Manappuram Finance Limited (531213) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Manappuram Finance Q1 FY '27 Earnings Conference Call. [Operator Instructions]. Please note this conference is being recorded. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir. Yes.

Thank you, Steve. Good evening, everyone. I am Abhijit Tibrewal from Motilal Oswal, and it is our pleasure to welcome you all to this earnings call. Thank you very much for joining us for Manappuram Finance earnings call to discuss the Q1 FY '27 earnings. To discuss the company's earnings, I am pleased to welcome Mr. VP Nandakumar, Chairman and MD; Dr. Sumitha Nandan, Executive Director; Mr. Buvanesh Tharashankar, Group CFO and CFO; Mr. Manoj Pasangha, Co-CEO, Asirvad Microfinance; Dr. Roy Varghese, Co-CEO, Asirvad Microfinance, Mr. Mandeep Singh, CFO, Asirvad Microfinance, Mr. Kamal Parmar, Head Vehicle and Equipment Finance, Mr. Rakesh Sharma, Co-CEO, Manappuram Home Finance, Mr. Suveen P.S., Co-CEO, Manappuram Home Finance, and Mr. Robin Karuvalli, CFO, Manappuram Home Finance. On behalf of Motilal Oswal, we thank the senior management and the Investor Relations team of Manappuram Finance for giving us this opportunity to host you today. I now invite Mr. Nandakumar for his opening remarks. With that, over to you, sir.

Thank you. So good evening, everyone, and thank you for joining us for Manappuram Finance Q1 FY'27. It's a pleasure to connect with all of you once again as we discuss our performance for the first quarter of FY '27 and share our perspective on the opportunities and priorities shaping the year ahead. Operating environment. The first quarter of FY '27 witnessed a resilient operating environment for the Indian economy despite persistent geopolitical uncertainties and volatility in global commodity markets. India's macroeconomic fundamentals remain strong, supported by healthy domestic consumption, improving rural demand, sustained infrastructure spending and a stable financial system. Credit demand across the banking and NBFC sectors continued to remain healthy while asset quality across secured lending portfolios remained resilient. Consolidated financial performance overview. Our performance during the quarter reflects the inherent strength of our diversified business model and the resilience of our core gold loan franchise. Consolidated AUM for Q1 '27 was at INR 69,635 crores, up by 9% QOQ and up by 57% year-on-year. Consolidated gold loan AUM for Q1 FY'27 was at INR 57,006 crores. It is 82% of our consolidated AUM versus 80% for Q4 FY'26. Consolidated revenue from operations for the quarter stood at INR 3,033 crores, up by 16% QOQ and up by 34% year-on-year. Profit After Tax stood at INR 585 crores, up by 45% QOQ and up by 47% year-on-year. Coming to gold loan business. The gold loan business continued to be our primary growth engine. At the same time, we maintain a disciplined approach towards risk management across all businesses, with asset quality, liquidity and capital preservation continuing to be main key priorities. With over four decades of experience in secured lending, Manappuram Finance has built one of the country's most trusted gold loan franchises. Stand-alone gold loan AUM for Q1 FY27 was at INR 54,655 crores, up by 12% quarter-on-quarter and up by 97% year-on-year. As guided earlier quarter, our gold loan yield has improved by 59 basis points during the quarter. Coming to microfinance business. Our microfinance business under Asirvad continues to operate in a calibrated manner. Microfinance companies have witnessed industry-wide stress over the few years. However, the strategic measures implemented over the last several quarters are beginning to deliver encouraging outcomes. Our balance sheet remains robust, supported by healthy capital adequacy, diversified funding sources and comfortable liquidity buffers. This provides us with flexibility to pursue growth opportunities by maintaining financial resilience in an evolving operating environment. Asirvad AUM stands at INR 7,188 crore, up by 5.8% QOQ and up by 7.2% year-on-year. Asirvad has reported a PAT of INR 21 crores in this quarter, up by 58% QOQ and up by 108% year-on-year. Coming to housing and MSME lending business. Our housing finance and MSME lending business continue to focus on profitable growth while maintaining strong credit discipline. Rather than pursuing rapid balance sheet expansion, we remain committed to building sustainable businesses that generate healthy returns over the long term. Coming to priorities for Manappuram. It is remaining unchanged. We continue to strengthen our senior leadership team. Mr. Ashish Singh has been appointed as the MD and CEO and expected to join by January 1st of 2027. He is a seasoned banker with over 25 years of experience in the retail banking space and his latest experience at the IDFC First Bank has set off retail liabilities. He previously has leading private banking business. Moving forward, we continue to maintain our leadership in the gold loan business through customer-centric innovation and digital capability and operational excellence. Simultaneously, we will focus on improving the performance of diversified business through disciplined underwriting, strong portfolio quality and sustainable profitability. Technology, governance, and operation efficiency continue to remain important of our strategy as we build a more agile and future-ready organization. While the operating environment will continue to evolve, we believe that instituting in strong governance disciplined execution, trust brands and prudent risk management will emerge stronger over the long term. With our resilient business model, robust capital position, and diversified financial services platform, we are well positioned to capitalize on the significant opportunities ahead. With that, I now hand over the call to our President and Group CFO, Mr. Buvanesh Tharashankar, who will take you through the detailed financial and operational performance for the quarter. We'll then be happy to take your questions. Thank you.

