“W ith 170 branches we are well placed to address the entire market segment,” says Sumit Mukerjee, VP, Magma Fincorp, in an interview with Equipment India. Excerpts from the interview.
After a tough last year, the CE industry seems to be back on track this fiscal. How does the vibrancy in the market reflect in the financing segment? And where is Magma placed in this evolving scenario? Financing has definitely picked up and we seeing a growth of 20 per cent over last year already. We are yet to touch the peak levels of 2007-08 however the industry expects to end the 4th quarter on a high and continue the growth story in 2011-12. Magma is present across segments, ie, from first time buyers to strategic customers and across geographies. We are thus extremely well placed to take advantage of the growth expected and clock high numbers in the coming months.
How did Magma perform in the last two quarters and where does it see itself ending this fiscal? Magma has been on a growth curve since August 2009 and during the first half of the current fiscal, the company’s disbursements in all products have grown over 30 per cent. The company is quite hopeful of maintaining the momentum and end the year on a high note.
Which are the major verticals Magma expect more business from? We expect roads and mining to be the major drivers of our business in this fiscal as well as the next fiscal.
Is there a move towards more affordable financing systems with more value add-ons? The industry has already moved towards it with AMC and registration cost being added to the price of the asset. However there is much that can be done on this, but it would take some more time for the process to evolve.
Given the fact that 80 per cent of the customers are micro, small and medium enterprise players; to what extent has Magma tailor-made the financing packages so as to end up with minimum NPAs? We have a structured lending programme with a well defined customer selection criteria and offerings for each distinct segment. This selection criteria has evolved over a period of time and gets further defined with lessons learnt and change in external environment. All customers from the first time buyer to SMEs, Mid tier and strategic, would need to pass through these filters, which enables us to offer packages as per the customers size and thus keeps our NPA within acceptable loss norms.
As the competition is getting tougher how do you differentiate your product offerings from the rest of the players? In a commodity scenario the differentiator will be speed of service and reach. With 170 branches we are well placed to address the entire market segment. Our success has been largely due to a combination of factors like speed, superior customer support and deeper reach and we believe these will continue to yield results for us.
What are the major challenges and your suggestions to iron those out? The growth that we are seeing in the industry is only the tip of the iceberg, structural bottlenecks are slowing down growth. For example the desire to execute 20 km of roads a day is nowhere near reality. I would suggest that the government set up one window clearance for projects. This I am sure would substantially speed up project execution.
What is the size of the market and the growth expected? Our estimate is that the market size is around Rs 20,000 crore. We are expecting a 20 per cent growth this year and 30 per cent next year.
How do you look at the potential of used equipment market? What are the services offered by Magma in this segment? The potential is good with refinance enabling existing operators to trade in their old equipment for new ones. With multiple projects being available, it enables the end user to deploy the right kind of equipment. For example a time bound project execution would work to be done in two shifts. The requirement for such a work would be new equipment whereas a small canal works in a rural area with sufficient execution time in hand can be done more economically by used equipment. The rates for such jobs would differ and hence capitalisation cost would need to be different for the EMI outflow to match the project inflow.
Are there any new product offerings to customers during the bC India? Our existing bouquet of offerings are comprehensive enough; ie we offer new equipment financing, used and refinance, letter of credits etc which would meet the requirement of our customers.