We have targeted 10-15% growth in gold loan -V.P. Nandakumar, Manappuram Finance

Excerpts from an interview of Mr V.P. Nandakumar, MD, and CEO, Manappuram Finance with Live Mint dated 13-01-2020:

Update on the Indian Equity Market:

On Monday, NIFTY closed +0.6% higher. Among sectoral indices NIFTY Realty (+2.1%), NIFTY IT (+1.7%), NIFTY Metal (+1.2%) closed higher. None of the sectoral indices closed on a negative note. The biggest gainers were Infosys (+4.7%), IndusInd Bank (+3.7%) and Coal India (+3.1%) whereas Yes Bank (-5.8%), Bharti Infratel (-1.2%), and UPL (-1.2%) ended with losses.

• Mr Nandakumar says, the all-inclusive cost is expected to be around 11%. on January 13, 2020, the company will finalize the hedging portion.
• The coupon rate is 5.9%. The hedging rate is yet to be finalized.
• Mr Nandakumar says they want to diversity liability and this is a new addition.
• The incremental cost is 9.2%, this is costly, but diversification of liability is needed as there are liquidity challenges in the non-banking financial companies (NBFCs) sector and the company is a little more cautious about that.
• So far, the company has not been affected.
• Speaking about the slowdown in vehicle financing, Mr Nandakumar says, they do not lend to fleet owners.
• Primarily the thrust area is lending to the operators who have one-two trucks, this segment remains stable.
• Recoveries remain the same. The company will be achieving around 30-35% growth in the commercial vehicle (CV) finance this year.
• The company has targeted 10-15% growth in gold loan and they are confident to achieve it.

Consensus Estimate (Source: market screener and investing.com website)

• The closing price of Manappuram Finance was ₹ 177/- as of 13-January-20. It traded at 2.6x / 2.1x / 1.8x the consensus Book Value for FY20E / 21E / 22E of ₹ 65.7/81.3/97.6 respectively.
• Consensus target price of ₹ 177/- implies a Price to Book multiple of 1.8x on FY22E Book Value of ₹ 97.6.