Flat growth in gold loan business is on seasonal patterns, says Manappuram Finance MD

Non-banking finance company Manappuram Finance on Friday (February 9) said its flat growth in the gold loan business on a quarter-on-quarter basis is mainly due to seasonal demand for gold.  "Our growth in the gold loan business seems to be relatively flat due to historical seasonality in gold demand that  influences borrowing patterns," said V P Nandakumar, Managing Director and CEO.

For the December quarter, Manappuram Finance’s gold loan portfolio grew by 11.5% year-on-year (YoY) due to base effect. In the previous quarter (Q2 FY24), the YoY growth was 8%.

Nandakumar said that the gold price does not significantly impact borrowing trends, as more than 95-96% of gold loans are redeemed within the usual course, highlighting borrowers' management of their cash flows.

Addressing concerns about the trend in interest rates, Nandakumar expressed optimism.

He referred to the Reserve Bank of India's (RBI's) projection of lower inflation for the upcoming year as an encouraging sign. He anticipates that this could indicate a stabilisation or potential decrease in interest rates.

Despite expectations of a marginal increase of 10-15 basis points in borrowing costs, he reassured that Manappuram Finance, being a small-ticket short-term lender, is well-equipped to pass on any incremental costs as needed.

Providing further insights into Manappuram Finance's strategic initiatives,   Nandakumar said that the company is on track to take its subsidiary Asirvad Microfinance (MFI) public, with plans to launch its initial public offering (IPO) by mid-March or early April.

Additionally, he expressed confidence in maintaining the Net Interest Margin (NIM) at current levels and foresees reasonable growth in the fourth quarter of the fiscal year 2024.