Magma Fincorp Q3 net up by 174% aided by new accounting

Moneycontrol Bureau

Aided by a new accounting practice and higher interest income, Kolkata-based Magma Fincorp on Thursday reported nearly three-fold jump in its third quarter (October-December) net profit to Rs 38 crore in 2012-13.

"We have changed our accounting policy since April, 2012 while reducing the share of securitized portfolio in our total loan book," V Lakshmi Narasimhan, CFO of Magma Fincorp told moneycontrol.com.

"Now, we are amortizing the income from securitized assets over six quarters. Hence, it is adding to our bottom line. Besides, we are experiencing strong loan growth. We have recently acquired the home loan portfolio GE Capital India for Rs.1,600 crore. Our disbursements grew 20% y-o-y to Rs 2,300 crore. We see lot of potential in the home loan market," he said.

As on December 31, 2012; the asset under management stood at 16,012 crore, up 35% y-o-y. A majority of the book to the tune of 93% comes from the earning assets (its own disbursements). Earlier, the company used to sell its own portfolios to banks (technically called securitization) and thereby earn one-off income. Since April, 2012; Magma decided to amortize any such income over six quarters. Currently, unearned income out of securitization forms around 7% of the book.

A healthy expansion in loans helped the non-banking finance company (NBFC) to register a net interest margin at 5.43%, an improvement of 52 basis points from a year ago. Other income too zoomed 325% y-o-y to Rs 22 crore.

The company board on Thursday passed a resolution to raise Rs 500 crore equity capital. However, Magma is yet to finalise the mode of fund raising.

On asset quality front, it decided to tighten the noose.  The NBFC will recognize its non-performing assets after 120 days of stop-repayment instead of 180 days earlier. It has also increased the provisions against standard assets to 0.30% as against at 0.25%.

"We have made those changes in conformity with the proposed guidelines by Usha Thorat committee," said the CFO.

Magma's provisions for NPAs more than doubled to Rs 17.30 crore compared with Rs 7 crore a year back. Provisions for standard assets rose to Rs 5 crore as against Rs 2.54 crore.

saikat.das@network18online.com