Manappuram Finance recorded earnings growth of 38%, mainly driven by strong growth in the gold lending business, but slightly offset by the slowdown in the non-gold portfolio. Gold assets under management increased 33% year-on-year to Rs 17,736.8 crore, indicating increased demand for gold lending. However, gold tonnage decreased on a sequential basis due to a lower LTV ratio. The total share of new activities fell to 30% (vs. 33% QoQ) in consolidated outstandings.

The company continued to take aggressive provisions to adequately address macroeconomic uncertainties in the microfinance, vehicle finance and housing finance businesses. Provisions are expected to remain at a high level until the lockdown relaxes and the situation improves. The company also pointed out that higher gold prices do not necessarily translate into higher demand for gold loans. As a result, they moderated their gold lending growth target slightly to 10-12% for FY21 (compared to 10-18% of the forecast given in Q4). Management is confident to maintain a strong position in online gold lending.

Management expects the microfinance business to be difficult in the short term, but maintains a positive outlook in the long term. Vice President Nandakumar, Managing Director and CEO of Manappuram Finance, in his interaction with ET NOW, mentioned that the lockdown had an impact on the company’s ability to reach and maintain connection with customers, but that the efficiency of collection is gradually improving from month to month.

They expect collections to reach around 90% by September for MFI activities. Vehicle usage is currently 60-65% and it will take another 4-5 months for normal to return. Collections would take time to reach pre-COVID levels. Management expects normalcy to return in the fourth quarter of FY21, particularly for MFIs and vehicle finance businesses. He further added that they did not expect any significant growth in the activities of the subsidiaries.

The street remains cautious about the company’s overall growth prospects. The main concerns are the NPA and the efficiency of the collection of the non-gold loan portfolio.