ANALYSIS OF LOAN PROCESS AND

DOCUMENTATION AND
COMPETITORS OF MAGMA FINCORP LTD.

A Summer Training Project

Submitted in partial fulfillment of the requirements
for the Award of degree of Master of Business
Administration from
Bharati Vidyapeeth Institute of management
and Entrepreneurship Development,Pune.
2009 – 2010

Submitted by: Guided by:

Shaivya Singh: Ms deepanjali Saxena

CONTENTS

Chapter 1 Introduction

1.1 General introduction about the sector.

1.2 Industry profile.

a. Origin and development of the industry.

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 b. Growth and present status of the industry.

c. Future of the industry.

Chapter 2 Profile of the organisation

2.1 Origin of the organisation.

2.2 Growth and development of the organisation

2.3 Present status of the organisation.

2.4 Functional departments of the organisation

2.5 Organisation structure

2.6 Product and service profile of the organization competitors

2.7 Market profile of the organisation

Chapter 3 Discussions on training

3.1 Student’s work profile (Role and responsibility), tools and techniques used

3.2 Key learning

Chapter 4 study of selected research problem

4.1 Statement of research problem

4.2 Statement of research objectives

Chapter 5 Summary and Conclusions

5.1 Summary of learning experience

Bibliography

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CHAPTER 1

INTRODUCTION

INDUSTRY PROFILE – NON-BANKING FINANCE

Non-banking Financial Companies (NBFCs) play a vital role in the context of Indian Economy. They
are indispensible part in the Indian financial system because they supplement the activities of banks in
terms of deposit mobilization and lending. They

play a very important role by providing finance to activities which are not served by

the organized banking sector. So, most the committees, appointed to investigate into

the activities, have recognized their role and have recognized the need for a well

established and healthy non-banking financial sector.

Non-banking financial companies constitute an important segment of the financial

system. NBFCs are the intermediaries engaged in the business of accepting deposits

and delivering credit. They play very crucial role in channelizing the scare financial

resources to capital formation. NBFCs supplement the role of the banking sector in

meeting the increasing financial need of the corporate sector, delivering credit to the

unorganized sector and to small local borrowers. NBFCs have more flexible structure

than banks. As compared to banks, they can take quick decisions, assume greater risks

and tailor-make their services and charge according to the needs of the clients. Their

flexible structure helps in broadening the market by providing the saver and investor a

bundle of services on a competitive basis.

NBFCs at present providing financial services partly fee based and partly fund based.

Their fee based services include portfolio management, issue management, loan

syndication, merger and acquisition, credit rating etc. their asset based activities

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include venture capital financing, housing finance, equipment leasing, hire purchase

financing factoring etc. In short they are now providing variety of services. NBFCs

differ widely in their ownership: Some are subsidiaries of large Manufacturers (e.g.,

T.V. Motors T.V. Finances and Services Ltd). Many others are owned by banks such

as ICICI Banks, ICICI Securities Ltd, SBI Capital Market Ltd, Muthoot Bankers

Muthoot Financial Services Ltd a key player in Kerala financial services. Other

financial institutions are IFCIs IFCI Financial Services Ltd or IFCI Custodial Services

Ltd (Devdas,2005).

DEFINITION

Non banking Financial Company has been defined as:-

(i) A financial institution, which is a company;

(ii) A non-banking institution, which is a company and which has its principal business the
receiving of deposits under any scheme or lending in any manner.

(iii) Such other non-banking institutions , as the bank may with the previous approval of the
central government and by notification in the official gazette, specify.

NBFCs provide a range of services such as hire purchase finance, equipment lease

finance, loans, and investments. NBFCs have raised large amount of resources

through deposits from public, shareholders, directors, and other companies and

borrowing by issue of non-convertible debentures, and so on.

TYPE OF NBFCs

NBFCs can be classified into different segments depending on the type of activities

they undertake:

1. Hire Purchase Finance Company

2. Investment Company

3. Loan Company

4. Mutual Benefit Finance Company

5. Equipment Leasing Company

6. Residuary Non-banking Company

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7. Miscellaneous non-banking company

8. Housing Finance Company

1. Hire-Purchase Company – It is a company which carries on as its principal

business, hire purchase transaction or the financing of such transactions.

2. Investment Company – It means any company which carries on as its principal

business the acquisition of securities.

3. Loan Company – It is a company which carries on as its principal business, the

providing of finance whether by making loans or advances or otherwise for any

activity other than its own.

4. Mutual Benefit Finance Company – It means any company which is notified by the

central government under section 620A of the Companies Act, 1956.

5. Equipment Leasing Company – It is a company which carries on as its principal

business, the business of leasing of equipments or the financing of such activity.

6. Residuary Non-banking Company – It is a company which receives deposits under

any scheme by way of subscriptions/ contributions and does not fall in any of the

above categories.

7. Miscellaneous Non- banking Company – It is a company which collects from

specified number of subscribers periodically and in turn distributes the same as prizes

amongst them. Any other form of chit is also included in this category.

8. Housing Finance Company – It is a company which carries on as its principal

business, the financing of the acquisition or construction of houses including the

acquisition or development of plots of land for construction of houses.

Factors contributing to the Growth of NBFCs

According to A.C. Shah Committee, a number of factors have contributed to the

growth of NBFCs. Comprehensive regulation of the banking system and absence or

relatively lower degree of regulation over NBFCs has been one of the main reasons

for their growth. During recent years regulation over their activities has been

strengthened, as see a little later.

