Manappuram Finance streaks on its fundraising plan

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Manappuram Finance, a gold loan offering NBFC (Non-Banking Financial Company) is planning to raise its fund through borrowings. This may include the issuance of various debt securities in the onshore/offshore securities market by public issue, on a private placement basis, or through issuing commercial papers.

The company had declared that its board may consider issuing debt securities in November 2020. Based on the prevailing market conditions, the board of directors may approve the issuance of debt securities that are subject to certain terms and conditions including the issue price of debt securities. This declaration has resulted in a rise of 2.57% to Rs 161.40.

Every business venture requires an adequate amount of funds to run its day to day operations. Insufficiency in finance can hinder the progress and compels one to shut down the business. Fund requirement gets double in the case of financial entities like NBFC’s. Therefore, NBFC must search for alternate financial sources for raising their fund.

Manappuram Finance is an NBFC that is engaged in providing finance against used household gold ornaments. Now the company is planning to raise their fund through various other options like debt securities (financial assets that entitle their owners to a stream of interest payments), public issues (securities issued not for the existing shareholders but for the public who is to be included as new shareholders in the company), commercial papers (an unsecured form of promissory note that pays a fixed rate of interest), etc.

The domestic banks were uncomfortable lending to an NBFC, especially one with an untested business model focused on gold loans. So the growth of Manappuram Finance was slow in the initial period. The picture had changed only after the company hit upon unconventional ways to raise funds. Once they were persuaded in that field, the domestic players became more confident about lending to the company.

As a result, currently, the NBFC reported a rise of 37.9% in consolidated net profit to Rs 367.97 crore. It also shows a 26.3% increase in total income to Rs 1,516.47 crore in Quarter1 of the Financial Year 2021 over Quarter 1 of the Financial Year 2020.

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