Eyeing GNPAs below 7%; lower ticket size of LAP seg upto Rs 25 lakh: Magma Fincorp

While most non-banking financial companies (NBFCs) are under pressure, Magma Fincorp seems to be bucking the trend and has gained in trade on back of bullish notes form IIFL and Kotak Securities.

IIFL has initiated coverage with a buy rating on the stock and Kotak has reinitiated coverage with an add rating.

However, according to an ICRA report, loan against property (LAP) might be a concern for NBFCs in terms of NPAs in 2018.

To know what is keeping the stock in the limelight, CNBC-TV18 spoke to Kailash Baheti, CFO, Magma Fincorp.

Talking about the trends in LAP segment, Baheti said the focus is on reducing the large ticket size of around Rs 50 lakh and above to average ticket size of Rs 12 lakh.

In an effort to reduce pressure in LAP segment, going forward as well they would scale up the LAP segment in the ticket size less than Rs 25 lakhs and only a few would be in the above Rs 50 lakh size, said Baheti.

Stress in the LAP segment was mainly seen in the ticket sizes above Rs 50 lakh, he added.

The disbursements in the first quarter was around Rs 40 crore and currently it is around Rs 60-65 crore. They would further scale up with focus on ticket size in zero to Rs 25 lakhs, he said.

Talking about the business outlook, he said with two good monsoons and government investments into rural economy, it augurs well for the company. Tractors sales have risen and will be at all-time high this year, said Baheti.

Moreover, there has been change in aspirations in the rural economy, he said.

He said the target is for gross non-performing assets to be less than 7.2 percent despite moving to 90 days past due (DPD) by end-FY18.

Furthermore, he said all the parameters look positive and so they expect their rating to improve going forward.