Magma Fincorp slows down tractor finance in North Karnataka

 Hit by severe drought in North Karnataka, Kolkata-headquartered asset financing company Magma Fincorp is keen to be very selective and has exited in certain markets for lending tractor finance, a top NBFC company executive said.

Magma Fincorp Business Head (South) Dhrubashish Bhattacharya said, “The drought in Karnataka is very unfortunate, and it is not the first time, but for the second consecutive year it has struck, especially in Northern and Central Karnataka.”

“For us, it has impacted tractor finance, which is purely linked to farmers. We have become very cautious in lending the tractor finance,” Bhattacharya said, adding, “We are very selective in certain markets, and have exited those areas, which are drought-prone.”

Sectors like used segment (new and used cars, commercial vehicles) and tractor finance are the growth drivers for the company.

Bhattacharya explained, “We have scaled down our tractor lending finance and moved to the other markets to South Karnataka, where there are irrigation facilities, while the finance is open for other products like auto, commercial vehicles, SMEs, and affordable housing. Our tractor finance business has gone down in Davangere, Hubballi-Dharwad, Sindanur, Raichur and Kalaburagi.”

For Magma, the tractor finance accounts for 18.7% business pan-India of Rs 18,521 crore book size as on December 31, 2015. In Karnataka, close to Rs 45.12 crore (total disbursement of Rs 690 crore in FY2015) accounts for tractor finance.

The company which embarked its journey in 1989, has a customer base of 6 lakh and employs over 9,600 staff. It has presence in 228 branches with an annual disbursement of Rs 8,788 crore in FY2015. In Karnataka, it has 11 branches with 381 employees.

Magma Fincorp follows conservative NPA recognition policy at four months (120 days pass due) default, instead of the RBI requirement of six months. He said, “Normally, a writeoffs is done in 180 dpd, however Magma is advancing to 120 dpd.”

“According to the Usha Thorat Committee report, by FY-18, all NBFCs have to move to 90-plus dpd. That is a step down approach, we have already advanced it,” he added.
In 2015, Magma has raised Rs 500 crore from new and existing investors to drive growth.