The merit of non-banking finance companies lies in the higher level of their customer

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orientation. They involve lesser pre or post-section requirements, their services are

marked with simplicity and speed and they provide tailor-made services to their

clients. NBFCs cater to the needs of those borrowers who remain outside the purview

of the commercial banks as a result of the monetary and credit policy of RBI. In

addition, marginally higher rates of interest on deposits offered by NBFCs also attract

a large number of depositors

Regulation of NBFCs

In 1960s, the Reserve Bank made an attempt to regulate NBFCs by issuing directions

to the maximum amount of deposits, the period of deposits and rate of interest they

could offer on the deposits accepted. Norms were laid down regarding maintenance of

certain percentage of liquid assets, creation of reserve funds, and transfer thereto

every year a certain percentage of profit, and so on. These directions and norms were

revised and amended from time to time.

In 1997, the RBI Act was amended and the Reserve Bank was given comprehensive

powers to regulate NBFCs. The amended Act made it mandatory for every NBFC to

obtain a certificate of registration and have minimum net owned funds. Ceilings were

prescribed for acceptance of deposits, capital adequacy, credit rating and net-owned

funds. T he Reserve Bank also developed a comprehensive system to supervise

NBFCs accepting/ holding public deposits. Directions were also issued to the

statutory auditors to report non-compliance with the RBI Act and regulations to the

RBI, Board of Directors and shareholders of the NBFCs.

The Task Force constituted by Government of India under the Chairmanship of Shri

C.M. Vasudev submitted its report on October 28, 1998, after reviewing the existing

regulatory framework for NBFCs. The Govt. of India framed the Financial

Companies Regulation Bill, 2000, to implement the recommendations requiring

statutory changes, as also consolidate the law, relating to NBFCs and unincorporated

bodies with a view to ensuring depositor protection. According to this bill, all NBFCs

will be known as Financial Companies instead of NBFCs.

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Supervision

In order to ensure that NBFCs function on sound lines and avoid excessive risk

taking, the RBI has developed a four pronged supervisory framework based on:

(i) On-site inspection structured on the basis of assessment and evaluation of

CAMELS (Capital, Assets, Management, Earnings, Liquidity, and Systems)

approach.

(ii) Off-site monitoring supported by state-of-the-art technology. It is through periodic

control reports from NBFCs.

(iv) Use of Market Intelligence System.

(v) Exception reports of statutory auditors of NBFCs

The RBI supervises companies not holding public deposits in a limited manner.

Companies with asset size of Rs 100 crore and above are subject to annual inspection

while other non-public deposit companies are supervised by rotation once in every

five years.

Conclusion

NBFCs are gaining momentum in last few decades with wide variety of products and

services. NBFCs collect public funds and provide loan able funds. There has been

significant increase in such companies since 1990s. They are playing a vital role in

the development financial system of our country. The banking sector is financing only

40 per cent to the trading sector and rest is coming from the NBFC and private money

lenders. At the same line 50 per cent of the credit requirement of the manufacturing is

provided by NBFCs. 65 per cent of the private construction activities was also

financed by NBFCs. Now they are also financing second hand vehicles. NBFCs can

play a significant role in channelizing the remittance from abroad to states such as

Gujarat and Kerala.

NBFCs in India have become prominent in a wide range of activities like hire

purchase finance, equipment lease finance, loans, investments, and so on. NBFCs

have greater reach and flexibility in tapping resources. In desperate times, NBFCs

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could survive owing to their aggressive character and customized services. NBFCs are

doing more fee-based business than fund based. They are focusing now on retailing

sector-housing finance, personal loans, and marketing of insurance. Many of the

NBFCs have ventured into the domain of mutual funds and insurance. NBFCs

undertake both life and general insurance business as joint venture participants in

insurance companies. The strong NBFCs have successfully emerged as ‘Financial

Institutions’ in short span of time and are in the process of converting themselves into

‘Financial Super Market’. The NBFCs are taking initiatives to establish a self-

regulatory organization (SRO). At present, NBFCs are represented by the Association

of Leasing and Financial Services (ALFS), Federation of India Hire Purchase

Association (FIHPA) and Equipment Leasing Association of India (ELA). The

Reserve Bank wants these three industry bodies to come together under one roof. The

Reserve Bank has emphasis on formation of SRO Particularly for the benefit of

smaller NBFCs.

Future of the industry

NBFCs are in the news again. The industry is likely to witness the formation of a

giant - by the merger of four leading NBFCs - the Mumbai-based Apple Finance Ltd,

the Chennai-based Apple Credit Corporation, the Calcutta-based Srei International

Finance and Alpic Finance. The new company will have an asset base of Rs.2200

crores, a network of 130 branches and a good reach of over one million investors

across India. The decision was taken as a step to face the challenges and competition

from banks and financial institutions, which the NBFC industry has been facing for

the last few years. The step is also to overcome the stringent laws imposed on the

industry after the CRB Scam.

Apple Finance has assets worth nearly Rs.800 crores and a strong presence in the

West and North. The company is mainly active in the car and truck financing

segment. On the other hand, Apple Credit Corporation is well established in the South

with assets of nearly Rs.450 crores. In the Eastern market is Srei International (Rs.

500 crores asset-base), based in Calcutta. The company mainly services the

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infrastructure leasing and construction equipment leasing segment. And Alpic has

assets worth almost Rs.500 crores and a good hold of the north and west markets. The

company is into car financing and medical equipment leasing.

The most obvious advantage of the merger is the reduction in the costs of servicing

and costs of funding. Moreover, even if the company reduces its margins, it will still

be in a strong position. In towns where more than one of these four companies has an

office, post-merger, only one office will suffice. This will enable considerable

reduction in the cost of operations, which is expected to be around 75 percent.

Presently, each of these companies is lending at least 4-5 points more than the PLR of

banks. Once the alliance is formed, this spread over the PLR could be drastically

reduced.

