Manappuram Finance : Quarterly Repoting Document

"Manappuram Finance

Q1 FY2022 Earnings Conference Call"

August 10, 2021

ANALYST: MR. AALOK SHAH - MONARCH NETWORTH CAPITAL LIMITED

MANAGEMENT: MR. V.P. NANDAKUMAR - MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER - MANAPPURAM FINANCE MS. BINDU A.L - CHIEF FINANCIAL OFFICER - MANAPPURAM FINANCE

MR. B N RAVEENDRA BABU - MANAGING DIRECTOR - ASIRVAD MICROFINANCE LIMITED

MR. YOGESH UDHOJI - CHIEF FINANCIAL OFFICER - ASIRVAD MICROFINANCE LIMITED

MR. K SENTHIL KUMAR - HEAD, VEHICLE & EQUIPMENT FINANCE

MR. SANDEEP KUMAR - CHIEF OPERATING OFFICER - MANAPPURAM HOME FINANCE

MR. BIKASH KUMAR MISHRA - CHIEF FINANCIAL OFFICER - MANAPPURAM HOME FINANCE

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Manappuram Finance

August 10, 2021

Moderator:Ladies and gentlemen, good day and welcome to the Manappuram Finance Q1 FY2022 Earnings Conference Call hosted by Monarch Networth Capital Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing "*" then "0" on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aalok Shah from Monarch Networth Capital Limited. Thank you and over to you Sir!

Aalok Shah:Thank you Melissa. Good evening to all. On behalf of Monarch Networth, we welcome you for Manappuram Finance Q1 FY2022 results concall. We have the entire management of Manappuram on the call represented by Mr. V.P. Nandakumar, MD & CEO, Ms. Bindu, CFO, Mr. B N Raveendra Babu, MD, Asirvad Microfinance Limited, Mr. Yogesh, CFO, Asirvad Microfinance Limited, Mr. K Senthil Kumar, Head, Vehicle and Equipment Finance, Mr. Sandeep Kumar, COO, Manappuram Home Finance and Mr. Bikash Kumar Mishra, CFO, Manappuram Home Finance. Without taking much of the time I now hand over the call to Nandakumar Sir for his opening comments post which we can get into the Q&A session. Thank you and over to you Sir!

V.P. Nandakumar: Thank you Mr. Aalok Shah. Ladies and gentlemen welcome to Manappuram Finance Q1 FY2022 conference call. I hope you, your family and friends are safe and healthy.

Our previous concall to discuss about Q4 FY2021 results were held on May 26, against the backdrop of a raging second wave that affected India very badly. That was the time when many of our branches were not functional because of the widespread local lockdowns. Since then there has been good improvement and today we work at full capacity. After 8 straight months of GST collections exceeding Rs.1 lakh Crore mark, the revenue collection in June pertaining to economic activity in May dipped to Rs.93,000 Crores. With the ebbing of the second wave, the economy appears to have regained the momentum and the collection in July has topped 1 lakh Crore mark; however, the GST collections are essentially a proxy for the formal sector and our experience has been that the informal sector. from where we draw the bulk of our customer base, suffered more damage. At the same time, the overall recovery in the economy is now being felt in the unorganized sector as well as we have begun to see growth coming back.

In the last concall, we had also mentioned how the price of gold had corrected sharply from the peak of August 202 by the end of the fiscal year, which had an impact on our business. The overall trend in the gold prices remained weak in Q1 as well.

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Manappuram Finance

August 10, 2021

Along with the physical disruption which prevailed in Q1 that affected new customer acquisition, all these factors had an impact on our business volume, especially gold loans. As you know gold loans have the dominant share in our company's business picks and about 67% of our loan book is against gold.

For the quarter, our gold loan AUM declined by 6% year-on-year and about 13% Q-on-Q, mainly the impact of the combination of factors we mentioned just now. Further, we also observed that in response to the stress their general loan book, many private and PSU banks as well as other non-gold loan focused NBFCs gave an extra push to their gold loan offerings by competing over price and tenure. In our case, we saw that some of our high value customers with loans above Rs.1 lakh were especially targeted for takeover by these other players.

To stem the attrition in this segment, we have now identified the areas where such attrition was seen more. We have launched special schemes for these areas targeting high ticket borrowers on competitive terms and conditions. I can say that the results are already visible in terms of renewed momentum of growth and new customer acquisition and we are confident the trend will be sustained.

The stress in the informal economy and weak gold prices led to higher auctions as well. As we are mainly into short-term gold loans, we recognize stress in the portfolio early and initiate auctions in time so that the credit costs are minimized. As a rule, the price risk is better managed in the short-term gold loan compared to the one-year product offered in the market.

Going forward as I said, we are already seeing growth coming back and barring further pandemic disruptions, we are confident that it would be back to business as usual.

Some other key performance highlights for Q1 are as follows: Consolidated AUM at Rs.24756 Crores is lower by 2.3% year-on-year and 9.1% Q-on-Q, mainly due to the weakness in the gold loan portfolio which we have discussed. Our gold holding stood at

58.1 tonne, the tonnage degrowth during the quarter was about 7 tonnes. Our microfinance subsidiary, Asirvad Microfinance, ended the quarter with AUM crossing Rs.6,000 Crore, a growth of 20% year-on-year and 1.1% over the preceding quarter. During the quarter, we prioritized asset quality over AUM growth given the stress in the system. Going forward, we believe the worst is behind us and barring further unforeseen eventualities, the outlook is quite positive.

