Magma Fincorp Prioritising Profitable Assets Over AUM Growth, For Now
Pedestrians walk past the Bombay Stock Exchange in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Magma Fincorp Prioritising Profitable Assets Over AUM Growth, For Now

Magma Fincorp Ltd. is now focusing on its more profitable assets, even if it means not growing its assets under management, at a time when non-bank lenders have turned cautious amid a prolonged slowdown.

“These are the times when we’re prioritising very sharply on where the profitability in the long run is,” said Manish Jaiswal, managing director and chief executive officer (housing finance and sme business) of the financial services provider.

“We have recalibrated our disbursements more towards secure and profitable asset classes,” he said, adding that the company will not be betting on riskier assets such as commercial vehicles.

NBFCs have been reeling under a liquidity crunch since September 2018, when a subsidiary of Infrastructure Leasing & Financial Services Ltd. defaulted on its debt, roiling the markets and triggering an industry-wide credit squeeze. Credit dried up for such lenders after investors turned wary about their ability to refinance debt.

Magma’s profit for the three months through September fell 61.4 percent year-on-year due to elevated credit costs in the quarter, brokerage Emkay Research said in a note.

“Disbursements fell 53.9 percent year-on-year, whereas AUM remained flat year-on-year,” Jaiswal said.

“As a firm, we were at a GNPA (gross non-performing assets) of 6.4 percent by the end of last quarter. We believe that a stable range for us is around 5-5.5 percent,” he said. “We believe we will get there based on the kind and quality of collections, without any growth in AUM.”

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