Mangal Credit and Fincorp Enters Gold-Loan Market, Becomes First Indian NBFC to Offer Loans Against Diamond Jewellery

Mangal Credit and Fincorp Limited (MCFL), a leading non-banking financial company (NBFC) promoted by industry veteran Mr. Meghraj Jain, has announced its’ entry into the loan against gold and diamond jewellery market with the launch of its’ maiden retail branch in the Mumbai suburbs of Vile Parle followed by the launch of five more outlets in Andheri, Kandivali, Mira Road, Dombivali and Bhandup by March 2021.

The plan to enter the growing gold and diamond jewellery loan business is a natural extension of the company to leverage the promoter’s two decades plus experience in the fine jewellery business as well as the company’s sustained success in providing loans to SME & MSME sectors since 2012. Additionally, the company has brought forward its’ plans to enter the secured loan segment for a year, taking into account of the possible surge in demand for asset-based personal finance in post-COVID recovery phase.

Around 75 per cent of MCFL’s assets will be from gold and diamond jewellery loans, while SME & MSME loans cover the remaining. The average ticket size of gold and diamond jewellery loans is INR 75 thousand with the interest rates starting from 1 per cent per month onwards. MCFL which has an equity size of INR 19.31 crore, now has a loan book of INR 65.01 crore as of March 2020 which has grown by 19 per cent YoY. The company expects a surge in demand in Q3 and Q4, with lockdown restrictions easing across the country.

MCFL estimates an earning CAGR of 31.85 per cent on AUM of INR 150 crore over FY 2020-2022. The remarkable financial metrics underline the high operational efficiency in the company’s business operations while maintaining zero borrowings from external market participants.

MCFL has reported 79 per cent increase in its’ standalone net profit to INR 10.76 crore in the year ending March 2020 as compared to INR 6.01 crore net profit reported in the year ending March 2019.

Mr. Meghraj Jain, Managing Director, Mangal Credit and Fincorp Limited

Speaking further on the launch, Mr. Meghraj Jain, Managing Director, Mangal Credit and Fincorp Limited states, “For us at Mangal Credit and Fincorp Limited, the secured loan business is a natural extension of our existing portfolio. With aim to become a well-entrenched and dynamic player in the gold and diamond jewellery loan market by 2023. Our initial strategy was to commence the gold and diamond jewellery loan business next year, but then we advanced our plans viewing the current situation - gold and diamonds are a rising asset class and there is good demand for these loans now. With the launch of these branches, we expect to cater to the needs of people in financial distress. We believe that in the post-COVID period the need for asset-based personal finance will witness significant progress, and with gold prices on a secular growth phase, we foresee a viable business opportunity to drive growth in this segment. Most of the gold and diamond jewellery loan customers are into small and medium businesses. Post unlock, they would require capital to restart and grow. Gold and diamond jewellery are an easy loan where the disbursement process can be completed over the counter within 20 minutes. That’s why salaried professionals, farmers, traders and small businessmen, prefer this product. The surge in gold prices over the last few months is also one of the factors driving individuals to monetise their unutilised gold to tide over the liquidity crisis. It’s been interesting to watch how the price of yellow metal has rallied more than 30 per cent over the last six months. We will raise funds through privately listed debentures and bank loans when we decide on expanding our network to Rajasthan and Gujarat next year, after setting up the first few retail outlets in Maharashtra and making them operationally profitable.”

From an industry perspective, the organized gold and diamond jewellery loan business is a less-populated industry, with the presence of hand-picked significant players. The formal banking sector is highly focused on niche customers and their needs, creating an opportune prospect for a new entrant like MCFL. The company is likely to ride the gold and diamond jewellery loan industry wave which is expected to grow at a CAGR of about 13.4  per cent over FY 2020-2022 to reach about INR 4,50,000 crore in FY 2022, with NBFCs leading the way.”

MCFL’s vast network in the jewellery business in the western and northern parts of India, equity funded current loan book in SME and MSME segment, overall zero debt status, and an ability to organically scale-up the credit business characterized by low operational risks, has provided the right levers to formidably grow the gold and diamond jewellery loan business.