On the commercial vehicle business reported an AUM of Rs.1,045 Crores which is lower by 0.7% Q-on-Q and by 17.8% year-on-year. Collection efficiency was at 87% in May and

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	Manappuram Finance
	August 10, 2021
	105% in June. On housing loan portfolio had total book of Rs.658 Crores which is up by
	0.3% Q-on-Q and up by 6.5% year-on-year. Collection efficiency was 79% in May and
	87% in June and fast improving. On the liquidity front, we are placed comfortably and we
	continued to receive funds from all routes at competitive rates. We do not accept any
	funding challenges to come in the way of our growth plans and we are comfortably placed
	with our ALM which we monitor closely.
	Finally, we are reporting a consolidated quarterly net profit of Rs.437 Crores for Q1
	FY2022, up by 18.7% year-on-year although sequentially it is down by 6.7%. Thank you.
	Now, over to our CFO, Ms. Bindu for a detailed result numbers.
Bindu A.L.:	Thank you very much Sir. Thanks to all our stakeholders for attending the quarterly update
	call. We hope you are doing well and staying safe. Since Q4 2021, the industry has been
	making a return with significant increase in disbursals and collection efficiency; however,
	the recovery had been hampered due to lockdown across all the geographies and fear among
	the employees and customers.
	Now coming to the operational review, we are carrying surplus liquidity across all the
	businesses. Cash and cash equivalence on hand on a consolidated basis was Rs.2893 Crores
	and undrawn bank line was Rs.7320 Crores as on June 30, 2021. Our CP exposure has
	come down to 6% against 9% in a year ago. Borrowing cost now more stable due to less
	availment of new facilities.
	Our consolidated AUM for Q1 was Rs.24756 Crores down by 2.3% year-on-year and down
	by 9.1% Q-on-Q. The Q-on-Q decline is largely by gold loans. This is on account of partial
	lockdowns and the auction of collateral as well as the higher than normal redemptions. As
	you would have seen gold prices have been declining globally driven by the outlook
	towards higher interest rate we believe that we are extremely well positioned to deal with
	any significant volatility in gold prices with average LTV of 65%. The short tenure of our
	gold loan product which is three months on an average result in early recognition of NPAs
	compared to other players in the market who offer longer tenure gold loans.
	Consolidated profit after tax was Rs.437 Crores up by 18.7% Y-o-Y and down by 6.7% Q-
	on-Q. Despite the significant adverse effect of COVID phase II, ROE on a consolidated
	basis was 23.4% and ROA was 5.8% for the quarter. About the gold loan business, which
	constitute 67% of consolidated AUM, the AUM declined by 6.8% Y-o-Y and down by
	13.3% Q-on-Q. The detailed explanation for the decline is provided in page 23 of the
	investor presentation.

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Manappuram Finance

August 10, 2021

Gold holdings at 58.1 tonne during the quarter we were able to add only 2 lakh new customers as against 3 lakh in last quarter due to lockdowns and limited operating hours for our branches. Gold loan average ticket size and average duration was Rs.42749 and 114 days respectively.

The total number of gold loan customers stood at Rs.24.06 lakhs. The gold loan book was at Rs.16540 Crores. Our weighted average LTV stands at Rs.2850 per gram or 65% of the gold price as on June 30, 2021. Gold loan disbursements during the quarter at Rs.35419 Crores compared to Rs.44630 Crores in Q4. The online gold loan book accounts for 53% of the total loan book.

Coming to MFI business, the AUM stands at Rs.6053 Crores up by 1.1% Q-on-Q and up by 20.1% Y-o-Y and this business reported a PAT of Rs.7.7 Crores compared to Rs.4.1 Crores in Q4 FY2021. Our collection efficiency from MFI business was at 70% in June inline with the industry and disbursements during the quarter was Rs.1181 Crores. MFI collection has steadily improving. The company has a capital adequacy of 22.7%.

Coming to vehicle finance business, we reported an AUM of Rs.1045 Crores which is flat Q-on-Q and down by 17.8% Y-o-Y. Collection efficiency was 87% and 105% for May and June. Home loan business had a total book of Rs.668 Crores which is again flat Q-on-Q and up by 6.5% Y-o-Y. Now operates from 68 branches and reported a profit of Rs.2.2 Crores during the quarter. Collection efficiency was 79% and 87% in May and June. Collection efficiency for the quarter was 84% in compared to 96% in Q4 FY2021. Loan to NBFCs was at Rs.144 Crores and loan to SMA and others at Rs.307 Crores.

Provisions and write offs for the standalone entity during the quarter stood at Rs.30 Crores compared to Rs.12 Crores in Q4 FY2021. We have provided Rs.15 Crores additional due to COVID-19. Our gross NPAs were at 1.96% against 1.92% Q4 FY2021.

The board declared an interim dividend of 0.75 paise for the quarter. Our capital position is strong and the company is well capitalized with the capital adequacy ratio of 34.4%. Company's consolidated networth stands at Rs.7662 Crores at the end of the quarter. The book value per share stood at Rs.90.5. Thank you. Now we can go for the Q&A session.

Moderator:Thank you. Ladies and gentlemen we will now begin the question and answer session. We have the first question from the line of Dhaval Gada from DSP. Please go ahead.

Dhaval Gada:Just few questions. First is on the gold loan stock, basically we saw this quarter, the stock of gold come down 65 tonne to 58 tonne approximately, could you explain the sort of drop between the pressure that you saw in the high value gold loan customer segment that you

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