The combined entity will also be able to cater to many more areas of finance,

considering the expertise each of these companies has in its area of operation. The

new company will also be in a better position to bargain while attracting funds, both

domestic and international, as well as in attracting investors. However, it may take

months before the entire deal is finalized. Approval of the Reserve Bank of India is

required. The companies also need to approach the high court and convene a meeting

to get approval of shareholders and creditors.

While the alliance will do good to each of the companies, where will it leave the

competitors is the question. Today, the NBFCs industry is dominated by Sundaram

Finance, Tata Finance, Reliance Capital and Kotak Mahindra. Sundaram Finance is

the largest Auto Finance company. In the fixed deposits segment, the company has

the largest retail base of deposits. Sundaram has more than 6.64 lakh

depositors with total deposits aggregating over Rs.700 crore.

Kotak Mahindra has an asset base of over Rs.1200 crores and is into trade finance,

asset finance, collateral funding, structured finance and funds syndication. In the

consumer services group, the company is into consumer finance, office equipment

finance, fixed deposits and commercial vehicles finance. In the fixed deposits

business, the company has a retail deposit base of more than Rs.190 crores spread

over 1,32,000 investors. In the commercial vehicle finance business, Kotak has over

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4000 customers.

The new company will definitely be the largest in terms of size. One major threat to

the leaders today. Secondly, the strength of the company will put it in a position to

provide better services to a set of customers, the size of which probably no individual

company can have. And thirdly, the merged company may be able afford lesser

margins on its products, the biggest blow it could give to the existing companies.

Definitely the leaders today need to gear up and make themselves strong enough to

face the challenge before the merger actually happens. The goodwill with their

customers could probably be their biggest asset. More importantly this could become

the trend of the future where the NBFC industry will increasingly look towards

consolidation to survive and thrive in this dog-eat-dog world of finance.

CHAPTER 2 MAGMA FINCORP LIMITED

COMPANY DESCRIPTION

ORIGIN OF THE ORGANISATION

Magma Fincorp Limited (formerly Magma Leasing Limited) was incorporated in

1988 and commenced operations in 1989. To strengthen its business, the company

merged with Arm Group Enterprises in 1992. Magma has emerged one of India's

largest financial services companies during the past five years.

In early 2007, to strengthen its services even more, Shrachi Infrastructure Finance

Ltd. (SIFL), a non-banking retail financing company, merged with Magma to create a

new financial services powerhouse: Magma Shrachi Finance Ltd. On August 2008,

we renamed ourselves as Magma Fincorp.

We are headquartered in Kolkata (India), and registered with the Reserve Bank of

India. We are represented by a qualified team of over 4200 Magmaites.

In response to rapidly evolving demand, we offer individual and corporate customers

a range of financial products and services in:

• Commercial Vehicle Finance

• Construction Equipment Finance

• Car and Utility Vehicle Finance

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 • Suvidha Loans (Refinance)

• Strategic Construction Equipment Finance

• Tractor Finance

• SME Loans

• Insurance

We not only provide a one-stop-shop financing facility to our customers, but also

fulfil the dreams of millions of first-time entrepreneurs, catalysing local economies

and helping the nation grow. We are best recognized for providing an equality of

opportunity to the economically disenfranchised.

We have achieved a CAGR (compounded annual growth rate) of more than 51% over

the last three years.

Our rapid growth does not derive solely from our conscious initiative in growing our

physical infrastructure; it is also owing to careful investments in lasting relationships

with team members, alliance partners, customers and vendors.

By proceeding on these lines, we aim to sustain this growth, thus becoming even more

responsive to the rising needs of a dynamic nation.

Magma started in Eastern India. From modest beginnings, over the years, we have

been able to establish our presence into the interiors of the country, thereby gaining

first-mover advantage, essential for our growth across the length and breadth of India.

We have sustained our momentum by focusing on the under-reached semi-urban and

rural markets. We are proud to be in markets where the overall financial services

industry penetration is low.

Today, we serve 20 states and 1 union territory through 153 offices. Each branch

caters to an area of 40 km radius - down from 125 km just a year ago - translating into

a wider reach and better penetration.

Leaders are our key differentiators. We create engaged leaders through the employee

engagement model based on three key parameters:

Say - feeling good and thus speaking well about the company

Stay - improving the retention of talent and

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Serve - being productive to 'serve' customers efficiently

Over time, we have extended the scope of our people development with a HR

management division whose initiatives include:

Development of a Corporate Scorecard through the metrics unit

We constantly measure performance against targets. In this strategy-based

programme, the scorecard benchmarks performance to targets in finance, customer

satisfaction, internal processes and knowledge. The aim is to cut down formal

decision-making and shrink response time.

'Train the trainer' programme

Our middle managers must be good teachers too. This initiative will create a

knowledge ripple, integrating seamless and successful rollout of custom-made

company programmes.

Training programmes

There is no substitute for up-to-date knowledge. The focused and extensive training

modules cover both functional and behavioural aspects, equipping members with

specialized skills.

'Grow own wood'

Our growth is closely linked to the quantity and quality of our people. We have

launched an effective Management/Executive Trainee scheme to create a leadership

pipeline. The new recruits, especially those joining as management or executive

trainees, undergo rigorous induction and functional training to imbibe the Magma

culture. We also provide adequate career opportunities to all the leadership talent.

Performance assessment

Responsible growth can only come from a fair assessment of performance. Hence, we

have created a performance management system tailored to our organisational

requirements.

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Compensation system

It is not enough to pay employees well; it is important for them to derive a sense of

pride through their compensation. We benchmark our direct remuneration and

perquisite structure with peers in our industry, creating the right package for

recruiting and retaining the best.

Rewards & Recognition

Our monthly R&R acknowledges the best performers across the organisation.

