Manappuram sees loan book growing 220% this fiscal

Manappuram General Finance & Leasing Ltd has almost doubled its loan book in the first six months of the fiscal 2011. The growth is due to the huge customer acquisition on a daily basis and the strategy followed is creating awareness by using celebrities. V P Nandakumar, chairman and managing director of the Kerala-based non-banking finance company, shares the secret of his company’s success with DNA. Excerpts from the interview:

How has been the journey of your company since 1949?
We hail from a backward village in the Thrissur district of Kerala. My father started this business in 1949. At that time there was no financial institution or bank in that area so he started a money lending institution, which was a proprietary concern. I joined in 1986 when my father passed away. At that time the capital was around Rs5 lakh and the loan book was around Rs25 lakh. I started the flagship company Manappuram General Finance and Leasing in 1992. In 1995 the company got listed on the Bombay Stock Exchange. The company was primarily into leasing activities on vehicle finance. Then in the late 90s we ventured into gold loans. Today we are the pioneers in loan against gold.

What is the average ticket size of loans and what is the average interest you charge on them?
The average ticket size is around Rs25,000. We charge around 12-24% per annum based on the loan to value.

How many branches do you have and how many more you plan to add by March 2011?
We have 1,400 branches now and we have plans to add 300 more branches.

Which are your competitors?
I do not see much competition in this business and there is enough headroom for at least another half-a-dozen players. The gold in custody in India is so large that the value is somewhere near the gross domestic product. Whatever has been captured so far is hardly 5% of that. When more players enter this business we would think of creating an edge over them.

Between fiscal 2008 and the first quarter of fiscal 2011 your loan growth has averaged 72%. If gold prices fall, will you be able to maintain this type of growth given that the loan book has an average maturity of three months?
During the first six months of this fiscal our loan growth has been almost 100%. Our portfolio is currently Rs5,000 crore. Our growth is on account of customer acquisition. Our acquisition was 800 to 1,000 customers a day. But now because of the growing awareness about the product it has gone up to 3,000 to 4,000 customers a day. We started using celebrities in the South in a big way which helped us to acquire more customers. We are trying to popularise the gold loans’ product. We are hoping that by the end of fiscal 2011, our loan book will be beyond Rs8,000 crore. In another three to five years I believe that there would be a sustained growth of 60-80% on a year-on-year basis.

What are your fundraising plans for this fiscal?
There will be a shortage of Rs500 crore this fiscal. We have ploughback of about Rs200 crore and the balance will be raised. If we raise Rs1,000 crore then it will take care of our capital adequacy for another one to two years. We will raise this money through qualified institutional placement before March 31, 2011.

Are you planning to diversify into any other business?
The promoter’s plan of entering into jewellery retailing has already started. We have opened three to four shops in Kerala and Bangalore. In another five years we plan to have at least 50 stores all over India.