Asset finance company Magma Fincorp wants to pare its tractor loan portfolio and focus on growing the used and commercial vehicle loans business faster, as part of an overall strategy to return to a path of healthy growth.
The plan is to reduce the share of tractor loans from the existing 27% of the portfolio to 20% in three years, president and CEO (Asset Finance) Kaushik Banerjee said here on Wednesday.
Tractor loans
The company will continue to disburse tractor loans since there is good growth potential in the segment, he said. The decision to trim is to ensure against over dependence on a single product. Of the asset finance portfolio of ₹11,500 crore, the share of car loans was 35%, while commercial vehicles and used vehicle loans accounted for 8% and about 24% respectively.
Tractor loan repayment, unlike that of a car, is dependent on various factors such as a good monsoon and farm yield. The repayment is only twice a year.
Mr. Banerjee, in an interaction with reporters, said other measures being taken by the company to rein in NPAs include deploying predictive tools, an independent team of managers to monitor the quality of loan, engaging a credit bureau to map portfolio behaviour.
The measures come in the wake of the company having sold ₹678 crore of NPAs and having taken a hit on its bottomline last fiscal. Post the cleaning of the balance sheet, the company was left with NPAs that were only 7-8 months old. The situation with regard to bad loans was improving, he said, adding that the collection efficiency was better now.
The latest annual report of the company said several initiatives had been introduced in the areas of business origination, underwriting, receivable management and hygiene and efficiency enhancement.
The performance in 2017-18, Mr. Banerjee said, was expected to be better. Asset finance disbursements were expected to increase 25% to ₹6,000 crore.
The net interest margin this fiscal was expected to be around 7.5%, similar to last year, he said.