Kolkata-based Magma Fincorp expects its asset quality to improve and assets under management (AUM) to start growing next fiscal (FY19).
According to Kailash Baheti, Chief Financial Officer, Magma Fincorp, the NBFC hopes to be able to bring down its net non-performing assets (NPAs) to sub 4 per cent level by the end of FY19 from the current 5.3 per cent.
Magma sold ₹680 crore worth NPAs in the last quarter of FY17, bringing down the net NPAs to 5.6 per cent.
In absolute terms, NPAs have come down from ₹889 crore in Q4 FY17 to ₹797 crore in Q3 FY18.
“We have been making efforts to improve the portfolio quality; we will ensure there is no further deterioration in asset quality,” Baheti told BusinessLine .
NBFCs have been mandated to make a transition to 90 days past due (dpd) for non-performing loan (NPL) recognition in Q4 FY18, from 120 dpd in Q4 FY17. The revised norms would, however, not throw up additional NPAs for the company.
“This transition from 120 dpd to 90 dpd will not move the needle (of NPA) substantially,” he said.
The company had taken various strategic initiatives over the last eight quarters in portfolio origination and in collections, including merging of sales and collection teams, segregation of the SME and housing collection teams, and introduction of a dedicated tractor collection team in select markets.
Magma plans to trim down its exposure to tractor lending, which is considered to be a more ‘volatile’ business as repayments are linked to crop cycle.
Plans are afoot to bring down tractor lending to 20-22 per cent of total loan book in a phased manner from nearly 28 per cent of the loan book of ₹11,000 crore in FY17.
AUM growth
The NBFC’s AUM, which was at ₹19,000 crore in 2015-16, has come down to ₹15,252 crore at present.
This is because the company has been focussing on product recomposition and asset quality management to improve its portfolio.
During the October-December 2017 quarter, Magma saw its disbursements grow by 18 per cent.
The NBFC is looking to ramp up its used assets financing business.
The share of used assets financing to total loan book, which was at 17.2 per cent last year, has increased to 24.6 per cent. The company plans to increase this to nearly 30 per cent by FY19.
Magma will also focus on commercial vehicles and reduce exposure to cars and utility vehicles.
“From Q4 of FY18, we expect our AUM to start growing,” he said.