Schemes like Internal Brand Ambassador celebrate success, promote bonding,

encourage healthy competition and motivate employees to perform better.

Internal communication

The better we understand each other, the more informed is our decision-making. To

this end, our intranet makes it easy to access postings and common information.

VISION

MAGMA FINCORP LIMITED’s main vision is to

“To become India's largest retail financing company.”

MISSION

Continue service excellence in retail financing to bring prosperity and happiness

to all.

COMMENT

Our business is not finance. It is nurturing the aspirations of people. People who

dream. Dream with their eyes open. Small dreams. Smallest of small dreams.

We come with a commitment to invest even in your smallest dream; extending a

helping hand. At Magma, we provide finance and freedom to those who wish to rise;

to those who are denied both.

GROWTH AND DEVELOPMENT

In this financial year, Magma increased its branch network to

153 branches, across 20 states and 1 union territory, of which

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77 percent reside in the semi urban and rural markets. Magma

during the year took advantage of rising economy and

increasing credit demand, by providing increased levels of

funding across its branch network.

Magma has in the past entered into agreements with major

manufacturers of cars, commercial vehicles and construction

equipments such as Maruti Suzuki India Limited, Hyundai, GM,

Tata Motors, Telcon and JCB, among others, which provides

Magma access to their respective dealer networks across India.

During the year under review, it entered into agreements with

new manufacturers of various asset classes, such as Mahindra &

Mahindra, Escorts, Ashok Leyland, Volvo Eicher Commercial

Vehicles, Hyundai Construction Equipment India Pvt Ltd, John

Deere and International Car & Motors Ltd, among others.

During the year, Magma focused on increasing the share of

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higher yield products, such as used commercial vehicles, tractors

and SME loans, which were launched in the recent past. These

new products have not only contributed to higher business, but

also to higher margins for disbursements done during the year.

It was due to the above reasons that Magma reported growth

in total disbursements by 24.88 percent during 2009-10.

Magma also further improved its collection performance and its

asset quality in fiscal 2009-10.

Magma’s total disbursements reached Rs. 4,483 cr during FY

2009-10, recording a 24.88 percent growth over Rs. 3,590 cr

achieved during FY 2008-09. Assets under the management

touched an impressive Rs. 9,377 cr as at end-March 2010,

recording an increase of 13.4 percent. Magma's fund-based

product portfolio includes commercial vehicle financing (both

new and used), cars and multi-utility vehicle funding, financing

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of construction equipment and tractor financing. A significant

proportion (approximately 70 percent) of Magma's loan

disbursements qualify as priority sector lending under the RBI

guidelines, underpinning the importance of NBFCs such as

Magma in credit delivery to sectors and customers which are not served to the

fullest extent by the conventional banking

system.

Magma has an installed capacity of 20 numbers of wind turbine

generators (WTGs) (with rated capacity of 17.5 MW) in the

states of Maharashtra, Madhya Pradesh, Karnataka and

Rajasthan, which operated smoothly during the year, adding to

revenue growth.

Keeping in view business growth of the Company needing

capital infusion, in this year, the Company raised perpetual debt

of Rs. 30 cr from banks, qualifying as Tier I capital as per relevant

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RBI guidelines, and unsecured redeemable non-convertible

subordinated debt of Rs. 48 cr in the nature of debentures

qualifying as Tier-2 capital. Capital adequacy as on 31 March

2010 stood at a comfortable 14.93 percent, against the RBI

prescribed norm of 12 percent for non-deposit taking asset

financing companies such as Magma.

Growth Path

1. 1989: Magma Leasing Limited commenced operations

2. 1992: Merged with Arm Group Enterprises to strengthen its business

3. 1996: Entered retail financing business for vehicles and construction equipment

4. 1998: Expansion of retail financing operations in Orissa and Chhattisgarh, thus expansion of
network in East India

5. 1999: Acquisition of Consortium Finance Ltd (CFL); expansion of network across 40

branches in North and East India

6. 2100: Strategic joint financing agreement with Citicorp

7. 2003: Strategic arrangement with ICICI Bank

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 8. 2005: Launched fee-based business - Insurance and Personal loan

9. 2006: Rolled out two new products - Used Vehicle Finance & Strategic Construction
Equipment

10. 25 August 2006: Magma Leasing and Shrachi Infrastructure merger announced; Magma also
entered into a tie-up with Maruti Udyog Limited, the country's largest carmaker, to finance
Maruti cars

11. 2007: Merger and integration of Magma Leasing and Shrachi Finance completed - pan-India
footprint with 160 offices in 20 states and asset base of over Rs 6,400 crore

12. August 2007: Magma Shrachi and International Tractors Limited (ITL) entered into a joint
venture to form Magma ITL Finance Limited

13. August 2008: Underwent a major branding exercise, subsequent to which the company was
renamed Magma Fincorp Limited

14. 2009: Entered into a tie-up with Ashok Leyland for financing of commercial vehicles.

15. 2009: Magma inks JV with German insurer HDI Gerling to enter general insurance business.

16. 2009: Magma owns 7% stake in the newly formed Experian Credit Information Company of
India Pvt Ltd, the Indian Credit Information Company (CIC) arm of the global information
services company, Experian.

PRESENT STATUS

Magma Fincorp Limited is one of the fastest growing retail asset finance company in India.

It has a well-diversified product portfolio comprising Commercial Vehicle Finance, Car &
Utility Vehicle Finance, Construction Equipment Finance, Used Vehicle Finance(Suvidha),
Strategic Construction Equipment Finance, SME Finance and Insurance (throughthird party
arrangement). The Company follows an excellent credit appraisal policy through well-laid
processes, which helps to build up a quality asset base over the years.

