Manappuram Finance on Tuesday reported a modest 2% year-on-year rise in its consolidated net profit to Rs 572 crore for the second quarter, impacted by higher interest expenses and provisioning for bad loans.
The Kerala-based lender recorded a 22% increase in revenue from operations at Rs 2,633 crore for the latest quarter. Total expenses were up 31% to Rs 1,864 crore, weighing on the overall profitability. Finance cost grew 31% to Rs 906 crore while bad debts provisions jumped 117% to Rs 260 crore.
Total assets under management grew 17.4% to Rs 45,716 crore, with gold loans accounting for 53% of total assets, followed by microfinance (24%), vehicle financing (11%) and MSME lending (7%).
Addressing the earnings call, managing director and CEO VP Nandakumar said the company has identified gaps in its gold lending process and took corrective measures, including stricter monitoring of the loan-to-value (LTV) ratio and overseeing the end use of gold loans to align with the Reserve Bank of India’s (RBI) guidelines.
In September, the RBI directed banks and NBFCs offering gold loans to reassess their policies, identifying any weaknesses. “We will ensure implementation of the guidelines prescribed by December,” he said.
As of September 2024, the company’s LTV ratio stood at 58%, well below the regulatory ceiling of 74%.
Last month, the RBI barred Manappuram’s subsidiary Asirvad Micro Finance from issuing new loans after finding compliance gaps in assessing household income and repayment obligations. The central bank also cited Asirvad, along with three other NBFCs, for charging usurious interest.
Nandakumar noted that Asirvad has decided to reduce its interest rates, though he did not specify the exact rate. He said the company has also addressed other deficiencies, including accurate income assessment of borrowers. “Asirvad has submitted a compliance plan to the RBI, and we are optimistic that the ban on new disbursals will be lifted soon,” he said.
Manappuram Finance’s shares closed 4% higher at Rs 158.70 on the NSE.