Magma Fincorp scaling down exposure to tractor loans

Kolkata-based Magma Fincorp has seen month-on-month disbursements under tractor lending drop to 15 per cent, compared to 25 per cent in the same period last year.

This is in line with the NBFC’s plans to de-risk its portfolio by scaling down exposure in the “more volatile” tractor lending business and broad-base its loan book.

According to Kaushik Banerjee, President and CEO, Asset Finance, Magma Fincorp, nearly 28 per cent of its total advances book of ₹11,000 crore (as in FY17) was from tractor loans. Plans are afoot to bring it down to 20-22 per cent of its total lending in a phased manner.

Banerjee said, “Earlier, 25-26 per cent of our disbursements on a monthly basis was driven by tractors. Today, that is down to 15 per cent. Used vehicle finance, which accounted for 15-20 per cent of our monthly disbursements, has now gone up to 35-40 per cent.”

This shift in disbursement pattern may not immediately reflect in the portfolio composition as there is likely to be a lag effect. However, the share of tractors and cars to the overall assets under management (AUM) is likely to come down by 2-3 percentage points in the near term.

Magma’s lending portfolio, which was more skewed towards tractors and cars, would be revamped with a focus on commercial vehicles and used vehicle (cars and construction equipment) finance.

Though there is no wilful default, tractor loan repayments, which are linked to crop cycle, are more volatile in nature.

“With 28 per cent of my assets lying in tractors, the risk is fairly high,” he said, justifying Magma’s move to reduce its exposure to the sector.