A Gold Rush

By Kavitha Srinivasa

V.P. Nandakumar, chairman of the Manappuram Group, has a lofty vision. He wants the entire country to see a gold loan for what it truly is—a socially relevant product that has tremendous potential to promote inclusion and, in the process, make the lives of ordinary Indians easier.

This simple and neat logic, along with his uncanny ability to convince people and bring the masses into his fold, has been the cornerstone of his business success. At least that is what he did in Kerala, his home turf, when he took over the reins from his father VC Padmanabhan in 1986 after his death.

Ever since, he has transformed Manappuram General Finance and Leasing Ltd (MAGFIL) from a single branch institution in Thrissur to India's first listed, highest credit rated and most admired gold loan company.

He really hit the nail on the head. With millions of Indians still outside the purview of formal, institutional banking, Manappuram facilitated low-cost working capital against gold ornaments. It is the one collateral most Indians have. So, they've reached customers who aren't necessarily poor and given them secure loans against gold. In just five years since 2006, the company has grown from 50 branches to the 1,800 it now has.

The company's origins hadn't forecast these strides. Manappuram began as a money lending and gold loan outfit in 1949, working out of a lone office in the coastal village of Valapad for decades.

"My father was not ambitious in the sense that we would use the term today but he had very high standards of integrity," says Nandakumar.

Thrust into the business after the death of his father, that's a lesson he carries for life. "When you are in the financial services business, you have to earn the trust of the people around you. Integrity is paramount."

An enormous base of goodwill has definitely been the company's great treasure, helping it sail through many a rocky patch.

Nandakumar, in fact, says if it wasn't for this good-as-gold reputation they wouldn't have been able to go for an IPO in 1995. Frustrated at failed attempts to raise funds from commercial banks, Nandakumar went down an unconventional route to go public.

He launched a drive to collect small retail investments from customers belonging to the Valapad area. The painstaking efforts worked and MAGFIL mobilised funds without a hitch. The public issue gave the company its glossy shine.

From then on, MAGFIL has been riding on a new wave of growth. Even immediately after the IPO, MAGFIL's focus was massively dependent on the home crowd. In the late 1990s, there was a greater acceptability for gold loans in Kerala, Nandakumar says.

"Given the higher literacy and education levels here, people were quick to grasp the advantage of dealing with a transparent and professionally run organisation," adds the 56-year-old.

By then, the IT revolution had also started touching the lives of small town businesses like MAGFIL. With the technology gap plugged, there wasn't a reason to shift out anywhere. Today, MAGFIL has 1,800 branches across 19 states, a workforce of 14,000 and a live customer base of 10 lakh.

Now, Nandakumar has glittering global dreams. Spanning the breadth and length of India isn't enough for this ardent devotee of Dhirubhai Ambani. He has hugely diversified his portfolio, sowing the seeds for 10 companies that now handle gold loans, asset financing, insurance, foreign exchange, money changing, gold jewellery and healthcare among others.

The long-term vision of the company is to unlock the value of the large privatelyheld stock of gold in the country, estimated at about 18,000 tonnes. It might be a big dream for a company that still anchors itself to a small town in Kerala, but as they say, size is just a state of mind.

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