George Varghese from Kochi is in need of a personal loan of Rs 1, 00,000 to pay his hospital bills.
“Approaching a bank for the amount is out of the question. There is too much of paper work involved and chances of availing a loan are slim,” he shares. Money lenders are another option. But, “Interest rates are too high,” he adds. Pledging his gold
in lieu of money is an option he is comfortable with. This is not the first time George has pledged his gold. He says: “This is the easiest way to get a loan on short notice.” With a wide variety of market players in this segment, for George and many others in Kerala the preferred choice of company for loan against gold is Manappuram Finance.
Manappuram’s origins go back to 1949, when it was founded in Valapad by the late V C Padmanabhan, father of Manappuram chairman V P Nandakumar. Back then its activity was money lending on a small scale. However, in 1995 there was a major change in the company when they were faced with an asset-liability mismatch. Nandakumar who took over the reins of the company in 1986 after the death of his father said, “Towards the late nineties, the NBFC sector in India was in turmoil in response to the CRB scam. RBI had clamped down on NBFCs and had made it difficult for us to raise money. It was at this point, we decided to get into gold loans because these were typically short-term loans with high repayment rates.” In hindsight, the setback turned out to be an opportunity, a blessing in disguise
As one of the leading NBFCs of India, the company has recorded a turnover of Rs 1,178.75 crores in 2010-11. PAT of Rs 282.66 crores, and a Capital Adequacy ratio of over 30 per cent. Assets under Management (Aum) are of Rs 7,549 crores. “We are the first NBFC from Kerala to issue bonus shares in the ratio of 1:1 in 2007, 2010 and 2011. We are also the first from Kerala to offer ESOPs (Employee Stock Option Plan) to our middle and senior management,” asserted Nandakumar.
The company has played a major role in unlocking the largely privately held stock of gold in the country (estimated at about 18,000 tonnes). Nandakumar said, “When gold is held idle in lockers and vaults, it is a drag on the economy. It keeps billions of dollars in savings out of the financial system.” Borrowings against gold (monetization) have the impact of generating economic activity. With the entry of Manappuram Finance, a host of new players have also entered the loan against gold segment.
“Commercial banks that had for long ignored the sector have got into the act. In the days ahead one can reasonably expect more of India’s idle gold to be put to productive use,” he shares.
Nandakurmar explains that unlike in the old days, where the unorganized money lending sector did not contribute to the exchequer. Through organized money lending, the government is the major beneficiary. In 2010-11, Manappuram Finance reported PBT of Rs 424 crores of which Rs 141 crores went back to the government as income tax. In the year before, the company paid Rs 64 crores to the government out of a PBT of Rs 182 crores. “Had the gold loan business continued with the unorganised sector, the exchequer would not have gained anything,” he adds.
Manappuram’s entry into the loan segment has also helped bring down interest rates in the unorganized sector to a great extent. “Individuals are now able to procure gold and unsecured loans at reasonable rates of interest,” he said. However he is of the opinion that despite all the efforts, the gold loan business in India is yet to grow to its true potential. “There is a continuing stigma attached to pledging gold, particularly in northern India, he shares.” To tackle the issue Manappuram has initiated advertising campaigns to sensitise people on the issue.
The Manappuram Group was always in the forefront to complement the social development and extends its hand to the lower strata of the society. To prove the Corporate Social Responsibility, Manappuram has come up with “Janaraksha Manappuram” a health insurance policy for 20,000 Below Poverty Line families covering seven Panchayats in Nattika and Valapad. This helps them to have a free medical care for RS. 60,000 per year and also eligible for a cashless treatment in major hospitals in Thrissur District. Another initative to empower the women folks in the coastal area of Thrissur, was the “Manappuram Sarojini Padmanabhan Women Empowerment Progremme”. This programme provides for self employment in areas like organic vegetable cultivation, dairy and poultry farming home enterprise. The Manappuram Foundation gives a prime concern to work with the charitable institutions.
V P Nandakumar disclosed Manappuram’s contribution to the Economic Development of India, it helps to ferret out the hoarding of dead money ie, gold to make it to use in more productive. Tonnes of gold help lot of people to cherish their dreams. It also helps to have a considerable percentage of flow towards the government exchequer. He also said they need a strategic move to win the conservative attitude of the people to shed the stigma pledging gold in different parts of the countries. The big budget advertisements and campaigns incorporating leading film stars in different states help a lot to overcome this. The biggest success of Manappurm is considered by V P Nandakumar as the QIP that took place in November 2010. He also announced his plan to raise equity capital of Rs.1000 crores at a substantial premium. Number of Awards was presented to him for his achievements. The most important achievements were Manappuram Finance Ltd. became the first Kerala based NBFC to get a Credit Rating of “MA” (current rating MA+) from ICRA. The company was also one of the first NBFCs from Kerala to go for a Public Issue of its shares in 1995. The company has consistently made profits and paid dividend. It became the first NBFC from Kerala to issue bonus shares in the ratio of 1:1 in 2007 and later, repeat the feat twice (in 2010 and in 2011). In 2007, Manappuram Finance became the first Kerala based NBFC to receive equity Investment from foreign institutional investors (FIIs) In 2010, it became the very first Kerala-based company to offer ESOPs (Employee Stock Option Plan) to its middle and senior management functionaries. In April 2011, it became only the second listed company from Kerala to have its shares traded in the “A-Group” at the Bombay stock exchange.