Thank you, Mr. Nandakumar. Good evening, ladies and gentlemen. Thank you for joining us for a discussion on our financial results for the first quarter ending June 30, 2026. In Q1 FY '27, performance was driven by a strategic focus on gold loan growth, improved gold loan yields through a greater emphasis on non-gold loan collections and strengthened asset quality. Our consolidated AUM for Q1 FY '27 was at INR 69,635 crores, up by 9% sequentially and 57% year-on-year. Gold loan continued to be our key growth driver with an AUM of INR 57,006 crores, up by almost 12% quarter-on-quarter and by about 98% year-on-year, supported by strong customer demand. Gold loan business constitutes 82% of the consolidated AUM versus 80% in the prior quarter and 65% a year ago. Consolidated profit after tax before OCI and minority interest was INR 585 crores for Q1 FY '27, which sequentially was up 44.5%. Coming to stand-alone business. Our stand-alone AUM for Q1 FY '27 was at INR 60,971 crores, up by 9% sequentially and 70.8% year-on-year. Gold loan AUM in stand-alone business was INR 54,655 crores, up 12% quarter-on-quarter and 97.4% year-on-year. It constitutes 90% of our stand-alone AUM versus 87% in the prior quarter and 77% a year ago. Stand-alone PAT before OCI was INR 552 crores, up 47% sequentially and 41% year-on-year. Stand-alone GNPA was at 1.56% versus 1.8% in prior quarter and credit cost in stand-alone entity for the quarter was 1%. The stand-alone borrowing cost has gone up by about 10 bps in the first quarter of FY '27. Coming to the gold loan business. During the quarter, we were able to add about 3.2 lakh new customers and outstanding number of customers was 26.5 lakhs. Our average gold loan LTV was at 65.6% in Q1 FY '27. Online gold loan book accounts for about 86% of the total gold loan book. Coming to microfinance business. Asirvad's AUM stands at INR 7,188 crores, which includes gold loan AUM of INR 2,344 crores. Overall, the growth was 5.8% quarter-on-quarter and 7.2% year-on-year. PAT before OCI was INR 21 crores in Q1 FY '27 versus INR 13 crores in the prior quarter. And in Q1 FY '26, we had a loss of INR 269 crores. So essentially a swing of INR 290 crores year-on-year. Net NPA stands at 1.4% and Asirvad's CRAR as of quarter end was at 31%. Coming to vehicle finance business. In the vehicle finance business, we have reported an AUM of INR 2,562 crores, down 14.3% quarter-on-quarter and 43% year-on-year. Focus is now on collections as GNPA continues to be elevated at 13.3% versus 10.4% in prior quarter. Loans to MSME and allied was at INR 3,303 crores with a disbursement of INR 191 crores, and GNPA was at 5.9% versus 7.1% in the prior quarter. Home loan business had a total book of INR 1,847 crores, flat Q-o-Q and down by about 3% year-on-year. The Board has declared an interim dividend of INR 1 for this quarter. Our capital position is strong and company is well capitalized with a capital adequacy ratio of 21.29%. The company's consolidated net worth stands at INR 16,552 crores as of June 30, 2026, and book value per share stood at INR 176.20. We can go now for the Q&A session.

Our first question comes from the line of Shreepal Doshi with Equirus.

Sir my question was first on the recent implementation of RBI framework on the LTV side. So, what changes have we made in terms of product tenure? And have we launched income-generating products as well during the quarter? If yes, could you please throw some light in terms of the interest rate as well as tenure and the underwriting practice that we have in that category?