With a vision to become India’s Largest Retail Financing Company, Magma continues its

customised services, striving towards excellence in retail financing, garnering prosperity and

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 happiness to all. Magma has implemented several initiatives directed towards building a
strong financial institution with innovative processes and support structures in mission

critical functions like people, technology, customer relationships,branding and internal

control.

FUNCTIONAL DEPARTMENT OF MAGMA

The functional department of magma are as under:-

1. FINANCE AND ACCOUNTS DEPARTMENT – Finance department is

involved in the budgeting and taxation and is also being actively taking part in

the Accounting and Financial decisions of the company.

2. HUMAN RESOURCES DEPARTMENT – HR is responsible to handle the

entire gamut of HR. This department is responsible for the Recruitment as

well as Generalist Profile.

3. MARKETING AND ADVERTISMENT DEPARTMENT – Marketing is

involved in the business development and new product development. It works

for the promising schemes and advertising of the services.

4. ADMINISTRATION DEPARTMENT – The department of administration is

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 liable to manage all the daily functions of the organisation.

5. EDUCATION DEPARTMENT – This department deals with the training

provided to all the staff members and the facilities to be provided in their

Institutes where they provide guidance to their students.

6. CUSTOMER CARE DEPARTMENT – This department deals with how

better the employees satisfy the customer needs and wants and how better the

staff can guide its customer in magma.

The company has a multidivisional structure. Each division of the company has

separate functions to perform. Each department provide training to its future senior

manager in order to meet their objective which ultimately lands up in satisfying its

customer needs and to become the leader in India.

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SERVICES PROFILE OF THE ORGANISATION

Magma makes it possible to finance all kinds of dreams.

Those who dream of owning passenger cars, utility vehicles and commercial vehicles, utilising the
company’s single-stop financing service in the automobile sector. Those who dream of owning
construction equipment (retail and institutional) and participating in the country’s infrastructure
growth. Those who dream of owning used commercial vehicles that are affordable and just right for
small businesses (using the Company’s Suvidha loans scheme).

What makes Magma a preferred financing company is our mix of competitive rates, immediate service,
customer proximity and a wide asset portfolio. We strengthened our rural presence through the
extension to the tractor financing segment.

Over the years, we have introduced insurance products, strengthening our one-stop service proposition.
We just don’t offer customers a product basket to select from; we comprehend customer needs and
advise them in the right product selection.

1. Commercial vehicle finance

• Magma is a prominent player in commercial vehicle finance in each of the states in which it
operates

• Our primary focus is on financing first-time buyers and first-time users owning 0-5 vehicles

• Our large geographical coverage is marked by a hub-and-spoke approach through an array of

regional, branch and pocket offices

• We enjoy an unbroken record of 'customer satisfaction throughout the loan period': We are
proud to have created a sense of entrepreneurship among our hirers

• We pre-fund our commercial vehicle dealers to accelerate the delivery of vehicles to our
customers

• We participate directly in the promotional activities of our dealers and manufacturers,

resulting in a greater acceptance by them

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 • We have forged alliances with automobile giants like Tata Motors, Mahindra & Mahindra,
Ashok Leyland, Volvo, Eicher Motors and others, enhancing our access to the large nationally
dispersed customer base

2. Passenger car finance

• In this segment, Magma's primary focus lies in servicing the growing, yet under-penetrated,
semi-urban and rural markets through a chain of regional offices, branch offices and pocket
offices

• We provide loans to customers with or without proof of income, through our 'Income Proof'
and 'Non-Income Proof' schemes, extending our service to a wide range of customers

• Exchange schemes, where we buy old cars at attractive prices and finance new cars at
customer-friendly terms, lead to high levels of customer satisfaction

• Marketing executives directly meet each customer before closing a deal, bringing in a greater
transparency into the transaction

• The 'lead-only' channel networking results in the early identification and fulfilment of
customer needs, helping us emerge as a market leader in the semi-urban and rural segment

• Vertical segregation of sales, credit and collection functions has helped us achieve a rapid
turnaround time in customer service

• Low down payment, competitive rates and doorstep service have made us a force to reckon
with

• Attractive schemes for commercial use of cars and multi-utility vehicles have helped many
unemployed youth evolve into entrepreneurs

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 • Promotional activity among dealers and manufacturers as well as a pre-funding provision for
dealers are among our strengths

2. Construction equipment finance

• We finance construction equipment in the retail segment

• Our financing to first-time buyers and small customers has helped a number of plant
hirers become entrepreneurs in their own right

• In our category, we have the shortest turnaround time in financing assets to

customers

• Magma has entered into tie-ups with Telcon and JCB and works closely with L&T,
Ace, Caterpillar, Volvo and others others to attain market leadership in the areas
where we are present

• Marketing executives trained on products and projects assist hirers take the right
decision

• Tailor-made and innovative schemes help customers buy equipment without putting
pressure on their cash flows

• LC facilities for import and export of various kinds of equipment help customers take
up large projects in India and abroad

3. Suvidha (Refinance)

• Owning a used vehicle can be a simple, easy and reliable experience with Magma Suvidha
loans

• Loans are available on all makes of used commercial vehicles, with most attractive interest
rates and tailor made schemes

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• Simple documentation and quick turnaround time ensure convenience of prospective
customers

• Magma nurtures long-term relationships with its customers, even advising them on the choice
of appropriate vehicles that suit their business and personal requirements

4. Tractor Finance

• Magma extended its activities to the financing of tractors in 2007-08

• We provide secured tractor finance for agricultural and commercial use (hiring tractors for
commercial transportation of goods in agricultural areas)

• The new service provides funding to the farming community all over the country for purchase
of M&M, TAFE, John Deere, New Holland, ITL etc. brand of tractors and other equipment
which they need for agriculture and allied purpose

• This opportunity leverages the established distribution and dealer network of the major
manufacturers and facilitate the cross-sale of other financial products such as insurance and
loans for all types of farm equipment

• The product is in line with Magma's focus on rural markets

5. SME Loans

• Magma helps in fulfilling Small and Medium Enterprise (SME) customers' business
needs through unsecured loans upto 50 lacs.

