On a consolidated basis, Magma Fincorp reported net loss of Rs 647.72 crore in Q4 FY21, higher than net loss of Rs 35.51 crore in Q4 FY20.
Total income slipped 4.9% to Rs 587.14 crore in Q4 FY21 from Rs 617.62 crore in Q4 FY20. Pre-tax loss stood at Rs 863.58 crore in Q4 FY21, higher than pre-tax loss of Rs 4.11 crore in Q4 FY20.
During the financial year, Magma Fincorp's consolidated net loss stood at Rs 558.96 crore in FY21 compared with net profit of Rs 27.05 crore in FY20. Total revenue slipped 8.20% to Rs 2,352.47 crore in FY21 as against Rs 2,562.87 crore in FY20.
Magma Fincorp had announced a series of leadership changes following the Poonawala-controlled Rising Sun Holdings acquiring controlling stake through an equity infusion of Rs 3,456 crore in May 2021. The board, on Monday, appointed Adar Poonawalla as the chairman and Abhay Bhutada as the managing director (MD) of the company. Vijay Deshwal, a seasoned banker with a track record of over two decades, will take charge as chief executive officer (CEO) at Magma Fincorp from the first week of July. He will also be the group CEO of Poonawalla Group's financial services business.
Magma Fincorp is going to augment the leadership team with the appointment of experienced professionals, set to join by Q2 FY22. As the second wave of COVID-19 is subsiding, the new management is expected to drive business acceleration. The rebranding of the company as a Poonawalla Group firm is underway. The company's cost of funds is expected to fall in line with the industry best, along with resultant improvement in credit rating and progress towards resilience under the Poonawalla brand.
Meanwhile, the company said its balance sheet has been strengthened significantly through the equity infusion, with the Tier- 1 capital adequacy ratio standing at 66.8%, and leverage at 1.3 times as on 15 May 2021. The Mumbai-based NBFC has created capital buffers and opted for aggressive write off policies in line with a bank structure. Magma Fincorp has improved operating performance during FY21 and reported increase in NIMs, reduction in operating expense ratios, reduction in cost of funds. Disbursals have been lower resulting in lower AUM. The company has exited FY21 with a very strong balance sheet and with further capital infusion of Rs 3,456 crore, is adequately capitalised to usher in a period of growth and superior risk-return ratios and RoA and RoE.
The firm introduced 100% provisions and wrote off all accounts in the 90+ DPD (Days Past Due) bucket in the SME lending business, 180+ DPD bucket in the Vehicle Finance business and 730+ DPD bucket in the Affordable Housing Finance business. It also made significant provisions for the COVID-19 second wave applying management overlay, with no lingering impact in FY22. This resulted in Gross Stage III Assets and Net Stage III Assets as on 31 March 2021 declining from 6.4% to 3.7% Y-o-Y (year-on-year) and from 4.2% to 1.2% Y-o-Y respectively. Prudent provisioning led to sharply higher 90+ DPD Provision Coverage Ratio (PCR) going up to 68.6% from 36.5% last year and overall coverage ratio going up to 9.5% from 4.4%, being one of the highest and most conservative in the industry.
Apart from one-time incremental write-off impact of Rs 274 crore, the company has created management overlay provisions of Rs 621 crore, aggregating to a one-time P&L charge of Rs 895 crore. Loss before Tax stood at Rs 749 crore for FY21. The company expects some recoveries from written-off contracts through legal actions taken against the defaulting customers which will flow into income in subsequent quarters. The management is confident that with such provisions buffers and stringent write-off policies, the Company is adequately prepared to deal with the potential impact of COVID-19 second wave in FY22 and these provisions will be reviewed quarterly on the basis of on the ground situation in collections and regulatory forbearance.
Mumbai-based Magma Fincorp is a Mumbai-based non-deposit taking systemically important non-banking finance company (NBFC), is registered with the Reserve Bank of India (RBI). The company is now part of Poonawalla Group with 60% shares owned by Rising Sun Holdings, a company owned and controlled by Adar Poonawalla.
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Shares of Magma Fincorp was locked in a 5% upper circuit of Rs 143.05 on BSE.
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