Thrissur: Imagine this. Sixty-eight tonnes of gold, the estimated value of which comes to around Rs. 19,000 crores, kept in 3300-plus branch lockers across the country and handled by over 18,000 employees!
But for someone who holds the custody of such a massive asset, there wasn’t the faintest hint of tension on his face. He was uber cool personified! For the nearly three hours that we spent with V P Nandakumar at his corporate office at Valapad, a small village en route to Guruvayur – better known as the hometown of Manappuram Finance Limited (MAFIL) now – not once did his attention waver. Forget attending phone calls, he hardly stole a glance at his mobile phone during the entire conversation.
The risk factor in financial services business is very high. It takes nerves of steel for one to be in it, because anything can go awry at anytime. But this man dispels the image we have in our mind of a hard-nosed financier even as he holds tonnes of collateral gold under safe custody and employs more than 25,000 people. V P Nandakumar of Manappuram Finance Limited, is soft-spoken, has a clear vision and complete faith in his system. Sitting at his headquarters in rural Thrissur, he controls his empire spread over many States. Here, in a chat with Destination Kerala, he touches upon all aspects of his business
“Such is the trust that you have cultivated amongst your employees,” I quipped, unable to hide my surprise.
“It is not just that,” Nandakumar says. “Rather, it is the confidence in the system that I have evolved to safeguard this huge asset. Since I joined the company back in 1986, I have been continuously working towards putting in place a stringent protocol for managing the safety and security of assets and thereby ensuring transparency in transactions. That’s why I can stay calm in this office even while operating branches in faraway places like Amritsar which I haven’t even visited yet,” says the MD & CEO of Manappuram Finance Ltd. (MAFIL) which has a net worth of Rs. 4144 crore as on September 30, 2018.
Nandakumar, in fact, is unassuming and a surprising contrast to those of his ilk – for a big league financier, he is quite soft-spoken, and neither does his countenance come across as even remotely assertive. Instead, he speaks gently like an avuncular person telling his tale, thereby belying the steely inner core of the seasoned businessman that he is. The owner of the semi-stifled voice though, never fails to convey the essence of his successful innings or his dreams and priorities, for there is much sublime clarity and energy.
Established in 1949 by the late V C Padmanabhan, the firm functioned as a single-branch business engaged in moneylending and pawnbroking on a modest scale till 1986, the year when Nandakumar took over his father’s venture after his demise. The next three decades saw a phenomenal upsurge in the company’s fortunes under Nandakumar’s able leadership. Today, MAFIL has 4,260 branches (including those of subsidiary companies) across 28 States/UTs with assets under management (AUM) of Rs. 17,191 crore and a workforce of 25,000-plus.
Nandakumar, now 64, holds a 35 per cent share of the company and is also the Chairman of Manappuram Group of Companies; his other major businesses include Manappuram MAcare (dental and diagnostics chain), Manappuram Riti Jewellery, Manappuram Chits and Manappuram Agro Farms.
‘Together We Grow’
What makes Nandakumar’s entrepreneurial journey unique is how his business has empowered the whole region, almost raising a village of affluent people in the process of its upward journey. Simply put, when he became a billionaire, Valapad also saw the emergence of many millionaires.
Nandakumar’s father ran his business on a capital base of Rs. 5 lakh and, to mitigate risk, followed a conservative approach, fixing the deposit limit at Rs. 25 lakh. Beyond this limit, potential depositors were either turned away or made to wait for their turn in a queue. As and when an existing depositor withdrew his money, Padmanabhan would send out inland letters to the next in line, informing them of the availability of a slot. This would bring grateful depositors rushing in with their money. Over the decades, Padmanabhan earned a great reputation for his integrity and the firm came to be known in the area as a haven for keeping the deposits of the local people, offering them higher returns along with assured safety.
Nandakumar never worked alongside his father as he was employed with Nedungadi Bank after his post graduation. When he took over the reins in 1986, it was the firm’s goodwill that he effectively tapped into which, in turn, saw the business grow in a big way. Manappuram Finance Limited was incorporated in 1992.
The visionary in Nandakumar sensed potential for expansion but the lack of capital posed a major hurdle in pursuing his plans to take the business to the next level. Even after pledging his properties, Nandakumar was unable to raise the required amount from commercial banks. This was to be the defining moment – his decision to go for an IPO in 1995.
