The sharp slide in gold prices has impacted the share prices of the Kerala-based NBFC’s Muthoot Finance and Manappuram Finance on Monday.

Manappuram Finance lost 9.84 per cent to touch fresh 52-week low of Rs 17.40 on Monday with 38.89 lakh shares changing hands on the BSE. Muthoot Finance, after crashing to day’s low of Rs 121.30, recovered a bit to end at Rs 131.50, a fall of 13 per cent.

Commenting on the development, George Alexander Muthoot, Managing Director, Muthoot Finance, said “a 15-20 per cent price fluctuation in gold prices is already factored in our business model. It is not a new event, which has come up. Though gold price is an important factor, the business model should not be misunderstood as a business of financing of bullion or shares where mark-to-market could affect the repayment behaviour.

“Since we are financing only household jewellery, the impact of such fluctuations is minimal. More than the gold price, it is the collection mechanism, which is important in this business. We have institutionalised a system of regularly calling up the borrowers reminding him about the dues on the loan and every branch has a monthly interest collection target.

“These measures ensure regular interface with the customers and engenders repayment habit in the borrowers. We did not record a substantial rise in NPA’s also when compared to our disbursements, as loans have a very short duration of 3-6 months.” The officials in Manappuram Finance are not available for comments on the development. The company, however, last month had said it may lose Rs 250 crore as the price of the underlying security may not be sufficient to recover the interest in full due to the price correction of gold.

sajeevkumar.v@thehindu.co.in

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