Manappuram Finance Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Manappuram Finance Ltd (MANAPPURAM) Q2 FY24 Earnings Concall

• Financial Performance
  • Net profit increased 37% year-on-year to INR551 crore driven by profitability in gold loans and microfinance business.
  • Gold loan AUM was INR20,809 crore, up 8.4% year-on-year.
  • Maintained pricing discipline in competitive environment and improved profitability.
  • Consolidated AUM at INR38,950 crore, up 27% year-on-year.
  • Consolidated PAT at INR561 crore, up 37% year-on-year
  • Gold loans comprise 53% of consolidated AUM.
• Gold Loan Business and Outlook
  • Gold loan AUM at INR20,809 crore, up 8.4% year-on-year.
  • Added 4.03 lakh new gold loan customers during the quarter. Adding around 5,000 new gold loan customers daily.
  • Average loan-to-value ratio is 66%.
  • 56% of gold loan book is online.
  • South India contributes around 65% to gold loan portfolio
  • Expect to maintain 7-8% gold loan growth momentum without gold price increases.
  • Expects around 8% gold loan growth in Q3, higher than Q2 growth of 1%.
• Microfinance Business
  • Asirvad Microfinance filed DRHP for IPO on October 5, 2022.
  • Microfinance AUM at INR10,950 crore, up 43% year-on-year.
  • Microfinance PAT at INR111 crore versus INR48 crore year-ago.
• Other Businesses
  • Vehicle finance AUM at INR3,143 crore, up 66.6% year-on-year.
  • Home loans AUM at INR1,305 crore, up 41% year-on-year.
  • Loan to MSME and allied businesses AUM at INR2,639 crore.
• Loan Assignments
  • Assigned loans worth around INR700 crore this quarter for MFI loans.
  • Assignments not possible for gold loans, but doing for non-gold businesses.
  • Opened lines of credit to diversify sourcing beyond deposits.
• Operating Expenses
  • Employee expenses decreased due to lower incentives tied to growth and asset quality.
  • Administrative expenses increased due to more communication and outsourcing costs.
• Gold Loan Competition
  • Maintaining pricing discipline around 22% despite competition.
  • As banks’ overall credit growth increases, preference for small ticket gold loans may decrease.
  • Expect competition to taper given rising funding costs.
• Gold Loan Portfolio
  • 15% of book less than 1 month old.
  • Average LTV 66%.
  • Auctions were INR15 crore in 2Q.
  • Option surplus reduced from INR35 crore last quarter to INR30 crore now.
  • Delinquencies higher than MFI loans as grace period is provided to borrowers.
  • Underlying gold collateral ensures no loss on recovery.
  • Can sell gold before NPA classification if needed based on contract.
• Asirvad Microfinance Growth
  • Current capital position sufficient to support growth this year.
  • Fundraising through IPO for growth capital needs in future.
  • No expected slowdown in growth momentum.
• Funding and Liquidity
  • Apprehension from case now resolved with final order.
  • Have around INR4,800 crore in liquidity now.
  • Seeing adequate liquidity and some pricing reductions.
• Fee and Commission Income
  • Stood at INR31 crore in Q2 vs negligible in previous quarters, primarily from referral fees on selling products like appliances to borrowers.
  • Q2 income higher due to pent up demand in Q1 when disbursements were slow.
  • Expect run-rate to continue but not as high as Q2 due to one-time benefit.
• Business Outlook
  • Expect similar growth trends in Q3 as Q2 across gold and non-gold.
  • Targeting around 10-15% growth for non-gold lending business.
  • Growth dependent on region specific cycles and market conditions.