Non-banking financial company Manappuram Finance is looking at a flat growth in its gold loan business during the first two-quarters of the current fiscal due to the disruptions caused by COVID-19, a top company official has said.
The gold loan financier, however, expects pick up in gold loans in the second half of FY21 if economic activity, which has come to a standstill, restarts fully.
In the fiscal ended March 31, 2020, the company's gold loan disbursement grew by 31 per cent to Rs 16,967 crore.
The share of gold loans in the company's total asset under management (AUM) is around 67 per cent.
"The current situation has disturbed everybody's working capital cycle. Our customers are also paying back their loans to free up their collaterals which they can monetise to meet their immediate funding needs. This trend is likely to be there for some time and, hence, we are looking at a flat growth for the first two quarters," Manappuram Finance managing director and CEO V P Nandakumar told PTI.
Its gold loan borrowers consist mainly of farmers and small micro entrepreneurs.
Nandakumar said with 70 per cent of the branches being operational, the company has seen a dip of 1.2 tonnes in the company's gold holding during the last one month.
In FY20, the company's gold holding grew by 7.2 per cent to 72.4 tonnes from 67.5 tonnes in FY19.
These customers do not sell their gold holdings but due to the prolonged stress, they are forced to take this step, he said.
"If the economic activity restarts fully, we expect a 7-8 per cent growth in our gold loans business," he said.
As of March 31, 2020, the number of gold loan customers stood at 26.2 lakhs.
Of this only 100 customers have opted for moratorium on repayment of their loan, Nandakumar said.
"The gold loans are usually short term loans. Not many of the customers preferred to take a moratorium," he said.
Besides gold loans, the company has presence in microfinance loans, vehicle and equipment finance and home loan finance.
The non-gold businesses contribute a share of 33 per cent to the total portfolio.
"Post the lifting of the lockdwn, our focus will be more on collection in our non-gold businesses and less on lending. We do not expect any growth in this segment during FY21," Nandakumar said.
In FY20, the MFI business grew by 43.3 per cent, vehicle and equipment finance grew by 20.6 per cent and housing finance by 21 per cent.
The company had reported a 55.7 per cent rise in its consolidated net profit to Rs 1,461.8 crore in FY20 as against Rs 938.9 crore in FY19.
In the quarter ended March 31, 2020, the consolidated net profit stood at Rs 392.7 crore compared to Rs 274.6 crore recorded in the year-ago quarter.