Manappuram Finance board to take up proposal for $500 million fund raise
Upstox
2 min read • Updated: April 16, 2024, 3:31 PM
Summary
The proposal will be further discussed in the meeting scheduled on April 19, 2024, by the board members of Manappuram Finance.
Manappuram Finance is exploring the possibility of raising $500 million through external commercial borrowings (ECBs), which will also include the US dollar bonds. This thought comes immediately after successfully raising ₹6,000 crore worth of redeemable non-convertible debentures (NCDs) in March 2024. The NCD issue was fulfilled with strong investor demand, showing confidence in the company’s financial performance and growth prospects.
Following the announcement, shares of the company rose 1.7% higher intraday but were trading flat at 3:00 pm on April 16.
The company aims to diversify its funding sources with a motive of tapping into international capital markets. ECBs are bonds issued by Indian companies in foreign currencies.. The specific terms and conditions of the proposed ECB offering will be decided by the company’s board. However, the fact that Manappuram is looking to raise funds indicates its growth vision and the commitment to maintaining a strong financial position.
What will be the impact of this deal?
The upcoming external borrowing program will help in increasing the capital adequacy ratio of the company, which comfortably stands at 31%, much higher than the regulatory requirement of 10%. In addition, low cost funding avenues will help in augmenting margins for the company. The current cost of funding for the company stands elevated at 9.1% as of Q3FY24 against 8.5% in Q3FY23. It has previously raised nearly ₹5,000 crore through ECBs, which constitutes 1.6% of the overall funding for the company.
Financial performance in Q3FY24
In the third quarter of FY24, the company’s net profit rose 46% to ₹575.3 crore from ₹393.5 crore in the same period last year. Additionally, the net interest income rose 33% to ₹1,452 crore. The company also declared an interim dividend of ₹0.90 per share.
Manappuram Finance Ltd. is one of India’s leading NBFCs, with presence across gold, housing, vehicle and microfinance segments. The company was established in 1992 and has grown at a rapid pace. As of Q3FY24, the lender had 5,073 branches (including subsidiaries) across 28 states/UTs and assets under management (AUM) worth ₹302.6 billion.