“It wasn’t easy. Back then, the rule was that a company going in for an IPO should have a minimum of Rs. 3 crore as paid-up capital and MAFIL, at the time, had only half of that. Once again, it was the trust that people here had in us that came to my rescue. I managed to collect small retail investments from among Manappuram’s customers hailing from Valapad who were personally known to me. The funds were mobilised and eventually we managed to address the issue without much difficulty,” he recollects.
MAFIL issued a bonus to its shareholders in the ratio 1:1 thrice. Later, in 2010, the company decided to go for a stock split. “Every equity share of Rs. 10 was split into five shares of Rs. 2 each. Those who initially took a share worth Rs. 10 now have 40 shares and the market value has crossed Rs. 4000. And so, many people from Valapad who bought shares then to help me benefited in a big way. Some of them even named their house ‘Manappuram House’,” he says exuding pride.
For Manappuram, the growth was slow even after going public in the late 1990s. Moreover, the CRB Capital Markets scam of 1997 made the company’s efforts to raise more deposits a challenge. Nandakumar became convinced that the company had to adopt unconventional ways to raise funds to meet growth targets.
In the first breakthrough, Manappuram became the first gold loan company to raise finances through the securitisation and assignment route in a tie-up with ICICI Bank. Anticipating growth, the company planned a big expansion of the branch network in 2006. Unfortunately, due to some regulatory hurdles regarding securitisation, ICICI Bank was constrained to stop funding the company.
Fortune favours the brave, they say. At a conference of NBFCs in Singapore, Temasek, the sovereign investment fund of Singapore which was then looking to expand its footprint in the Indian financial market, evinced interest in financing Manappuram through their India arm, Fullerton. Thereafter, in December 2007, Manappuram became the first NBFC in Kerala to attract foreign institutional investment when the celebrated PE fund Sequoia Capital invested Rs. 70 crore together with Hudson Equity Holdings. The second round of private equity funding in November 2008 was led by Ashmore Alchemy which, together with Sequoia and Hudson, put in another Rs. 108 crore. Sizeable foreign investment was received during the two QIPs (Qualified Institutional Placements) in 2010 when a total of Rs. 1,245 crore was raised.
Once private equity came in, the company was able to shift gears and activate its expansion plan to become a national player by opening hundreds of branches. “Manappuram was not a known entity outside Kerala then. People couldn’t even pronounce the name of the company properly. So, we wanted to do a national-level marketing campaign. Besides branding, we wanted all the new branches to achieve break even in three months. Moreover, I wanted to break the general perception about pledging gold for loans that prevailed among the public. There was a stigma attached to pledging gold. Rather than use the gold at hand to raise money, many preferred to go to moneylenders and borrow at exorbitant interest rates. I wanted to transform gold loans into a lifestyle product rather than a distress product,” Nandakumar says, narrating the story behind one of the most successful advertising campaigns the country has seen.
Nandakumar discussed the idea with acclaimed adman V A Shreekumar Menon and the latter suggested a campaign featuring Amitabh Bachchan. “But, I felt it wouldn’t make an impact among my customers in Andhra Pradesh or Tamil Nadu. In each State, I wanted Manappuram to be known as a local company, belonging to that particular region. So, we decided to rope in a galaxy of film stars. Later, we engaged Priyadarshan to conceptualise the idea. Soon after our meeting in Kochi, he jotted down the lines ‘veetil swarnam vachitu enthinu nattil thedi nadappoo’ which formed the lines for the promotional jingle. In no time, the campaign went viral and we achieved faster growth. In fact, other players in the sector also reaped benefits as gold loans became more popular,” he says. A whopping Rs. 130 crore was spent for the campaign which saw actors Mohanlal, Akshay Kumar, Mithun Chakraborty, Vikram, Venkatesh and other popular stars pitching for Manappuram.
Technology – A Key Growth Driver
Sometime in 1986, Nandakumar happened to see a small computer firm, Alpha Computer Centre, at Triprayar junction. “Raveendra Babu, one of my college mates, was behind the venture. As I was curious to know about this machine, I joined the training course. Moreover, I had enough time then as I was only managing a single-branch business. As I began to pick up the basics, I became keen on ‘computerising’ my branch. When I sought my friend’s help to do so, he readily agreed, coming to the office himself to install computers and related paraphernalia. Once I started new branches, we considered linking the branches by using computers. So, we have been an early adopter of technology in the business,” he says. To cut a long story short, when MAFIL was set up in 1992, Raveendra Babu joined as a director of the company and today he continues to be on the Board as an Executive Director.
