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Mr Sanjay Chamria embarked on his journey to set up a business along with his partner, Mr Mayank Poddar, with an initial capital of Rs 25 lakh. Today, nearly three decades later , Mr Chamria’s Magma Fincorp has a networth of Rs 1,102 crore and branches spread across 21 cities. In an exclusive interview with Business Line , Mr Chamria, Vice-Chairman and Managing Director, Magma, talks of the company’s journey and charts out the path for future growth. Excerpts:
Magma, when set up, focused on funding the mid-corporate and SME segments. Today, it is highly retail-centric. What were the reasons for this change?
In our initial days we were lending to the mid-corporate and SME segments. However, soon we witnessed most of these borrowers defaulting on their repayments and we had a tough time recovering funds from them.
While big corporates used their bargaining powers to negotiate for lower rates, the smaller ones typically turned out to be defaulters. So it was a losing proposition from both sides.
In 1995, therefore, we decided to move out of corporate lending and ventured into the retail segment. We first rolled out car loans and then construction equipment loans in 1997. Thereafter, we introduced products such as consumer durables finance, two-wheeler finance and tractor finance one after the other.
By 1999 we recovered most of our money from the defaulting corporates and we redeployed it into growing our retail portfolio.
How did you manage to expand your geographical presence despite being headquartered in Kolkata?
After realigning our business with a focus on the retail segment, we turned our attention towards expanding our footprint.
In 2000, we acquired Delhi-based Consortium Finance Ltd, which helped us grab a share in the northern markets. This company was primarily into financing of jeeps and trucks. So the acquisition also helped us expand our product bouquet.
In early 2007, we acquired Shrachi Infrastructure Finance Ltd, a non-banking retail financing company, with a network in west and south India. North currently accounts for 31 per cent of our total business, while west, south and east account for 29 per cent, 24 per cent and 16 per cent respectively.
How have your disbursements grown? What are your plans for the future?
Our disbursements grew by about 37 per cent in 2011-12. This year, we posted 45 per cent growth in advances during the first quarter, which I feel is an achievement given the current economic scene where growth is muted across various sectors.
We hope to sustain this growth in the future by expanding our product basket by venturing into the general insurance, housing finance and loan against gold businesses.
Do you see any stress on asset quality?
The defaults by the corporate segment in the initial days of our business taught us how to evaluate a loan proposal.
We put in place a robust risk management policy and legal framework for recovery of bad loans. This helped curb our bad debts to just about 0.20 per cent of our total assets under management in 2011-12.
I do not think asset quality will improve any further from here. In fact, there could be some deterioration in asset quality due to the economic conditions.
When is the general insurance business expected to commence its operations?
Our general insurance joint venture — Magma HDI General Insurance Company Ltd — has received all the requisite approvals. We have capitalised it at Rs 208 crore. The management team is in place and we hope to commence operations by October.
What are your plans for the housing finance subsidiary?
Our housing finance subsidiary Magma Housing Finance Ltd should commence operations by the end of December. We have pumped in Rs 10 crore into this subsidiary and have filed an application to the National Housing Bank.
The company will cater to the affordable housing segment with an average ticket size of Rs 15 lakh. We will leverage Magma’s branch network and systems and processes for the housing finance business. We will cater to the home loan requirements of our existing customer base, thereby minimising risks.
How many people do you plan to recruit across these new businesses?
We plan to recruit 1,000-1,500 people for our general insurance business, 1,500 people for our gold loan and another 500 people for the housing finance businesses over the next 1-2 years.
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