• We are geographically well covered in 21 locations

• We focus and service the customer needs for working capital, business expansion and
business maintenance

24
 • Our customer selection approach is decentralized and totally personalized. We ensure
each customer is personally met by Magma Managers

6. Insurance

• Magma introduced insurance products, strengthening its one-stop service proposition

• We have a third party distribution system in the insurance segment and provide the service to
existing customers of asset finance business

• Non-captive business in insurance distribution is provided through the distribution of policies

to customers not financed by Magma

• A dedicated sales team has been created to drive this business

• There is a low claim ratio on insurance business originated by Magma, due to the company’s
robust credit screening processes

• We have introduced a new life insurance policy – Credit Shield – for existing customers,
covering the loan value in the unfortunate event of the customer’s death or permanent
disability

• We just don’t offer customers a product basket to select from; we comprehend customer needs
and advise them in the right insurance product selection

MARKET PROFILE OF MAGMA

Magma Fincorp Limited ("Magma") is a non-deposit taking non-banking finance company (NBFC),
registered with the Reserve Bank of India (RBI) as an Asset Finance Company. The Company, having
started operations over two decades back, is listed on the Bombay Stock Exchange Limited and the
National Stock Exchange in India.

25
Magma provides a bouquet of financial products including financing of Utility Vehicles & Cars,
Commercial Vehicles, Construction Equipments, Tractors and SME Loans. Magma has a dedicated
base of over 2.5 lac customers and has assets of approximately INR 9390 crores under management.
The company has 153 branches in 20 states and 1 union territory and employs about 4400 people.

Magma has recently signed a joint venture with HDI Gerling, part of Talanx Group, Germany's third
largest insurance group to start a general insurance company in India. The new company will be head
quartered in Kolkata. The new insurance company since has obtained Reserve Bank of India approval
and is currently awaiting the Insurance regulator IRDA approval for commencement of operations

COMPETITION INFORMATION
• Intec Capital, a financial arm of INTEC GROUP of companies, is at the
forefront of financial innovation, customized solutions and strong investor
relationships.
• 1.8.1 Facts about Intec Capital
- Established in year 1994
- Focused on funding SME for capital assets
- Covered entire NCR, a hub for SME
- Listed in the year 1995 on DSE and BSE
- Independent Board of Directors
- Manpower 70- qualified and experienced people
- Strong Business Practice
- Higher capital adequacy and low gearing
• 1.8.2 Intec Capital- unique in market space
- Dedicated Non-Banking Financial Institution for SME
- Strong understanding for SME Sector
- Asset backed commercial assets funding
- Robust credit assessment process

26
- Association with machine manufacturers
- Low Non Performing Asset (NPA) track record
- Financing first time user
- ISO 9001-2000 certified
• 1.8.3 Sector Financed- There are several sectors that Intec Capital
provide financing for. These are:
9
- Manufacturing Sector
• Auto Ancillaries (Maruti, Honda, Yamaha, Toyota, GM etc)
• Printing, Packaging and Lamination (LG, Philips, Moser
Baer, etc)
• Textile and Fabrication (Satyapaul, GIVO, TSG, KKK
textiles, Shivalik etc)
• OEM (Samsung, Aircon, Sukam, Xerox etc)
• Casting and Forging (Ancillaries to BHEL, TELCO, Swaraj,
Mazda, Maruti, Honda Siel etc)
• Pharmaceuticals (Dhanuka Labs, Siamond Pharma, Baksons)
- Export Sector
• Auto Parts
• Leather
• Medical
• Garments
• Home Furnishing
• 1.8.4 Core Strengths of Intec Capital
- Intec Capital is committed to maintain the highest level of ethical
standards, professional integrity, corporate governance and regulatory
compliance.
• Customer Focus
• Diversified product profile to suit all segment
• Unsecured funding (Document Based)
• Flexible Repayment Period
• Transaction Transparency
• Customized Finance Scheme
• Product Leadership
• Niche funding
• Assets justifying requirements vis-à-vis indust
• Strong and committed supplier tie-ups
• People Management
• Total top management industry experience
• Friendly work environment
• Negligible employee turnover
• Industry’s amongst best empowerment policy
• The objective of Intec Capital Ltd is to build sound customer franchises
across distinct businesses so as to be the preferred provider of financial
services to target retail and small medium enterprises (SME’s) segments, and
to achieve healthy growth in profitability, consistent with the companies risk
appetite
• Intec Capital has developed significant expertise in retail loans to different
market segments and also has a large corporate client base for its Capital
expansion related credit facilities. With its experience in the financial markets,
a strong market reputation, large customer base and unique disbursement
process. INTEC has ideally positioned itself to promote “an institution with
a difference” in the Indian environment.
• 1.8.5 Future Plans
- Increasing market penetration
- Exploring new geography
- Diversify in products offering

