Magma Fincorp hopeful of getting insurance licence next year

Mumbai: The Kolkata-based retail finance player Magma Fincorp is hopeful of getting general insurance licence in the first half of the next year.
"We have already received R1 from Irda. Hopefully, R2 will be granted in the current fiscal and the final approval is likely in first half of the next year," Magma Fincorp Chief Financial Officer V Lakshmi Narasimhan said.

A company goes through three stages of approval before entering into general insurance business.
In the first stage or R1, Irda assesses the promoters and in the second stage or R2, the sectoral regulator investigates the business model of the company. In the final stage or R3, the watchdog checks into the constitution of the company.

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The non-banking finance company (NBFC) and its promoters Celica Developers have entered into a joint venture with Germany's HDI Gerling to form Magma HDI General Insurance company. While domestic partners hold 37% each in the company, HDI Gerling has 26% interest in the venture.

Referring to growth in advances in the current fiscal, Narasimhan said the NBFC would stick to its earlier guidance of around 50% growth in disbursement in FY12.

"While our growth in disbursements was around 37% in the first half of the current fiscal, we hope to grow around 55% in the second half," he said, adding that Magma expects to disburse around Rs 8,000 crore this fiscal.
Magma disbursed Rs 5,415 crore loan last financial year across segments like commercial vehicles, cars and utility vehicles, construction equipment, tractor and SMEs.

"While growth in commercial vehicle has been flat in the past two months, it is reasonable in the construction equipment finance segment. Tractor finance, car and utility vehicle segments are doing well," he said.
Narasimhan expects an increase in margins in the current fiscal. "Despite rise in interest rates, we will be able to improve our margins to around 4.6% from 4.4% in the first half of this fiscal due to higher yields in advances."
While the cost of borrowing of the company is around 10.4%, yield on its advances has been hovering at 15.2-15.6% in the recent months, he added.

The firm is also looking at entering the gold and home finance segments in the near future.
"We have an enabling resolution to enter into gold and home finance business. We are working on the blueprint of this business internally, which will be finalised in the next three-four months," he said.
Magma reported a drop of around 19% in its net profit to Rs 21 crore for the quarter ended September against Rs 26 crore in the year-ago period.

While disbursements grew by 37% to Rs 1,558 crore, interest income rose 27% to Rs 252 crore during the second quarter of the current financial year.