Manappuram Finance

Today in business standard newspaper IIFL Finance has published auctioning of five pages of gold.

If you can recall similar pattern was happening with Manappuram before their results were going to be auction last quarter I think.


Highlights from AR FY21:

  1. Gold loans of up to Rs.15 million offered online

  2. Housing Finance: Average loan size of Rs.1.5 million

  3. Forex and money transfer
    No bank account needed for amount up to β‚Ή 50,000
    β€’ Send cash anywhere in India within seconds
    β€’ Send money abroad
    β€’ Authorised Dealer Category – II Licence from the RBI

  4. Our consolidated AUM grew by 7.92% to β‚Ή 272.24 billion, and net profit improved by 16.53% to β‚Ή 17,249.5 million, the highest ever.

  5. Non-gold verticals now account for 30% of our consolidated AUM and contribute 21% of consolidated net profit.

  6. We have delivered attractive returns to our investors with ROA of 5.61% and ROE of 26.17%. Our standalone capital adequacy ratio is at a healthy 29.02%.

  7. From the peak of US$ 2,000 per troy ounce in August 2020, the price has fallen to levels of US$1,700.

  8. Learning from previous episodes of gold price volatility, we realised that a short-term gold loan product is the best way to manage the gold price risk. Accordingly, we shifted
    almost the entire gold loan portfolio to a tenure of 3 months, a departure from the industry practice of granting gold loans for a tenure of 12 months…

    1. The short-term product offers benefits both to the customer and to the company.
    2. The company can manage the price risk and asset quality prudently, without taking away flexibility from the customer in terms of his credit requirements.
    3. The periodic renewal of the loan and the regular servicing of interest by the customer enforces credit discipline and it also lowers the interest burden on the customer.
    4. The customer can also renew the loan indefinitely by periodically settling the interest and resetting the principal to the prevailing gold price.
  9. The share of digital collections in gold loans has increased steadily over time, standing
    at 54% in FY 2021, compared to 35% in FY 2020

  10. We are working towards establishing an automated solution to verifying the purity of the gold assets.

    1. I have seen videos online where there are machines which can do this. But it might come at increased cost.
  11. We made the transition from classroom trainings to virtual classes and eLearning courses, thereby saving time and money. We prepared over 400 e-learning courses of over 220 hours duration and now our Learning Management System is the main platform for learning and development at our Company.

  12. We are implementing augmented reality (AR) framework in our training programs to create near real, yet fully virtual classroom environment. AR infused training programmes will impart role critical training and get employees ready for future challenges. AR has the potential to
    revolutionise the learning industry completely.

  13. Supported by our resilient performance, we are marching tenaciously towards our FY 2025 goal of consistent AUM growth of 15-20% with 25% cross-cycle RoE.

  14. Asirvad Micro Finance Limited now among the lowest cost providers of microfinance loans in India. Asirvad proactively provided β‚Ή 75 crore provision during Q1 to alleviate COVID-19 and provided β‚Ή 130 crore provision cumulatively so far.

  15. Given the 3-month average contracted loan duration for Manappuram Finance, a significant proportion of loans disbursed at the time of peak gold price in Q2 were due for repayment during Q4.

    1. Despite significant volatility in gold prices, we were able to arrest gross non-performing assets (GNPA) in the gold loan portfolio to less than 2%. Auctions during the quarter were β‚Ή 404 crore compared to β‚Ή 8 crore during the nine-month period ended December 20.
  16. Added significantly to the gold loan marketing team.

  17. Gold Loan Segment Performance:

    1. Average loan ticket size increased to β‚Ή 44,600 in FY 2021 compared to β‚Ή 38,500 in FY 2020
    2. Share of Online Gold Loans (OGL) in gold loan AUM up to 54% from 48% a year back
    3. Loan-to-value (LTV) is 71% compared to 59% in FY 2020
    4. Undertook various cost rationalisation initiatives, such as introduction of cellular vaults, which has resulted in β‚Ή 521 million average opex saving annually
  18. Asirvad

    1. One of the lowest cost microfinance lenders in India
    2. Had added ~900 loan officers last year which helped enhance collection efficiency and increase borrower retention.
  19. Vehicle and equipment

    1. Covering 3,000+ co-located gold loan branches for collection and marketing distribution.
    2. Digital loan agreement signing with e-stamping to save cost
    3. Brand tie-ups with manufacturers for better reach
  20. Cost of borrowing at 8.8%, ROE 26%, Capital Adequacy Ratio 29%, ROA 6%, Net Yield 24.9%