27
- Adding new asset class
- Advisory services
- Improved method of turn around and risk assessment
- Build robust organization to serve SME
• Strong Business Practice
- Industrial verification before login
11
- Strong financial and ratio analysis
- Backward fund flow integration
- Analyzing customer and product growth
- Resale ability of asset
- Detailed field verification
- Client Meeting
SWOT Analysis
• Strengths
o Door step service to various manufacturing companies
 Intec Capital has been following strong customer-oriented
methodology by contacting the potential customer in the market
that would be adding as approved file.
o Quick financing in limited amount of time i.e. (turn-around time)
 After acquiring the right client, the company possesses a quick
client verification process, swift banking verification and credit
analysis and providing quick financing solutions to the required
clients.
o Transparent financing system
 The company keeps a transparent financing system which
attracts a lot of potential clients in the market.
• Weakness
o Higher amount of interest rates imposed by the RBI
 The Reserve Bank of India has imposed 12.5% interest rate on
Non-Banking Financing Companies who are currently
financing in different SME Sector.
o Few coverage of sectors
 Intec Capital has limited coverage in few high growing sectors
such as manufacturing sector and export sector.
• Opportunities
o A high amount of un-served service sector in India
 As the service sector is uncovered, Intec Capital can try to
penetrate service sector which is currently growing sector in
India.
o Uncovered robust growing states such as Punjab, Haryana
 The growing industrial states Punjab and Haryana have become
a hotspot for various activities. Intec Capital can enhance their
market coverage by covering high growing industrial sector.
• Threats
o High level of competition with huge firms
 Intec Capital faces a huge competition with firms such as
Magma FinCorp, Srei Infrastructure Finance which are
covering rural and semi-urban sector and has diversified
portfolios
o Frequently changing government policies
 The government doesn’t have flexible policies regarding NBFC
who are financing SME Sector. This creates high level of
insecurity among different NBFC’s and makes them unsure of
future events
• SREI Infrastructure Finance Ltd (SREI)
Srei Infrastructure Finance Ltd (SREI) was initially incorporated as Sri Radha
Krishna Export Industries Ltd in March 1985. The name was changed first in
April 1994 to SREI International Finance Ltd to reflect its focus on financial

28
services and then again in 2005 it changed its name to SREI Infrastructure
Finance Ltd to reflect its focus on infrastructure sector.
The core services of SREI (accounting for around 95% of consolidated revenues)
involve the financing of, both new and used, infrastructure equipment,
infrastructure projects, and renewable energy. The services provided by
subsidiary
companies account for balance of SREI’s consolidated revenues and capital
market services, insurance broking and venture capital.
The company headquarters are in Kolkata, and it operates directly from 8 regional
offices and 29 branch/field office throughout India
• SREI’s Business Areas
o Infrastructure Finance: This division is engaged in leasing and hire
purchases of infrastructure, construction equipment and machines to
various construction companies and small and medium scale
enterprises engaged in civil and mechanical construction. This division
also provides asset insurance services, equipment rental, deposit and
maintenance services and asset valuation and disposal services
o Infrastructure Project: This division of company finances various
development projects such as bridges, approach roads, bypasses and
roads, independent power projects etc.
o Advisory Services: This division of company provides project
advisory, investment banking and insurance services
• SREI Credit Strengths
o Superior market and product knowledge and strong customer base
helps the company in credit risk assessment and recoveries to maintain
credit losses at low level. Integrated value chain gives SREI an option
to deploy/dispose of the repossessed assets to reduce the severity of
losses.
o It has well entrenched Pan India and a buoyant market to ensure ample
business volumes for the company at higher yields.
o It has well spread geographical disbursements across the four regions
over India.
o It has a track record in reporting superior earnings on the strength of
securitization income and low credit losses.
RESEARCH
METHODOLOGY
Research Methodology may be a description of process, or may be expanded
to include a philosophically coherent collection of theories, concepts or ideas as
they relate to a particular discipline or field of inquiry. It may refer to nothing
more than a simple set of methods or procedures, or it may refer to the rationale
and the philosophical assumptions that underlie a particular study relative to the
scientific method.
In the competitive analysis of Intec Capital with two peer companies, the type of
research method that was involved was “Exploratory Research”. I selected
Exploratory Research as this project was providing insight on how Intec Capital
would improve against market leaders in asset-financing.
Exploratory research is a type of research conducted because a problem has
not been clearly defined. Exploratory research helps determine the best research
design, data collection method and selection of subjects. Given its fundamental
nature, exploratory research often concludes that a perceived problem does not
actually exist. The reason for selecting Exploratory Research was the use of
secondary research. The data collection in this analysis has been secondary data
with the help of different
websites, company’s websites, and various online articles by financial advisors
etc. The results of exploratory research are not usually useful for decision-making
by themselves, but they can provide significant insight into a given situation.
This type of research methodology has been of great use to data collection and
information gathering to collectively put in the project. The use of secondary

29
research contributed in selecting the two peer companies and then in gathering
the required
information about them.
This type of study required to go step by step in collecting information. So, with
the guidance of university guide and corporate mentor, I formulated the details or
points to keep in mind while researching, collecting data and information.
The details of the study to be carried out are given below:
• The project requires first to research different NBFC (Non-Banking Financial
Corporation)
• After selecting two corporations, I need to first go through their strategies,
geographical market coverage, financial data
• Then after using websites and other materials, I need to go through their
process by viewing their balance sheets, profit/loss accounts and their listed
documents.
• Then, the financial data of MAGMA FINCORP needs to be compared with the
selected competitors.
• After analyzing the case, I need to come up with some suggestions and
recommendations that would be useful to the company
• The suggestions/recommendations can consist of strategy differences or the
market captured, amount of time taken to process the loan sanction
• Objectives of the study
- This project objective is to get overall knowledge about the MAGMA LTD and its
main competitors in the market.
- The project would give in detail explanation of the credit process and
market coverage of the company
- At the end of the project, I would be able to get knowledge about asset
financing which is really profitable in long run and for my
specialization in finance area.
- The core area of this project is that to get in detail regarding how the
company is financing its clients, range of assets coverage, financing
limits, geographical market coverage and key business strategies.
Managerial Usefulness of Study
• The study contains “Competitive Analysis” which means covering all the
financial data such as Balance Sheets, Income Statements etc. These type of
data helps to understand of using them in the analysis by examining various
profit indicators, firm’s strategies, market opinion of various finance agencies
etc.
• It is quite useful as a student; I will be able to explore various companies at
first who are involved in asset-financing .
This gives an overall idea of selecting the appropriate company and then going
through their financial documents.
• It is quite resourceful for me as finance fascinated student to gain knowledge
on how to accurately analyze company’s financial wealth and competitor’s
strategy.