Manappuram was one of the earliest business houses to adopt the ‘core banking’ platform. “Unlike in the banking sector there were no ready-made software solutions available for gold loans. We invested in developing our own proprietary solutions, and today, that’s one of our core strengths. The business of gold loans demands speedy and hassle-free processing. Simplicity of procedure, therefore, is also a must and a balance has to be struck,” he says.
Apparently, for Manappuram, the investment in technology has paid off in many ways, for instance, by streamlining procedures for reducing turnaround time in gold loan disbursal and implementing advanced risk management practices.
Nandakumar is yet to visit a majority of the company’s branches. He hasn’t even been to some of the states where his company has been operating for years. “I haven’t met 90 per cent of my employees too. I don’t think I can do that in this lifetime. But, when I entrust assets worth Rs. 10 crore to a branch head, I am guided both by my trust in the individual as well as the system that we have developed and implemented over the years. I have suggested designs for most of the storage systems that we use. As they say, necessity is the mother of invention. The IT platform alerts the management upon spotting any suspicious or abnormal transactions at the branches. For example, the gold loan business focuses on used jewellery to which borrowers may have an emotional connect. When a branch accepts multiple numbers of the same type of ornament as a pledge, it is more likely to be a local jeweller or pawnbroker and the system automatically flags the transaction for verification by internal auditors,” he says.
MAFIL now aims to bring down the share of the gold loan portfolio to 50 per cent of total business with the other verticals growing to account for the remaining 50 per cent, over the next 10 years. This diversification will serve as a hedge against uncertainties in the economy. Nandakumar says the growth drivers would be commercial vehicle loan, affordable housing finance, MSME sector lending and microfinance businesses. “After all, gold is a commodity whose price can be volatile these days,” he says.
At present, the gold loan portfolio accounts for around 75 per cent of the company’s business, while microfinance accounts for about 15 per cent, commercial vehicles for five per cent, housing finance for three per cent, and the other verticals account for the rest. “Within a year, we will be launching two more new products – consumer loan and personal loan. Those who have a proven track record of repayment, as captured by the credit bureaus, will be sanctioned personal loans up to Rs. 2 lakh within 24 hours,” he adds.
Currently, MAFIL has a customer base of more than one crore. According to Nandakumar, consumer need is what dictates the company’s diversification plan. “Through the effective utilisation of futuristic technologies like Artificial Intelligence (AI) and Robotics, we want to serve our customers in a better way. We have a strong technology team with more than a hundred professionals. There is immense scope for robotics, especially in storage and retrieval of items. Now, IBM is managing our IT infrastructure. Every month, the technology team devotes a day to discuss our digital strategy and also invites various digital solutions providers to make presentations,” he says.
In 2015, in a first in the BFSI sector, MAFIL launched Online Gold Loans (OGL) facility. Last year, the company also introduced its co-branded debit card which is linked to existing gold loan accounts, in a tie-up with YES Bank. “Today, OGL constitutes 37 per cent of the gold loan portfolio and it is growing around 2 per cent every quarter. We want that to be 100 per cent in the next 10 years and we intend to invest more on technology to achieve this. Our objective is to ensure that anybody who is literate enough to operate mobile phones should also be able to use the OGL facility,” he adds.
In February 2015, the company acquired Asirvad Microfinance Pvt. Ltd. with AUM a little short of Rs.300 crore. Today, three years after its takeover, it has more than Rs.2730 crore as AUM after the subsidiary expanded operations to Madhya Pradesh, Chhattisgarh, Punjab, Haryana and UP. Accelerated growth is reported in the other new business segments, too. Commercial vehicle loans and housing finance loans – now contribute around Rs. 1270 crore to the total AUM. Overall, non-gold businesses contributed 26.7 percent of the total business as of September 30, 2018.
Manappuram is also awaiting regulatory permission to acquire India School Finance Company (ISFC). “It will become a subsidiary. We plan to invest around Rs. 400 crore for acquisition as well as providing the growth capital for future lending requirements. Our policy has always been to retain the existing management even when we acquire more than 90 per cent stake in a company. I am particular that the person running the company should have skin in the game,” he says.
