Manappuram Finance reputation at risk amidst invention

The Indian NBFC may be facing money laundering investigations.

Manappuram Finance, an Indian non-banking finance company, is at risk for reputational damage due to money laundering investigation, S&P Global Ratings wrote.

India's law enforcement and economic intelligence agency is investigating Manappuram Agro Farms (MAGRO), which was previously owned solely by V.P. Nandakumar, CEO and managing director of Manappuram.

It is not yet final if the financing firm will undergo legal, financial or funding risk from the probe, said S&P.

“Whilst not our base case, any significant negative findings on the core business of Manappuram could affect investor confidence in the company, which operates in a market-sensitive segment,” said S&P.

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Compared to world standards, the overall corporate governance standards for financial institutions in India are weak, resulting in a higher risk assessment within our banking industry country risk assessment framework.

Manappuram's ratings are primarily supported by its strong capitalization and earnings, as well as its position as a leading provider of gold-backed lending in India. 

As of 3 May, the company has INR35b (US$430m) in working capital loans due for repayment in three months, with liquid assets of INR10b (US$120m). 

The majority of the company's asset base consists of short-term, self-liquidating loans, which helps to mitigate refinancing risk.

(INR1 = US$0.012)