Manappuram Finance Ltd Q1 FY2027 Concall Summary

Key Takeaways

• Gold loan engine delivered: Consolidated gold loan AUM grew ~12% QoQ and ~98% YoY, now 82% of consolidated AUM, with yield recovering 59 bps after pricing actions.
• Microfinance turned the corner: Asirvad swung from a ₹269 crore loss to a ₹21 crore profit YoY, a ₹290 crore swing, as strategic measures taken over several quarters began paying off.
• Vehicle finance is in runoff: AUM contracted 43% YoY and disbursements are halted for the full year while management focuses on collections; GNPA remains elevated at 13.3%.
• Leadership transition underway: Ashish Singh, a 25-year retail banking veteran, joins as MD and CEO by January 1, 2027, with strategic priorities set around gold loan leadership and disciplined diversification.
• What to watch next quarter: Whether branch expansion accelerates toward the ~500 target after only 10 additions in Q1, and whether gold loan yield holds near the 18% band as competitive pressure persists.

Gold Loan: Growth, Yield & LTV

• Growth momentum: Q1 FY27 showed strong customer and tonnage growth despite being seasonally slow, a sharp contrast to Q1 last year when both were weak; momentum continued into July and August.
• Yield recovery: Yield improved 59 bps during the quarter because management took pricing actions after having "overcorrected" pricing previously; the improvement was not driven by any shift in disbursal mix or customer segmentation.
• Yield outlook: Management expects stabilization in a broad band around 18%, with possible movement of 25 bps either way but not beyond that.
• LTV movement: Average LTV rose from 57.3% in March to 65.6% in June primarily because gold price dropped ~8.5%, a denominator effect rather than a numerator computation change; the new RBI interest-inclusive LTV calculation has some effect but the movement is largely price-driven.
• LTV range: In normal scenarios, average LTV is expected to be 64%–67%, range-bound assuming stable gold prices.
• Customer profile shift: Gold loan customers are moving from distress use toward business class and MSME borrowers, driven by regulator and government encouragement of gold-backed MSME lending.

Nandakumar: "Earlier, these were seen as a distress product. Now, with the publicity given by all institutions, including banks, more and more business people, particularly MSME, they are availing the loan."

Diversified Businesses: Turnaround & Runoff

• Microfinance strategy: Management wants to contain microfinance below 10% at the consolidated level, growing it along with overall growth but with asset quality as the prime concern; the cap is 8%–10% on a consolidated basis.
• MFI provisions: Q1 FY27 provisions increased versus Q4 FY26 because Q4 had one-time releases of ~₹9 crores; Q1 represents a normalized provision cycle.
• Vehicle finance restart: No disbursements during this year; management may consider restarting in FY28 after one year.
• Consolidated AUM mix: Focus on gold loan at 75%–80% of consolidated AUM, with the balance in secured lending like mortgage-based MSME lending plus affordable housing.

Nandakumar: "I will tell at the group level, we want to contain microfinance at below 10% at a consolidated level. We want to grow that along with our overall growth, but in a stable manner where the asset quality is the prime concern."

RBI Framework & New Products

• LTV framework implemented: New RBI circular guidelines effective April 1 were implemented across the company, including interest in LTV calculation and ticket-size categories (up to ₹2.5 lakh, ₹2.5–5 lakh, above ₹5 lakh).
• New product launches: Monthly interest payment and monthly EMI scheme products were launched as part of RBI circular options; an income-generating gold loan product also started after April for business-class customers with regular income.
• Income-generating gold loan: Product is based on assessed cash flows, with EMI or quarterly interest instalments based on cash flow; LTV up to 85% for monthly EMI; interest rate 14%–16%; recovery process can start per regulator if payments are missed.
• Staff readiness: Staff were hired for cash-flow-based products and training started at least three months before April 1 implementation, giving staff roughly six months of training.
• IGA portfolio: Experience so far is "very good"; portfolio still very small compared to the overall portfolio, with no fixed target as a percentage of portfolio.

Funding, Costs & Asset Quality

• Borrowing cost: Stand-alone borrowing cost rose ~10 bps in Q1 FY27.
• Cost of funds: Standalone cost of funds rose ~20 bps because of spikes in short-term rates and MIFOR at all-time highs; management kept it "fairly under control" despite the environment.
• Cost of funds outlook: Difficult to predict where it settles; elevated rates could feed into cost of funds; management will monitor opportunities.
• Stand-alone asset quality: GNPA improved to 1.56% from 1.8% prior quarter; credit cost was 1% for the quarter.
• Asirvad cost of borrowing: There is a window of opportunity to negotiate better cost of borrowing with lenders given the 30%-plus secured gold loan book; this is actively in place.
• Net loss on derecognition: An analyst asked what the ₹30 crores net loss on derecognition of financial instruments is and whether it is a write-off; management confirmed it is a write-off but said "we can get back on more specifics on that," leaving the specific nature unexplained.

Branch Expansion & Operating Efficiency

• Branch expansion target: Plan to open ~500 branches in FY27 for Manappuram Finance and Asirvad combined; Q1 added only 10, but the process was initiated after the RBI circular; management is confident of reaching the 500 target with pickup expected in Q2.
• RBI approval removed: Prior approval from RBI for opening branches has been removed, facilitating branch expansion.
• Beyond 500: After reaching ~500, management will examine and proceed; no commitment beyond that.
• AUM per branch: Growing considerably; opex to AUM is steadily coming down.
• Opex efficiency: Management hopes to improve opex to AUM going forward.
• Attrition: Attrition has come down due to policy changes; no attrition at the top level handling gold loans; overall attrition is 2%–2.5% per month, though branch-level specifics were not provided.

Competitive Positioning & Pricing

• Pricing stance: Management will maintain a balance between holding margins and pushing growth; currently pricing is at the lowest range in the NBFC industry; will move according to market but hopes to be "reasonably balanced."
• Gold loan growth guidance: Expectation around 30% for FY27, with a range of 25%–30%; Q1 grew nearly 12%.
• MFI disbursement: Expected at ₹400–500 crores.
• ROA/ROE targets: Targeting ROA of 3.5%–4% and ROE of 15%–18%; expect ROEs and ROAs to consistently grow; in three years, expectation to take ROE to ~18%.

Nandakumar: "We will maintain a balance. So currently, our pricing is at the lowest range in the NBFC industry. So with the market, we cannot be totally away from the market. So we have to move according to the market. But I hope we'll be reasonably balanced in that."

Guidance & Commitments

Key Metrics