Three years ago, there were reports that MAFIL is eying a universal bank licence. Though the current diversification strategy focusing on priority sector lending (PSL), including affordable housing finance, microfinance and commercial vehicle loan will equip the company to fulfill the eligibility criteria, Manappuram is yet to take final call in this regard. “We have taken steps in the right direction but we have not decided whether to apply for a banking licence. I think it will be appropriate to take a decision once we meet the PSL lending requirement applicable to banks,” he says.
Family and future
Nandakumar’s younger son Suhas Nandan is in the business as Assistant Vice President. His daughter Dr. Sumitha Nandan returned to her profession after a brief stint in MAFIL. She now works as Assistant Professor with Amrita Institute of Medical Sciences (AIMS), Kochi. Meanwhile, his elder son Sooraj Nandan is an aspiring entrepreneur currently working on his pet project, a retail food chain to be launched in London.
Ask him how long he intends to keep on working before he hangs up his boots, and he has a ready answer. “As long as I am healthy, I will continue in my present role.” A brief pause, and he goes on to add, “I haven’t yet set any deadline for myself. You see, people like me have been conditioned in such a way that for us the biggest punishment would be to force us to remain idle. For decades, I have been groomed like this. Now, there is no escape from it.”
V P Nandakumar
Based at: Valapad, Thrissur
Family: Sushama (Spouse); Dr. Sumitha Nandan (Daughter); Sooraj Nandan and Suhas Nandan (Sons)
Loves to do (when not working): I read whenever time permits. Due to frequent travel and paucity of time, I could not pursue any hobby as such
Gadgets: I am not a tech-savvy person. I learned to use a computer in the late 1980s, but now I hardly use it
Drives: Mercedes Benz Maybach. In the early days, I used to drive. Since 2000, I have a driver and the same person is with me till now. Every four or five years, he will suggest buying a new car and mostly, he has a major say in choosing one
Movies & Music: I hardly watch movies but love listening to music. Hindi film songs are my favourites. While travelling by car, I leave the choice to my driver
“The Central Government’s act of withdrawing 87 per cent of the cash all of a sudden had crippled the economy, at least in the medium term. I agree that demonetisation and the subsequent implementation of GST have long-term benefits in terms of formalisation of the economy. But, it has impacted India’s growth and affected the people at the bottom of the pyramid in a big way. I think it will take two more years for the economy to come back to normal.”
Advice to startups / aspiring entrepreneurs
“When you fail, everybody will blame you. Even your family members won’t be considerate. Here, perseverance is the key. Also, in my view, aspiring entrepreneurs should primarily consider pursuing the family business, however simple it may be, and taking it to the next level. For instance, if your father is a coconut merchant, your mission should be to expand the business by introducing value-added products. As far as supporting startups financially, we are largely interested in providing funds to those working on robotic technology.”
“I draw happiness from empowering people. That gives me lot of satisfaction. MAFIL has a tie-up with Bharathiar University to facilitate higher studies of our employees interested in it. We associate with premier institutes, including Wharton Business School to impart professional training to qualified employees to help them scale greater heights in the profession.”
On March 9, 2017, Kerala Governor Justice (Retd.) P Sathasivam declared Valapad as fully e-literate village. The concept of e-Valapad was first suggested by V P Nandakumar, as a CSR project to support the community which was then reeling under the impact of demonetisation. The project was undertaken jointly by Valapad Grama Panchayat, S N College, Nattika, and MAFIL. The goal of the project was to make at least one member of each family capable of performing digital transactions using a web-enabled device.
The Manappuram Foundation was established in October 2009 to drive the company’s CSR initiatives. Health insurance coverage to 20,000 Below Poverty Line (BPL) families at Valapad was provided under the Foundation’s Janaraksha Manappuram Free Health Insurance Scheme. The BPL families became eligible for free medical care along with cashless treatment at some of the leading hospitals in Thrissur district.
■ The first NBFC in Kerala to receive a Certificate of Registration issued by the RBI
■ One among the earliest companies in Kerala to go for an IPO, in 1995
■ The first Kerala-based NBFC to receive funding from foreign institutional investors (FIIs) in 2007
■ The first NBFC in Kerala to obtain the highest short-term credit rating of A1+ from ICRA
■ The first NBFC in Kerala to offer ESOP (Employee Stock Option Plan) to its middle and senior management functionaries in 2010