Manappuram Finance, which has a market share of around 12% in the gold loan business is eying to acquire a Commercial Vehicles (CV) loan company in a bid to expand the CV portfolio which currently has an assets under management (AUM) of below Rs 5 crore.
“If a good opportunity comes up, we will acquire a CV loan company. The AUM of that company should be below Rs 1000 crore because we can currently look for only that much. We started offering CV loans few months back because our customers wanted these loans. We want to expand this business gradually. These loans are treated as Priority Sector Lending (PSL) loans which will be good since we are eying a small finance bank license,” said VP Nandakumar, MD & CEO of the company. Nandakumar added that gradually they may think of applying even for universal bank license.
The final norms for small finance banks were released last month while the guidelines for universal banks are still awaited. Manappuram Finance has engaged PwC as a consultant for their banking foray. “We plan to apply for the license through Asirvad Microfinance, which we propose to take over as our subsidiary. Once the regulatory approvals are in place, Manappuram will hold 85% stake in Asirvad Microfinance, and for the remaining 15% we have signed an MoU with the promoters. They will be transferring this 15% stake to us in the next 18 months from now,” said Nandakumar.
The company may have to cut branches to become a small finance bank. “A bank is a more stable model than an NBFC, but there will be challenges in transition. Our customer base is currently 30 lakh and we have 3,200 branches. We may face challenges in getting people to run the bank. Besides, the RBI may not allow all our branches to be converted into bank branches so we may have to rationalise them. Branches may have to be merged for rationalisation. Even technology may be a challenge,” said Nandakumar.
For conversion into small finance banks the Reserve Bank of India (RBI) has put a condition that the promoter’s minimum initial contribution to the paid-up equity capital of such banks should be at least 40%. “Considering this, the possibility of other players coming up is very minimal. But if RBI can relax this condition, more players can come. In most companies, the promoter’s stake is less than 10%,” added Nandakumar.