Hit by demonetisation, asset finance company, Magma Fincorp Ltd, reported an over 34 per cent dip in standalone net profit at Rs 29 crore for the quarter ending December 31, 2016. Net profit in the comparable quarter in the year-ago period stood at Rs 44 crore.

The company also reported a dip in total income from operations (standalone) to Rs 488 crore (Rs 530 crore) for the quarter under review; a nearly 8 per cent dip year-on-year.

According to a release issued by the company, weaker market sentiments, especially in rural markets post demonetisation, impacted the company’s business and collections. This in turn impacted profitability.

Magma Fincorp’s collections, especially the tractor portfolio, were severely impacted in the third quarter. However, with re-monetisation of rural economy and gradual relaxation of withdrawal limits, rural India will be better off in Q4. Better realisations from both kharif and rabi crops should also help, the company further said in the communiqué.

Net Interest Margins for the company however improved to 7.37 per cent from 7.19 per cent in the year-ago-period – due to lower cost of funds and increased contribution of focus products such as tractors, used assets and SME (small mining equipment).

Consolidated results

On a consolidated basis, the company's profit after tax declined by 29 per cent to Rs 37 crore (Rs 52 crore), while total income from operations stood at Rs 581 crore (Rs 622 crore).

According to Sanjay Chamaria, Vice-Chairman and Managing Director, Magma Fincorp, consolidated earnings were lower because of higher provisions and collection costs.

“With increased expenditure by the government in rural sector and infrastructure as proposed in the Union Budget, we are hopeful of an improvement in business, collections and profitability in the last quarter of the current fiscal,” he added.

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