Magma Fincorp Sees Credit Growth Picking Up In FY20

Magma Fincorp, which had witnessed moderation in disbursals during the festival season last year, is expecting credit growth to pick up this fiscal, backed by improved sentiments and liquidity situation.

According to Kailash Baheti, Group CFO, Magma, disbursements are likely to grow by more than 25 per cent and assets under management (AUM) by close to 20 per cent this fiscal.

The growth would be backed by higher credit offtake in the housing, SME, used assets, commercial vehicle, and commercial equipment segments.

“We had given a guidance of 10 per cent growth last year, and we are likely to be in that range. This is especially because we had some disturbances in the third and fourth quarters, which had a 3-4 per cent drag-down effect (on growth),” Baheti told BusinessLine.

For the fiscal ended 2019, the NBFC is hopeful of registering a 20 per cent growth in disbursement, which will lead to 8-10 per cent growth in AUM.

Sectoral growth and focus

The tight liquidity situation that prevailed in September-October last year as an immediate fallout of the IL&FS crisis has now improved, said Baheti.

Magma is likely to benefit from the slowdown in credit disbursals by some housing finance companies. The NBFC has already witnessed “good growth” in providing finance for affordable housing in the third quarter, and is expected to post “superior growth” in the fourth quarter.

“In housing, two of the big lenders, who together lend ₹8,000-10,000 crore every month, are now completely out of the market. Even the smaller housing finance companies are finding it extremely difficult to get funding support. So, housing finance was like a open runway (for us),” he said.

Housing finance, which currently accounts for close to 19-20 per cent of its total loan book, is likely to grow to 25-30 per cent in the next three years.

Magma is also bullish about loans to the SME sector, which was largely dominated by fintech companies till about a year or two ago. Since they have also not been able to garner adequate funding, a vacuum has been created.

The share of SMEs, which is currently close to 12-13 per cent, is likely to increase to 15 per cent in the next two to three years, he said. The NBFC, however, witnessed poor offtake in the asset-backed finance (ABF) business due to slowdown in primary sales. ABF currently accounts for nearly 67 per cent of Magma’s loan book and comprises cars, tractors, used assets, commercial vehicle, and commercial equipment, among others.

Asset quality

Magma, which had reported the highest gross and net non-performing assets (NPAs) among its three peers at the beginning of last fiscal, managed to improve and move to the second position by the third quarter of FY2019.

The company is hopeful of reporting GNPA of close to 5 per cent and NNPA of around 4 per cent as on March 2019. The target would be to bring down the GNPA to below 5 per cent and NNPA to below 3 per cent by FY20.