Detailed Narrative
Asirvad Microfinance: Navigating a Crisis
The quarter was dominated by the performance of Asirvad Microfinance, which reported a loss of ₹188 crores. Management attributed this to systemic challenges in the MFI sector, including climatic disruptions and a breakdown in Joint Liability Group (JLG) discipline. Despite the loss, the lifting of RBI supervisory restrictions in early 2025 is a major positive, allowing the company to restart disbursements with revamped processes. Management has increased Stage-3 provision coverage to 59% and plans to contain the MFI book to 10-15% of total consolidated AUM over the medium term⏳.
Gold Loan Resilience and Growth Pivot
The standalone gold loan business remains the company's core strength, with AUM growing 18.8% YoY to ₹24,504 crores. Interestingly, management raised its growth guidance for this segment from 10-12% to 15-20%, citing increased ticket sizes and new customer additions (3.3 lakh in Q3). While physical gold tonnage declined as customers borrowed less quantity against higher-valued gold, the LTV remains conservative at 60%. The company is also adapting to the RBI's September 2024 circular by implementing stricter LTV monitoring and partial interest servicing for rollovers.
Diversified Segments: Mixed Results
Vehicle Finance and Home Finance showed strong AUM growth of 41.4% and 25.7% YoY, respectively. However, asset quality in Vehicle Finance is a concern, with GNPA rising to 5.2% due to stress in the two-wheeler and farm equipment segments. Home Finance remains a small but profitable contributor, posting a ₹7 crore profit for the quarter with a GNPA of 3.86%. Management continues to prioritize secured lending, having largely exited unsecured digital personal loans and MSME lending in the standalone entity.
Regulatory Landscape and Operational Changes
Management spent significant time discussing the regulatory environment, particularly the RBI's focus on gold loan practices. Manappuram has implemented automated SMS alerts for customers when LTV ratios hit 85% and auction notices at 90%. They are also engaging with the regulator to seek permission for opening new gold loan branches, which has been a point of restriction. The CEO expressed optimism that the regulator understands the challenges of the NBFC sector and that standard industry practices are being developed.
Financial Position and Liquidity
Despite the earnings hit, Manappuram maintains a very strong capital position with a CRAR of 29.88%. The company has comfortable liquidity, with ₹4,592 crores in cash and equivalents and ₹2,524 crores in undrawn bank lines. Borrowing costs increased marginally by 6 bps during the quarter, primarily due to MCLR repricing. The company's leverage remains low at 2.9 times, providing significant headroom for growth in its secured portfolios as the MFI segment stabilizes.