Magma has a portfolio of nine products across asset finance, business finance and mortgage finance. The maximum exposure in a single product is capped at 30% thus ensuring that product specific risks are minimized. This diversified mix also allows Magma to calibrate its growth strategy with market realities and switch focus across products whenever required.
UNDERBANKED CUSTOMER BASE
Magma has espoused the policy of financial inclusion by focusing on customers who are left out of the banking network. Magma prefers to finance customers who do not have adequate documentation, credit history and hence are perceived as a high-risk category by the banking channels. Magma believes that credit worthiness can be evaluated by employing innovative methods that take into account the subjective knowledge gleaned from customer visits and background checks. This provides an opportunity to the customer to start building a credit history and move towards financial inclusion. The low delinquency levels in the loan book demonstrate the success of the methods that Magma employs for credit appraisal.
Magma has a pan India presence spread across 22 states and union territories, which account for more than 90% of India’s population. Magma has ensured that the loan book exposure in a single state is limited to around 10% thus reducing the impact of local and regional risks eg. drought, floods, political instability. An evenly balanced exposure across the four regions is a culmination of the risk mitigation principles that Magma has followed.
CONSERVATIVE ACCOUNTING POLICIES
Magma follows some of the most conservative accounting policies in the NBFC industry. Magma is one of the select few NBFCs to follow a 120 dpd+ NPA recognition policy against the RBI requirement of 180 dpd+. Besides this, the company has opted for higher than mandated provisioning norms on its NPA and provided 30 bps standard assets provisioning. These steps have resulted in Magma creating a pool of significantly higher provisions than is required.
EFFICIENT LIABILITY MANAGEMENT
Magma is one of the few NBFCs which has a truly diversified liability profile encompassing bank lines, capital markets and securitization transactions. Magma has been able to make a successful transition from a profile with a high share of securitization to a profile evenly spread across all three funding channels. This allows Magma the flexibility to balance the channel wide exposure to optimize the benefits of liquidity, cost of funds and maturity