Magma Leasing - Initiating Coverage

Magma Leasing - Growth Ahead

Magma Leasing Ltd, a retail finance company, is planning to expand into new product categories across different geographies. Competing in the over Rs 50,000 crore car and commercial vehicle retail finance segment, Magma has set focus on the used commercial vehicle finance and strategic construction equipment finance to drive its major business this fiscal.

The company, which has 67 branches, will be expanding into Maharashtra and Gujarat in a big way, by opening up its branches in these states this year. Thereafter, it will expand into the southern states. Plans are afoot to open up 15-odd branches. Also into fee-based business, Magma will be looking at increasing its portfolio of fee-based income, including insurance and personal loans.

“The target is to reach Rs 2,500 crore of lending in the current financial year. We estimate to finance Rs 700-800 crore for commercial vehicles and used vehicles. We are betting big on the strategic construction equipment finance market, where the potential is huge,” Sanjay Chamria, managing director, Magma Leasing, said.

Magma, which declared its year-end results on Friday, saw a 44% increase in its net profit at Rs 20.17 crore and it registered a 31% rise in profit before tax at Rs 30.58 crore in 2005-06. It registered a 54% increase in its net income at Rs 151.58 crore. Total assets of the company touched Rs 3,300 crore as on March 31, 2006. Almost 70% of the company’s business came from rural and semi-urban areas. Out of the new loans disbursed in 2005-06, which amounted to Rs 1,820 crore, the eastern and the northern states contributed to 31% and 45% respectively.

“Going against the sluggish growth of 8% in car finance, Magma recorded a high growth of 39%, disbursing Rs 451 crore in 2005-06. This came largely from financing in semi-urban and rural areas and mainly in the multi utility vehicle category, which comprises almost 35% of our total car finance portfolio,” Chamria said. “Used commercial vehicles is a new area and we already have set in place a dedicated team for this segment. Out of Rs 104 crore in this category, we did Rs 55 crore of financing in the last quarter,” he added.

Those who are not averse to taking risk can buy at Rs.165 now with a one year target of Rs. 230.