    1. Gross NPA at 1.9% vs 2.01 in FY17
    2. Net NPA at 1.53% vs 1.73% in FY17
  21. Lending industry data

    1. Bank credit growth hit a new low for the second year in a row in FY 2021 at 5.56%, the lowest in 59 years.
    2. Credit offtake in FY 2021 at β‚Ή 109.51 trillion was lower than FY 2020’s when it had clocked a growth of 6.14%, which was the lowest in as many as 58 years.
    3. It was way back in FY 1962 when credit growth was lower than this at 5.38%.
    4. The agriculture and allied segment were the only bright spot with growth rising to 12.1% in FY 2021 from 4.1% in FY 2020.
    5. The banking system’s credit growth is expected to almost double to 10% in FY 2022 riding on the economic recovery and policy interventions, according to rating agency CRISIL.
    6. The quantum of gross non-performing assets (NPAs) could rise to 10.5-11% by the end of FY 2022.
    7. According to RBI data, the consolidated balance sheet of NBFCs registered a y-o-y growth of 13% and 11.6% in Q2 and Q3 of FY 2021 respectively.
    8. The overall assets under management (AUM) of NBFCs are estimated to grow at a slower rate of 5% in FY 2022 and are yet to touch the pre-pandemic levels, according to rating agency CRISIL. The biggest constricting factor for the NBFC industry will be funding sources to take care of the liabilities side, it said.
    9. According to RBI data, outstanding loans against gold jewellery among banks grew by 131% in FY 2021 to β‚Ή 600 billion from β‚Ή 260 billion in FY 2020.
    10. For FY 2021 and FY 2022, the gold loan market expected to grow at a rate of 15-16%, reaching a maximum of β‚Ή 2.69 trillion by the end of FY 2022
  22. Edge over banks in Gold loan

    1. Turnaround time
    2. Geographically wider reach especially in the southern regions with high coverage in non-metro, semi-urban and rural areas.
    3. employee transfers are less frequent in NBFC branches, which ensures staff are around for much longer and become familiar with the customers in a town or village. Generally, the employees are local and can communicate with the borrowers in the local language
      which ensures familiarity and comfort particularly while understanding the financial terms and conditions.
    4. As the gold loan is only a part of the whole portfolio of a bank, they do not have full-time employees specialised for appraisal and advancing a gold loan. An appraisal is done by a professional appraiser therefore, loans can be extended only when he is available. On the other hand, specialised NBFCs have several trained and specialised employees to appraise collateral and quickly disburse loans. Therefore, a customer can reach out to NBFCs anytime to avail of a gold loan.
  23. The life insurance industry in India is expected to grow by 14-15% annually for the next three to five years.

  24. Asirvad delivered ROE of 1.6% in FY 2021


2Point2 Capital - Investor Update Q4 FY21.pdf (507.6 KB)
VEF-Rupeek.pdf (423.5 KB)

I was doing some competitive analysis, and frankly very impressed with β€œRupeek” business model. Rupeek Business Model: Essentially, they are similar to cloud-gold-lenders for banks; like third party customer acquisition, at-home gold transaction, 30 minute loan disbursal time, and safe deposits of gold (at local banks) are some of their +ve. They operates on asset-light model which means banks will carry liability on their balance sheets and Rupeek will do all the leg work for a small % cut (still its not known that what is % of their cut - however, after they achieve economies of scale, it looks easy for them to be profitable).
Only question I had was how accurate their at-home gold valuation method/process is? If it has any flaws or can be easily tricked than that might be their -ve point.

I have added some references for everyone’s review above. Staying on my toes for Manappuram.


To me muthoot looks risky with 6-12 month loans as compared to manappuram with 3 months


Someone shared an unconventional way to store gold. They pledge their gold and take online gold loan from Manappuram for minimum Rs 1000/- which they pay back with interest of Rs 5 within a week. They get to keep their gold in safe locker which is insured plus option to take instant loan from the app in the future. They keep renewing it every 3 months in the app and no need to visit the branch except first time.

It seems gold loan companies are ok with it since it increases their AUM.


So you will pay greater 24% (5 per week is 20 per month which is 240 per year) interest per year to keep your gold with gold finance company?

How does that make sense?

@vnktshb Main purpose is to get a cheaper locker and not a loan. They wont pay interest rate for full year. They repay the loan in a week itself and need not to pay interest for further days.

Yup. I can confirm this happens in my town as well.


Rs 5 is paid within a week for a loan whose tenure is 3 months so Rs 20 per year would be my calculation. I am not sure of the fine print of the loan. Even your calculation of Rs 240 per year is cheaper than bank locker annual charges. My point was the AUM figures may not be completely accurate if there are large number of such folks.

AUM will be accurate, whatever they report as Gold in Tonne will be inaccurate


Here are the updated gold AUM and auctions for FY21 and how it has varied over time across gold financiers.

