Money & Banking

S&P upgrades credit ratings of Manappuram Finance

Our Bureau Kochi | Updated on October 28, 2021

Rating agency said the gold-based lending business is an effective counterbalance to weakness in the micro finance segment

International rating agency S&P has upgraded the long term issuer credit rating of Manappuram Finance Limited from “B+” to “BB-” with stable outlook. The rating agency also affirmed the ‘B’ short-term issuer credit rating on the company.

According to the Rating Rationale released by S&P, the gold-based lending business of the company has proved to be an effective counterbalance to weakness in India’s micro finance segment. Manappuram Finance is expected to continue to outperform its non-gold NBFC peers over the next 12 months in terms of asset quality and profitability, which would be reflected in the company’s lower credit costs, above-average profitability and strong capitalisation.

Also see: ‘Microfinance lenders should not put profit above social objectives’

V P Nandakumar, MD & CEO, Manappuram Finance, said, “The upgrade reflects the overall recovery in the economy and better prospects for growth. With the unorganised sector also getting back on its feet, we expect improved growth in gold loans and micro finance, as well as our other business verticals.”

High stress likely

S&P also noted that Manappuram’s gold-based lending model with a three-month tenor allows it to recognise asset quality stress early. However, stress will likely remain high in Manappuram’s non-gold portfolio, especially in the micro finance business. Manappuram’s funding profile is also improving with a shift towards longer tenor debt though material exposure to short-term wholesale funding remains.

The agency expects Manappuram’s risk-adjusted capital ratio to stay above 30 per cent over the next 12 months, one of the highest among its rated peers. Core earnings are likely to remain at more than 5 per cent of its average managed assets during this period.

Published on October 28, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like