Falling gold prices have affected AUMs of gold loan companies. Moreover, the launch of gold monetisation schemes by the government is perceived to lower physical holding of gold in India. In an interview to Bloomberg TV India, Manappuram Finance Managing Director and CEO, VP Nandakumar, forecast gold prices to stabilise in near term and that will enable the company to post better performance in the third and fourth quarters. The gold schemes are unlikely to have any impact on the company’s business, he said.

What are the highlights of the quarter gone by and how Q2 has really played out for Manappuram?

This quarter there has been a slight increase in profits. Overall, our consolidated profits have grown. On gold loan, there has been a slight dip on account of the higher auction of the legacy portfolio — the long term portfolio. Also a new product has come in the auction. So, unusually the auction was for around ₹400 crore more than the normal rate. So, this was the reason why there was a dip. But, we can say that we have been able to clearly wash off the legacy portfolio. So hereafter in the next quarter, we are expecting practically negligible loss on account of auction. Our net interest margin will grow, which is expected by us in the next quarter. Also, our RoA will improve in Q3 as per our expectations, which we could not do in the last quarter. But in second quarter overall there has been an improvement compared to Q1. So, I think the company will improve profitably in the coming quarters.

How is third quarters cyclically in gold loan segment — is it historically a better quarter for you? What is the outlook?

Third quarter will be definitely better. As I have mentioned earlier, with the legacy portfolio out more options have come out. So, I think third and fourth quarters will be much better than first and second quarters.

What about asset under management (AUMs)? How have you performed on the AUM front in the second quarter? Where do you see them heading in the next two quarters as we close up the fiscal year? What is the target that you have set for yourself?

Even now lateral-wise we have grown. But assets under management (AUM) could not grow because the price declined by around 5 per cent. So, even the loan-to-value (LTV) will naturally be low and because of that reason we could not grow. Otherwise even with the auction, we would have grown. So, I think there will be some price stability somewhere around. I expect third and fourth quarters will be much better. Normally, fourth quarter used to be better.

What have you made of the gold monetisation scheme launched by Prime Minister Narendra Modi on November 5? Does it have any impact on your business given the fact that the government is trying to reduce the physical holding of gold of Indian citizens?

The gold monetisation and gold deposit schemes were there before. Now, the availability to the common man has increased — that’s what I understand. The new scheme will definitely improve the prospects of the whole monetisation scheme, which has been there for over a decade now or even more than that. So, now a lot more attention is given to it. Availability to the common man has increased with more institutions offering the product, which was restricted to only SBI earlier. Now, some other institutions are also there, which will attract some quantity of gold — that is good for the economy. As far as we are concerned, the gold import every year is estimated at 1,000 tonnes and a major portion of this goes to the jewellery sector and the nearby areas where our presence is being felt. So, even with gold monetisation, even if it is successful, I don’t think it will have any impact on our business.

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