AUM (in cr.) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Muthoot finance 26’000.04 21’617.90 23’349.90 24’335.50 27’219.90 28’848.40 33’585.30 40’772.40 51’926.60
Manappuram finance 9’945.80 8’155.20 9’269.30 10’080.60 11’124.53 11’734.98 12’961.52 16’967.18 19’077.00
Bajaj finance 37.39 146.78 543.96 655.01 853.37 1’557.49 2’239.97
SBI 900.00 2’179.00 20’987.00
HDFC Bank 4’042.00 4’057.00 4’531.00 4’800.00 5’500.00 5’900.00 6’200.00 8’300.00
Shriram City Union 4’787.00 2’453.00 2’943.00 3’408.00 3’427.00 3’374.00 2’712.00 3’119.00 3’789.00
IIFL 3’865.00 3’912.00 3’790.00 2’914.00 2’910.00 4’037.00 6’195.00 9’125.00 13’149.00
Federal bank 6’360.00 5’962.00 6’524.00 7’228.00 9’301.00 15’816.00
CSB bank 2’958.00 3’799.00 6’131.00
Gold auctions (in cr.) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Muthoot finance 3’429.31 2’787.90 3’880.00 1’184.70 2’517.68 1’400.05 854.78 325.48
Manappuram finance 1’301.30 2’284.70 1’188.00 1’932.00 929.00 1’204.50 419.40 116.10 412.25
Bajaj finance 6.29 18.79
Shriram City Union 50.21 17.85 32.48 10.42 3.07 0.37
IIFL 159.06 148.76 308.33
Auction % of AUM FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Muthoot finance 15.86% 11.94% 15.94% 4.35% 8.73% 4.17% 2.10% 0.63%
Manappuram finance 13.08% 28.02% 12.82% 19.17% 8.35% 10.26% 3.24% 0.68% 2.16%
Bajaj finance 0.40% 0.84%
Shriram City Union 1.47% 0.52% 0.96% 0.38% 0.10% 0.01%
IIFL 2.57% 1.63% 2.34%

Auctions went beyond 15% of outstanding AUM in the last cycle, this time it has been much more controlled across NBFCs. Banks are not obliged to share this data in their annual reports.

Disclosure: Invested in Manappuram (position size here)


Hi Harsh,

Thank you for sharing the data above. Just wanted to confirm if the data for SBI gold AUM is correct. Unbelievably aggressive growth.

SBI provides many types of gold loan - personal gold loan, agri gold loans, SME gold loans, gold loans to jewellers, etc. I have shared numbers reported in their personal (or retail) loan division.



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On the qualitative aspects, we believe MFIN carries greater key-person risk due to the significant involvement of the founder. This, along with a history of compliance lapses, suggest greater governance risks relative to higher-rated peers, although MFIN has strengthened its practices in recent years and continues to do so.
MFIN has ESG Relevance Scores of β€˜4’ for Customer Welfare and Governance Structure, due to a record of business practices, including customer-related activity, that did not fully comply with regulatory norms in the past - although MFIN has taken steps to improve governance and compliance in recent years. The scores reflect our assessment that governance and customer-related practices appear weaker than rated peers’, raising regulatory and reputational risk for MFIN.


Fitch Ratings - Singapore/Mumbai - 14 Sep 2021: Fitch Ratings has affirmed India-based Muthoot Finance Limited’s (MFL) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at β€˜BB’. The Outlook is Stable.

MFL’s high exposure in loans against gold collateral - 90% of consolidated loans at end-June 2021 - supports its asset quality,

perational risks are high in gold-backed financing due to the branch-led business model and physical handling of gold collateral. Such risks may arise from decentralised cash handling, collateral safe keeping, and lending against stolen or spurious gold. Constraints due to Covid-19 pandemic containment measures had a temporary effect on MFL’s operations. Various checks and balances and the company’s decentralised branch operations mitigate the operational risk.

I want to put my observations on rupeek as under
Does anyone trust and give their gold to a sales representative visiting their home??

@Vikky9995 In my point of view, I can trust the person when I get message/notification from loan provider that so and so representative will reach me for gold collection and I get update in loan provider portal that representative collected my gold before he is moving out of my house with my gold.

I am not sure how rupeek works, but if gold collection works in similar manner, i can trust him


Then the risk is on rupeek, if delivery person cheats rupeek has to compensate the loss.
But most of the Indian people won’t like it, they want to see their gold safe and secure in a bank/nbfc locker…

Yes, They have to bear theft loss while transit either by employee or a thief. This is common, even when you look at microfinance companies they have this risk. But they can manage this, they wont let a single employee to do large gold collection. There is a risk, but a manageable one.

When it comes to people trust on this model, On seeing how our country is changing last 5 years, People can adapt this model. I think Rupeek has high chance of success

Rupeek does not store gold, Gold will ended up in a nearby bank locker.