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Indian non-bank finance company (NBFC) Manappuram Finance has been upgraded to BB- by S&P on the back of expectations that the company will outperform peers over the next 12 months. S&P believes that Manappuram’s gold-based lending model with a 3-month tenor allows it to recognize asset quality stress early. The rating agency added that a second wave of the pandemic in India in April-June this year coupled with the decline in gold prices led to increased auctions of higher loan-to-value (LTV) loans in the first quarter of fiscal 2022. Elevated auctions have partly lowered Manappuram’s average LTV ratio to ~65% as of June 30 from ~71% as at March 30, offering some buffer to absorb price fluctuations. S&P expects the company’s risk-adjusted capital ratio to stay above 30% over the next 12 months and core earnings to remain at over 5% of its average managed assets during the period, the highest among its rated peers. The stable outlook reflects S&P’s view that Manappuram will maintain its financial profile over the next 12 months.

Manappuram’s 5.9% 2023s are trading 0.18 points lower at 102.25 yielding 3.97% currently.

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