PE-backed Magma Fincorp joins race for banking licence

Magma Fincorp Ltd, a non-banking financial company (NBFC) backed by Kohlberg Kravis Roberts (KKR) and World Bank’s arm International Finance Corporation (IFC), has announced its intention to apply for a banking licence. Magma is among a few NBFCs that have diversified portfolios.

The NBFC’s presence is largely in rural and semi-rural areas, which, according to the firm, offer good business opportunities for it to become a bank.

The company, which began its operation 25 years ago, has become a well-diversified NBFC with nine product offerings through acquisitions and joint ventures.

In FY13, the firm forayed into housing finance by acquiring the home equity loans portfolio of GE Money Housing Finance, an affiliate of GE Capital India, and also formed a JV for general insurance with Germany’s HDI General Insurance. Besides, it acquired the Rs 250 crore auto lease business portfolio of Religare Finvest, a subsidiary of Religare Enterprises Ltd (REL), in February 2013.

The firm’s revenues rose last financial year, primarily due to growth from its commercial vehicle business and improved spreads, and through acquisitions of new product portfolios.

The company reported a 54 per cent growth in revenue in the quarter ended March 31, 2013, and a 58 per cent growth for the year at Rs 1,701 crore.

Its overall business increased to Rs 10,387 crore, up 40 per cent in FY13, on the back of incremental disbursement and acquisition of the home equity loans portfolio of GE Money.

“We are now present in nine product categories and with over 80 per cent of our branches in Tier III cities, we have a lot of scope of cross-selling and improving our business in FY14,” said Sanjay Chamria, vice chairman and managing director, Magma, during an earlier interaction with VCCircle. He said the company’s business would see a 20 per cent growth in FY14.

The Reserve Bank of India (RBI) has proposed an 18-month window from the date of in-principle approval to commence banking operations. Magma said the proposed time window would provide sufficient opportunity for the company to make a transition to a bank with minimum disruption in its normal business.

(Edited by Joby Puthuparampil Johnson)

Leave Your Comment(s)