From the recent RBI circular guideline issued from April 1st onwards, we implemented in across in the recent period by considering the interest also while calculating that. There is a major change happened and also the ticket size also came in the picture, up to INR 2.5 lakh, 2.52 lakh and above INR 5 lakh. That is implemented from 1st onwards. And according to the new circular guideline and given some options or some different kind of product offering options also given. According to the customer requirement and request some of the products like monthly interest payment or monthly EMI scheme category products also we launched as a part of that. There are some acceptance from the customer also requesting now we got that option. So these were the changes and some of the customer segment like business class customer or business segment is there, those who are regularly getting income on their business and related operations. In that also a small segment of income-generating loan also started after this April.

How is this income-generating loan different from the vendor gold loan that we were doing consumer loan that we were doing, except for the bullet repayment part. So is there any other difference apart from having the option of bullet repayment in consumer loan versus in the income-generating loan we have the EMI option. Apart from these two, is there any other difference?

The income-generating asset, like income-generating gold loan, is given based on the cash flows. We have for that, for assessing the cash flow, etc. Whether it is the EMI product or quarterly AI product, interest installment is based on the cash flow. The LTV is also based on that. If it is an equated monthly installment, the LTV is higher. This gives us an option, if nobody, here we can send the due notices, and the recovery process can start as specified by the regulator. You had a question on the interest rate. The interest rate on this scheme, it ranges from 14%-16%.

Got it. Sir, when you say income evaluation or cash flow evaluation is lost when you are doing income-generating loan, so we have created a bandwidth there in terms of hiring staff over the last three, six months, and how is it?

We have hired staff. And we have our own people in cash flow-based products like MSME loans, et cetera with the capacity of the knowledge of processing the customer, et cetera, borrower, et cetera and sufficient training has been done so at various levels. We started this training much before the implement. We started this training at least three months prior to the implementation on April 1. So these schemes were implemented subsequently. So we had the time to train our staff for six months. They are adequately trained now.

Just one follow-up there. [Technical Difficulty] My question was that even in the income-generating loan, we follow the similar LTV norms as we follow in the consumer loans, right?

No. Income-generating loan based on the cash flow, we go up to 85%, it is monthly EMI [Indiscernible]. So the LTV is higher. But at the same time, I can tell you the overall average LTV remains at 64%. Now this is the last week's price. Now the average LTV would have come down further because the price has gone up during the last one week.

The next question comes from the line of Rajiv Mehta with Yes Securities.

Congratulations on good numbers. Sir, firstly, I want to understand this movement of 60 basis points improvement in the portfolio yield. What drove this? Is it the new products which you introduced under the new regulations since your portfolio tenure is generally short. Is that helping you in maintaining now the yield at a much better level than the earlier products, or has there been any underlying shift in the customer segment mix, meaning that more high-ticket customers or has there been any change in the customer mix as well? So if you can just answer and if are we able to maintain the same yield in July, August as well with the same momentum of business?

This is Buvanesh here. So, the yield movement is largely, I mean, in last quarter, I think I alluded to the point that we had overcorrected in terms of the pricing that we had, and we were taking some pricing actions to ensure that we are able to enhance the yield. So in Q1, essentially, we had taken some pricing actions, which are beginning to kind of yield results to us, which is what you see in Q1 numbers. And we see similar trends going forward as well. From a pricing perspective, we will probably be in this broad band around 18%. And basically, that's where we will be. So, it's not on account of any shift in terms of a disbursal mix or any segmentation mix. It's basically a set of actions that we have taken from a pricing perspective to be in line with our peer group, and we continue to monitor that pretty closely.

And with this holding on to the ease of around 18-odd percent, have we seen the velocity of business in terms of tonnage growth, customer growth continuing in July and August as well?

So Q1, if you look at the growth one year back, I think it was from a tonnage perspective and a customer perspective, it was a bit weak. In fact, on the tonnage side, I think we had gone down last year first quarter. This first quarter, despite seasonally being slow, we had a good momentum, and we continue to build on that momentum in July and August as well, both from a customer perspective and from a tonnage perspective as well.

And just one clarification. When you report LTV as of June end at 65.6% and as of March at 57.3%, the June LTV will also have LTV defined as per the RBI's new regulation? Or is it like-to-like comparable? It's not including interest.

No. So it is, to some extent, it will include interest. But in terms of largely the LTV movement that you see from 57% to 64% is driven by the price of gold. So you see that the price of gold has dropped by about 8.5%. Consequently, you see a similar movement on the LTV side. So it's more of a denominator effect, I would say.

So there is no numerator change you are saying numerator computation change.

No, it's not there.

The next question comes from the line of Piran with CLSA.

So just going back on the earlier question, where can LTV settle assuming gold prices are stable here?

So on an average, this would be like INR 64, 65, even INR 66 level only, like March ending and INR 57 came mainly because of the price, INR 14,161 was the price. Now 30 June that price is at INR 12,954. That is why this is coming at INR 66. But normally, in this level, it is 64 to 67 is the average LTV range in the normal scenario.

