Tech for better credit decisioning & asset tracking

Reported by: |Updated: December 20, 2019

V.P. Nandakumar, MD & CEO, Manappuram Finance, shares details about the company’s diversification plans, customer segments and technology innovations:
Manappuram Finance is essentially a gold loan company providing short-term personal and business loans. It also provides vehicle and equipment finance, loans to small and medium businesses and fee-based services such as forex and money transfer. The company has plans to raise up to $250 million through offshore bonds.

Ravi Lalwani: You have diversified from gold loans to home finance. How do you find the competition in home finance segment? Which other segments are you planning to enter in 2020?
V.P. Nandakumar: We are no longer a gold loan company as over one-third of our business comes from non-gold segments. We are now active in microfinance, vehicle finance and affordable home loans, and we are scaling up our lending to SMEs. Our microfinance subsidiary, Asirvad, is among the top 5 NBFC-MFIs.
Our home finance business is relatively small compared to our total business, but the initial teething troubles are over, and it is well-positioned to achieve good growth. We operate in the affordable housing space and mostly service customers left untapped by the established home financiers. While competition is there, it is unlike the gold loan business which faces intense competition from the informal segment players who operate outside the regulatory framework. In housing finance, all players operate under the same rules and regulations, with an even playing field. Moreover, large lenders with high operating costs may not find this segment attractive due to small ticket sizes and higher levels of customer handholding required.

Which are the top 3 customer segments that provide most of your business? Which are the top 3 emerging sectors?
In the gold loan segment, a good chunk of our customers are the new-to-credit micro entrepreneurs, small business owners, traders, farmers, etc, who were earlier dependent on informal borrowing channels. We are present across the length and breadth of India. Most of our business come from rural and semi-urban areas where access to credit is still a challenge. In urban areas, our customers mostly belong to the informal sector who would lack documentary evidence to establish their creditworthiness to banks. The next phase of our growth is likely to emerge from microfinance, home loans and vehicle finance. We hope to achieve a 50:50 ratio between gold and non-gold portfolio over the next few years, which currently is at 65:35 ratio.

Which are the top 3 cities from which you get gold loan business?
Since southern India accounts for the largest share of gold loans, the top 3 cities for us are Bengaluru, Hyderabad and Chennai.

How many branches do you have in India? What changes have been made to improve business and efficiency?
As of 30 September 2019, we have 4490 branches across 28 Indian states and union territories. This number includes the branches of our subsidiary companies too. We expect steady expansion in the branch network driven mainly by growth in gold loans and microfinance, especially in the non-South geographies. In recent years, we have focused more on the rationalization of branches than on expansion, with the result that business levels per branch have gone up significantly and cross-selling opportunities are better exploited.

Manappuram Home Finance has recently raised Rs 2 billion via NCDs. What are your plans to raise equity and funds soon? What is your strategy to reduce liquidity risks?
Manappuram Home Finance is very well capitalized, with low gross NPAs. At present, there are no plans to raise equity funds. The recent fund mobilization through NCDs was meant to raise long term funds, reduce liquidity risks and further diversify our funding sources.

Which are your technology and fintech partners? What new technologies have you adopted this year? What technologies have you shortlisted for future growth?
Our IT platforms are developed in-house. We have over 100 engineers within the company working on different technological innovations from improving operational efficiencies to developing and deploying newer products and processes. We are also working on artificial intelligence and machine learning for better and more efficient credit decisions, blockchain for asset tracking (hypothecated gold jewelry) and robotics for automating processes.

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