
Piran Engineer
6
Management
6
Shweta Daptardar
5
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Opening remarks
Pradeep Agrawal
Thank you, Rutuja. Good evening, everyone, and welcome to quarter 4 FY22 Earnings Call of Manappuram Finance. To discuss the results, we have with us Mr. V.P. Nandakumar, M.D. and CEO; Ms. Bindu A.L., CFO; Mr. B.N. Raveendra Babu, M.D., Asirvad Microfinance; Mr. Yogesh Udhoji, CFO, Asirvad Microfinance; Mr. K. Senthilkumar – Head, Vehicles and Equipment Finance; Mr. Suveen – CEO Manappuram Home Finance; Mr. Bikash Kumar Mishra – CFO, Manappuram Home Finance. I would now like to hand over the call to Mr. Nandakumar for his opening remarks. Over to you, sir.
V.P. Nandakumar
Thank you, Mr. Pradeep Agrawal. Good evening, ladies, and gentlemen. Welcome to our Q4 FY 2022 Conference Call. In our last con call to discuss the Q3 Results, I had expressed optimism about the signs of recovery in the economy, despite the Omicron variant then active and how we were beginning to see an improvement in the unorganized and rural sectors as well. It’s then our assessment the recovery of the economic activity in the unorganized sector has been somewhat uneven with some parts doing well, but in many household and small businesses is not out of woods as yet. In keeping with that assessment, we have achieved a sequential growth in our home loan finance as well as in vehicle and equipment finance division through the quarter. However, our core business of gold loan and our microfinance subsidiaries did not see growth through the quarter. Our consolidated AUM stands at Rs. 13,260 crore, which represents a growth of 11% year-on- year but a dip of 0.5% quarter-on-quarter mainly d
Bindu A.L.
Good evening, ladies, and gentlemen, and thank you for joining us for discussion on our financial results for the quarter of financial year '22. With respect to gold loan demand, we continued with our offerings of competitive interest rate to high-ticket size gold loan customers who are price sensitive. Currently, over Rs. 2 lakh ticket constitutes 33 percentage of our AUM. In the light of new MFI regulations, we are in the process of building secured loan book by adding gold loan business. The gold loan AUM as on 31st March 2022 in our share book stands at Rs.300 crore. From an accounting standpoint, we have prudently recognized the likely impact of RBI guidance. Accordingly, one significant change during the quarter has been that we have stopped considering the collections after the balance sheet date as a reduction from NPAs, even though we are technically permitted to consider up to 1 month collection after the balance sheet date. This has been the main reason for the increase in c
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