Understood. So LTV should be range bound out here?

The average this range will be there. If price increase on the last price we are calculating according to the calculation, and everywhere following that, last day's price.

Understood. Understood. Sir secondly, we are seeing a lot of competition on the ground in gold loans, but you all have done pretty well. Just wanted to understand conceptually, if competitive intensity remains strong or even rises, what would you prefer holding on to margins or sacrificing margins but pushing growth?

See, we will maintain a balance. So currently, our pricing is at the lowest range in the NBFC industry. So with the market, we cannot be totally away from the market. So we have to move according to the market. But I hope we'll be reasonably balanced in that.

Okay. Okay. And lastly, just a question for Bindu, if she's there. This net loss on derecognition of financial instruments of INR 30 crores, just can you explain what exactly that is? Is that a write-off?

Yes, it's a write-off, we can get back on more specifics on that.

Okay. It's a loan write-off basically.

Yes.

The next question comes from the line of Prithviraj Patil with Investec.

I just had one question of the new guidelines that Reserve Bank of India has given, the draft guidelines about the export facility. I just wanted to know if there are any such facilities or online gold portfolio.

Can you repeat the question?

There's a new draft guidelines on the revolving facility. I just wanted to know if there's any such facility on the online gold portfolio that you have.

Online gold loan doesn't come under the overdraft. It is a normal loan only. It's just been lettered in the revised instructions.

Okay. How does the functioning of this loan work once the principal is run down? Do we give the customer a top-up loan then?

When the principal is run down, he has the facility if the LTV permits. He has the facility in the online gold loan to repledge that at the LTV he wants within the range permissible. That's all. It is not an overdraft. He has the facility to repledge at the prevailing LTV, within that prevailing LTV he has the option.

The next question comes from the line of Bhaskar Basu with Jefferies.

I had three questions. Firstly, on the LTVs again, how are the origination LTVs? Do you have any loans which are originated at around 85% LTV post the new launch?

First of all, I can say we are working within the regulations. If consumer loan is up to INR 2.5 lakhs, there is a regulation. Similarly, beyond that also there are certain caps. The interest also is factored while calculating that. Let me say that. For income generating assets, we go up to 85%, this is the maximum, 85%. These are EMI products or the IGA products. Here, even though we have the gold collateral with us, most stress is given to assess this cash flow. These are all from the business people, who will even otherwise qualify for EMI products based on the cash flow, based on whatever securities they pledge their business upon.

Okay. But that income generating product, actually, my understanding is there is no required LTV cap for that, right? I mean, you can --

Yeah, there is no, as per the regulation, there is no LTV cap. But internally, we have fixed up the cap to be 85% maximum. That is the maximum.

Got it. And what portion of your book will be, say, originated at that 75%-85% band? And what proportion would be the income generating loan in the book?

That can be shared separately. We have to take that separate.

Okay. What would be your branch expansion plans for this year? Any acceleration expected?

Now, one good news for us is the requirement of prior approval from RBI has been removed, which facilitates the opening of the branches. So we have the plan to open around 500 branches now. We are at stream now already, progressing in that stream.

Sorry, 500 branches for this year?

Yes. That is what is planned.

And would this all be in standalone or would this also include Asirvad?

No, this is for Manappuram. For other businesses like home finance or MFI, they have their own plans.

No, I mean within the gold loan branches.

Yep. Yes.

So Asirvad gold loan branches expansion will be on top of this, or this is part of that 500 for the group?

Yeah. All these Manappuram Finance and Asirvad, all these will come under this 500. This is the plan.

Yeah, got it. My last question is on the cost of fund. We have seen about 20 basis points increase in standalone. Where do you see this settling? Does it go up further in the next quarter?

Buvanesh here, in terms of cost of fund, given the overall environment where we have seen spikes in terms of the rates in the short way, and we have seen a spike in the rates, we have seen MIBOR also at all-time high levels. Despite that, first quarter, we have been able to manage from a cost of fund perspective, we have been able to keep it fairly under control. We continue to monitor and see in terms of opportunities that will arise in future, and we will work on that. It is very difficult to put a number in terms of where this will settle in. But having seen that these are elevated currently, we could expect some of this coming into our cost of fund as well. But it is very difficult to predict where this will be.

Okay. But some sense on where your marginal funding cost is versus the average of about 8.8. Incremental basis.

On an incremental basis, I would say, we will be around the 8.8, 9 handle, is what I would look at.

The next question comes from the line of Kushan Parikh with Morgan Stanley.