Magma FinCorp…Buy/Sell or Forget??

Background

Magma Leasing Limited was incorporated in 1988 and started its operations in 1989[1][2]. After two mergers in 1992 & 2007, in 2008 it was renamed as Magma FinCorp(its current name).

It is a Non-Banking Financial Company(NBFC) headquartered in Kolkata (India) and registered with the Reserve Bank of India(RBI).It is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

Magma Fin Corp offers its services in 21 states through its 154 offices[1][2][12].

Share Holding 

Share Holding Pattern_Magma Finance

Fig 1. Share Holding Pattern (As of March 2017)[6][8]

 

Services

It caters to individual/corporate customers regarding financial products & services[1][2][6][12]:

– Commercial Vehicle Finance

– Construction Equipment

– Car & Utility Vehicle Finance

– Suvidha Loans (Refinance)

– Strategic Construction Equipment Finance

– SME Loans

– Insurance

Major Timeline

2011
Magma FinCorp got R1 approval from IRDA.

‘R1’ is an initial regulatory clearance step required for insurance companies in India[1][2][11].

2012
Magma Fincorp acquired GE Capital India’s Housing Finance & Home Equity Loans Businesses for entry into the affordable & middle-income housing finance sector[1][2][9].

2014
Magma FinCorp launched Tyre Loan for Existing Customers under Magma’s CV and Suvidha business[1[2][10].

2015
It got an investment from Kohlberg Kravis Roberts(KKR), Leapfrog, and Indium V of Rs. 500 crores[1][3].

Indium V is an investment vehicle advised by India Value Fund Advisors (IVFA).

2017
It got merged with its subsidiary Magma ITL Finance Ltd[1][4].

Financials

Last Closing= Rs. 177.90 (On 18th Jan, 2018)

Face Value= Rs.2, EPS= 0.72

P/E = 246.62, P/B = 1.88, ROE = 0.94 (As on Sept’17)

Gross Non Performing Asset (GNPA) = 6.7%(FY 17) v/s 8.1% (FY 16)

1-yr Return = 77.24%

Magma Fincorp_Image

Fig 2. Magma FinCorp performance in the last 1-yr[15]

Conclusion

Magma FinCorp caters to various customers and plans to grow organically & inorganically in FY18 & FY19. With the focus of the Government of India(GOI) on Rural consumption, housing for all and affordable loans, Magma Finance can be pivotal in this play. Though expensive from the current metrics, the NBFC has tried to bring down GNPA and realign its lending book for higher margins.

References:

  1. https://en.wikipedia.org/wiki/Magma_Fincorp
  2. http://profit.ndtv.com/stock/magma-fincorp-ltd_magma
  3. http://www.livemint.com/Companies/3cNmLDpnCtKao8sgZSPiUJ/Magma-Fincorp-gets-Rs500-crore-investment-from-KKR-IVFA-Le.html
  4. http://www.financialexpress.com/market/magma-fincorp-approves-scheme-of-merger-with-magma-itl-fin/926861/
  5. http://www.business-standard.com/article/finance/magma-fincorp-targets-15-growth-in-uttar-pradesh-116092200700_1.html
  6. https://www.valueresearchonline.com/stocks/snapshot.asp?code=6456
  7. https://economictimes.indiatimes.com/magma-fincorp-ltd/stocks/companyid-8917.cms
  8. http://www.moneycontrol.com/india/stockpricequote/finance-leasing-hire-purchase/magmafincorp/MF20
  9. http://www.livemint.com/Companies/HULRhA01HJ8V0NK4ndB0sI/Magma-Fincorp-buys-GE-Capital-Indias-housing-finance-biz.html
  10. https://magma.co.in/magma-launches-tyre-loan-existing-customers-2/
  11. http://www.thehindubusinessline.com/money-and-banking/magma-fincorp-gets-irda-initial-nod-for-general-insurance-biz/article1699340.ece
  12. https://magma.co.in/
  13. http://www.thehindubusinessline.com/money-and-banking/magma-fincorp-sees-improvement-in-npas/article9762268.ece
  14. https://www.indiainfoline.com/article/editorial-interviews-leader-speak/kailash-baheti-cfo-magma-fincorp-117080900567_1.html
  15. https://www.google.co.in/search?q=magma+fincorp+share+price&oq=magma+fincorp+share+price&aqs=chrome..69i57j69i60l3j0l2.10473j0j7&sourceid=chrome&ie=UTF-8
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