Rattled by allegations that NBFC Manappuram Finance (Mafil) has been accepting deposits in violation of RBI rules, the poster boy of Indian gold loan story, VP Nandakumar, has said he is willing to return all deposits held by Manappuram Agro Farms (Magro).
?Magro can accept deposits and it is involved in agricultural activities. But I am willing to repay all the deposits to the customers, including the interest payable on maturity,? Mafil chairman Nandakumar told FE. Magro has raised close to R100 crore of capital mostly through deposits. Most investors are Nandakumar’s close friends and relatives.
RBI had said that Mafil has been accepting deposits from the public at its branches and issuing receipts in the name of Magro, which is a sole proprietary concern of Nandakumar. Nandakumar said the controversy is unlikely to have an impact. ?The liquidity position of Mafil is quite good and we have raised adequate funds for expansion,? he said.
In September last year, the company raised R442 crore through a public issue of secured NCDs offering interest rates in the range of 12-12.56%. It is planning to raise another R500-600 crore in March through a similar issue. Nandakumar expects his company to have a y-o-y growth of 90% with a loan disbursement of R25,000 crore for the financial year. Mafil was the first company engaged in gold loan to go in for an IPO as early as 1996. Muthoot Finance, reportedly the biggest in the gold loan business, listed only in 2011. Mafil declared a net profit growth of 117% for the third quarter ended December 31, 2011. The net profit of the company stands at R161.37 crore against R74.53 crore for the Q3 of the last year. Net profit for the nine months up to December is also up 124% at R404.50 crore, compared to R180.86 crore in the same period last year.
For gold loan companies like Manappuram, the spread between the yield on advances and the cost of funds is as high as 14-16%. Another highlight of the business is the strikingly low incidence of non-performing loans (NPLs). Apparently, gold loans rarely become NPLs primarily because of the low average loan duration, which according to Nandakumar, averages to three months.
Shares of the company hit the lower circuit following reports that the company had violated rules. The shares fell by R11.35 at the BSE to close at R45.50. The company informed BSE its board would meet on Friday to discuss the RBI’s statement. It said the meeting will discuss measures for further improving corporate governance as well.