Manappuram Finance looks to take MFI arm Asirwad Microfinance public

Manappuram Finance, the second largest gold loan company in the country, is toying with the idea of hiving off and taking its microfinance arm Asirwad Microfinance public within a year, a top company official said.

With a loan portfolio of over Rs 5,360 crore and close to 25 lakh customers across 23 states, the Chennai-headquartered Asirvad is the fourth largest microfinance lender in the country in terms of the loan book.

Founded in 2008 by S V Raja Vaidyanathan, Asirvad was taken over by Manappuram in February 2015 for Rs 48.63 crore. The V P Nandakumar-led company first bought 71 per cent stake which was later increased to 95 per cent and the rest is with the founder Vaidyanathan.

Under Manappuram, Asirvad has grown leaps and bounds.

From a loan book of just Rs 300 crore and a few lakh customers across 115 branches in Tamil Nadu, Kerala and Karnataka when it was bought over, the company has over 1,030 branches across 314 districts in 23 states (excluding Andhra Pradesh and Telangana) and a loan book of over Rs 5,358 crore as of 2020-end, of which over Rs 1,000 crore is in Tamil Nadu alone.

As of the December 2020 quarter, Asirvad had a loan book of Rs 5,357.71 crore, a growth of 6.68 per cent from Rs 5,022.14 crore in the year-ago quarter.

This makes the microlending arm the biggest vertical after the gold loan business for the group.

“We are planning to hive off Asirvad within a year, and then take it public. We are looking at the right valuation. I am looking at a price to book value of 3-4 times, which is 2 times now,” founder and chief executive of Manappuram Finance Group, V P Nandakumar told PTI at his Valapad, Thrissur headquarters.

“This is our most profitable business when it comes to return on investment at 20 per cent. While my cost of fund is 10 per cent, my net interest margin is 10 per cent,” he said, explaining the rationale for his higher valuation expectation.

Microlending business has a long future in the country as the poor still face difficulties in getting credit from banks, he said.

Nandakumar also said Asirvad will close the year to March 2021 with a profit of Rs 50 crore.

Asirvad’s net profit had dipped to Rs 17.78 crore in Q3 of this fiscal from Rs 71.21 crore a year ago, and it posted a net loss of Rs 2.42 crore in Q1 due to the pandemic but it is expected to make a big comeback and clock Rs 200 crore net income in the 2022 fiscal, he said.

For his mainstay gold loan business under the Manappuram brand, Nandakumar expects 20 per cent growth in net income this fiscal over the last financial year.

In the December quarter, its net income rose 17 per cent to Rs 483 crore on an income of Rs 1,644 crore, up 14.5 per cent year-on.

Consolidated assets under management (AUM) grew 14.7 per cent to Rs 27,642.5 crore. Of this, the gold loan stood at Rs 20,211.6 crore, up 24.43 per cent from a year ago, while the aggregate gold loan disbursement was at Rs 57,445.14 crore.

Manappuram Home Finance has a loan book of only Rs 633.44 crore, while the vehicles and equipment finance arm had AUM of Rs 988.04 crore.

Asirvad has digitised its entire operations and all customers are on-boarded digitally now, which has helped it reduce the turn-around time to less than five days for a loan.

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