Mannapuram plans to enter SME, housing finance business

Company on Thursday announced it will be raising up to Rs 200 cr through a non-convertible debenture issue

Following the Reserve Bank of India (RBI)'s concerns over “concentration risk”, gold loan major Mannapuram Finance on Thursday said it will be diversifying into lending for small businesses and housing finance.

“The regulator wants us to diversify and there are synergies which we can tap,” the company's Managing Director and Chief Executive V P Nandakumar told reporters here. He said lending to small businesses will start in the next three months, but refused to give a timeline for the housing business, saying that the company has for now decided only to enter the highly competitive fray.

Loans to the small businesses will be done in a secured way, that is against some underlying asset, he said, adding that the company will have a separate subsidiary for the housing finance business to take advantage of provisions like availing refinance from the National Housing Bank.

When asked about the route to be adopted for the entry into housing finance, and whether it will be acquiring an existing business, Nandakumar declined to comment.

The company's Deputy Chief Executive and Executive Director I Unnikrishnan said 80 per cent of its borrowers own small businesses and hence getting into the fray for lending to small businesses makes a good business case. Notably, sector regulator RBI had shown concerns about the 'concentration risk' for companies like Mannapuram which finance against gold, following the volatility in the gold prices.

Steps taken by RBI include a reduction in the loan to value (LTV) ratio, or the maximum permissible limit of lending up to 60 per cent, which resulted in massive reductions in asset growth for such companies.

Meanwhile, Mannapuram on Thursday announced it will be raising up to Rs 200 crore through a non-convertible debenture issue, which will be open between December 30 and January 20. The debentures' tenure ranges from 400 days to 70 months and the coupons range from 11.50 per cent to 12.50 per cent. They will carry a face value of Rs 1,000 and be listed on the BSE.