Manapurram Finance, a sizable lender against gold jewellery and ornaments, said on Thursday that international credit rating agency S & P has assigned issuer rating to its proposed issue of debt instruments in the form of US dollar-denominated senior notes bonds by the establishment of a Euro medium-term note programme.
S & P Global Ratings has assigned an issuer rating of BB minus long-term and B short-term with a stable outlook.
"The stable outlook on Manappuram reflects our view that the company will largely maintain its financial profile over the next 12 months despite a challenging environment," S & P said.
It added that Indian finance companies face greater operating risk than banks because they usually have no access to central bank funding, and have less onerous regulations -- notwithstanding some regulations on capital adequacy, asset quality and asset-liability management.
Gold financing companies are subjected to additional regulations such as loan-to-value restrictions and higher capital for lending against gold.
"Several finance companies in India have created strong niches, domain expertise and economies of scale to support revenue stability and mitigate competitive pressure. Our starting point for rating financial companies in India is therefore BB," said S & P.
Manappuram is a non-bank finance company that focuses on lending against gold across India. Its loan portfolio is heavily skewed toward loans against gold jewellery and ornaments (67 per cent) -- bullions and coins are not allowed by regulation -- supplemented by microfinance (20 per cent) and other lendings.
About 40 per cent of the company's lending against gold is conducted online. Similar to other finance companies in India, Manappuram is looking to capitalise on growth opportunities beyond its core competency.
These include insurance broking and microfinance as well as auto, affordable housing, and small and midsize enterprise loans. The company is focused on servicing customers of similar socio-economic backgrounds who do not have readily available financing from other formal lenders.
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