We received Kailash Baheti, CFO of Magma Fincorp, at the Jefferies BFSI day on August 24th.
Management highlighted the implementation of various strategic initiatives, including: (1) changes in corporate structure, ranking of branches in terms of portfolio quality; (2) greater focus on GCs and used assets within its ABF segment; (3) a greater focus on home loans, particularly in the affordable housing segment, and the decision to increase the direct sourcing mix.
Management noted that it has made changes to its business structure to improve the quality of the portfolio. The business creation team is responsible for portfolios in the start-up phase.
The branches were rated based on the quality of the portfolio. Branches with lower NPAs have the option of increasing LTV levels and offering lower lending rates, and vice versa. As a result, the proportion of branches with better portfolio quality (grade A & B) increased from 40% to 80%. Gross assets in phase 3 fell to 9.5% in the first quarter (11.7% in the first quarter of fiscal 18). Management said it intended to increase the mix of used CVs and CVs, and reduce the mix of the tractor portfolio.
Management noted that the composition of VC disbursements increased to 15% in the first quarter, from 8% last year. Disbursements in the tractor segment were stable year on year.
Management pointed out that it had stopped dishing out large LAP bills (over 50 million rupees) a few years ago. She is now focusing on home loans in the affordable housing segment.
Management pointed out that the mortgage mix went from 27% in Q1FY18 to 51% in Q1FY19. In addition, the average loan amount fell to Rs 1.25 million.
The company has also focused on building direct distribution capacities and reducing reliance on DSAs. The mix of direct loan provision rose from 24% in Q1FY18 to 67% in Q1FY19.
Management expects disbursements to increase by 25% and assets under management by 15-16% during FY19. He expects NIMs to be stable and credit costs to fall to 1.5% by Q4FY19.