Manappuram Finance Says No Discomfort From Lenders On Asirvad, Collections Key

Manappuram Finance Ltd. said that despite the Reserve Bank of India imposing lending restrictions, lenders have not expressed any discomfort with its subsidiary, Asirvad Microfinance, as it has sufficient liquidity.

"Lenders have not shown any discomfort as the MFI has sufficient liquidity and parent support," the management said in the earnings call on late Tuesday.

Collections will be the key focus area for the company from here on.

The company will be implementing advanced tracking systems, which should help in recoveries. The management expects repayments of Asirvad to improve from January-March as it will start witnessing green shoots in October-December.

Further, the sharp rise in the number of loan officers sequentially will also aid in collections.

While Asirvad's credit costs may rise from the previous guidance of 1.5%, the management expects it to be similar to the industry this year.

On Oct. 17, the central bank barred Asirvad Microfinance and three other non-banking financial companies from conducting lending operations as it found material supervisory concerns in relation to high lending rates.

RBI took this action after it observed that the weighted average lending rate and the interest spread charged over their cost of funds were excessive and not in adherence with the regulations.

The current yields in loans provided by Asirvad Microfinance are at 24%, but the parent company has assured of a reduction in rates to the regulator, which will be at the lower end in the industry.

The parent does not expect the return on assets of Asirvad to be impacted, as it will be offset by better opex and credit costs. The parent company has rectified deficiencies in the system, the management said. Asirvad contributes 27% of Manappuram Finance's book.