Manappuram Finance plans to rope in private equity player for MFI unit

Gold finance company Manappuram Finance plans to rope in private equity investor for its microfinance unit Asirvad Microfinance Private Ltd to support growth plans. This is the first step towards listing MFI business on the stock exchanges.

Now it expects, after eight years of its takeover, for micro lending arm to touch Rs 10,000 crore by end of March 2023.  Micro Finance Institution (MF) is looking for AUM growth of 30 per cent YoY in Fy24. The microfinance subsidiary Asirvad posted an AUM of Rs 8,653 crore showing a growth of 22 per cent year-on-year (YoY) and a profit of 70.5 crore during Q3. Manappuram holds about 98 per cent stake in Micro finance subsidiary.

V P Nandakumar, managing director and chief executive, Manappuram Finance told Business Standard while the public offering and listing of microfinance entity is on cards, it would happen sometime later. PE investment will help to get benchmark for valuation. The aim is to have PE investment after FY24.

Some of the listed NBFC-MFIs include CreditAccess Grameen , Fusion Microfinance and Spandana Sphoorty Financial.

In analyst call after Q3FY23 results, Nandakumar said the company – MFI -- has a capital adequacy of around 21.6 per cent.  will maintain at a rate of around 20 per cent capital adequacy.

When the market situation improves, the company plans to raise capital there, and need not be through the listing at a reasonable valuation. It may also raise private equity. About timeline for listing, it has not planned anything as of now.

About the microfinance business, the company said it was coming to the end of COVID related provisioning cycle. MFIs net profit has increased to Rs 70 crore in Q3Fy23 versus Rs 56 crore in Q2 FY 23. It expects further reduction in credit cost and return to pre-COVID provisioning levels over coming quarters. Asirvad’s collection efficiency from MFI business during the quarter at 104%, and disbursements towards MFI during the quarter was Rs 2,382 crore.