CONCEPTUAL
DISCUSSION
A theoretical (or conceptual) definition gives the meaning of a word in terms
of the theories of a specific discipline. This type of definition assumes both
knowledge and acceptance of the theories that it depends on. To theoretically
define is to create a hypothetical construct. This method of defining is more
intuitive compared to other methods of Operationalization like operationally
defining. The project covers three NBFC (Non-Banking Financial Companies) which
are constantly reviving their company policies due to changes in government
policies in this sector. In conceptual discussion we need to put recent articles or
any news regarding the project or the study we are conducting. While searching
online articles, I came across a recent article on NBFC which talked about the
supervision that need
to be tightened on them.

30
“NBFC supervision needs to be stepped up”
[Source- Sify, 25-08-2010]
The Reserve Bank of India (RBI) on Tuesday said the supervisory regime of
nonbanking
finance companies (NBFCs) needed to be strengthened for a more robust
assessment of the underlying risks.
"The key underpinnings while developing (new) products and markets will be to
ensure that the process of disintermediation away from banks is genuine and the
risks are clearly and transparently captured in a prudential framework in areas
where both banks and NBFCs are involved," RBI said in its annual report for 2009-
10 released on Tuesday.
It added that inter-connected flows between NBFCs and other financial sector
entities also needed close monitoring. RBI has been taking efforts to tighten
control over NBFCs, which are more loosely regulated than banks.
Any takeover or merger involving deposit-taking NBFCs now requires the prior
approval of RBI. In addition, the management of the merged entity must comply
with the ‘fit and proper’ criteria of RBI. In its annual report, RBI also chided NBFCs
involved in micro-finance for charging high rates while accessing cheaper funds
from banks .According to the banking regulator, there are 12 systematically
important non deposit NBFCs that are lenders with an asset size of at least Rs 100
crore engaged in microfinance
lending. Many of them have agreements with private sector and foreign banks
for outright buy-outs and direct assignments of loans for priority sector
requirements that banks are subject to. However, the end-borrowers do not get
the benefit of low interest rates, as NBFCs are assigned the responsibility of
managing the loans. Consequently, the borrower continues to pay the same rate
of interest, which is as high as 23.6-30 per cent. "The main sources of funds for
these NBFCs are borrowings from banks and financial institutions. Most of them
have received large amounts as foreign direct investment
and many of them are now largely foreign-owned," RBI added. In the above
mentioned article, it clearly talks about the sources of fund for “Non-
Banking Financial Corporation” and Reserve Bank of India has tightened norms
and by checking up their sourcing profile by checking up their records and recent
transaction with clients acquired. This clearly states that these types of official
statements will keep the NBFC market in alert mode and would make those
companies to properly transact in the market.
DATA
ANALYSIS
FINANCIAL DATA
In this section, I have researched and found the recent financial analysis of
Magma Fincorp, Srei Infrastructure Finance Ltd and Intec Capital Ltd

31
PRODUCT AVG. TICKET AVG. TENOR
SIZ(RS IN (RS IN LACS)
LACS)

CAR 2.74 44

COMMERCIAL 6.91 44
VEHICLE

COSTRUCTIO 17.43 37
EQUIPMENT

USED 2.84 30
COMMERCIAL
VEHICLE

STRATEGIC CE 83.16 36

TRACTOR 2.98 50

MAGMA FINCORP LTD

• Loan Profile
Most of the loans disbursed are retail loans and have small ticket size except in
the construction equipments segment. The weighted average tenor comes to 37
months and the average collection time for loans is between 3 years- 5 years. MFL
has a concentrated focus on the under tapped semi urban and rural market to
finance first time users, Small Road Transport operators, small contractors,
transporters of Agri products, tractors etc. Almost 60% of their commercial vehicle

32
portfolio comprised first-time buyers (FTBs), who had never previously owned an
asset. In the construction equipment segment they largely finance small and
medium entrepreneurs. MFL has continuously achieved collection efficiency of
more than 90%, which stood at 91.90% in FY 2007-08 & at 95.72% for the nine
months of FY 08-09.
• Ease Funding Cost
Magma has developed long-standing relationships with major banks and financial
institutions in the country. These relationships helped it remain self-sufficient in
terms of liquidity, even during the slowdown in 2009. Further, a substantial part of
its loans (almost 73%) are to the priority sector. Hence, the company is able to
access bank funds at competitive rates. Magma funds its business through a
balanced mix of longterm debt funds such as term loans/debentures,
securitization and working capital.
The availability of adequate funding and consistent high investment grade rating
of Magma’s debt instruments is testimony to the company’s strong fund-raising
capability.
FUNDING PROFILE
PARTICULARS SOURCES OF PERCENTAGE
FUNDS MIX

WORKING Major banks of 4%

CAPITAL consortium
FACILITIES

TERM LOAN Banks and 32%

financial
institutions(SID
BI)

DEBENTURES Banks and 10%

financial
Institutions(IRE
DA)

Securitization of Banks/Mutual 52%

Receivables Funds/ FIs

Source : Company, Centrum Research Estimates

• Financial metrics to escalate on growth trajectory

despite economic slowdown in FY09, Magma recorded stupendous 27% CAGR

disbursement growth over FY05-10E. For the 9-month period FY10, the
disbursements for the company stood at Rs 31.7bn and the total AUM (Asset
under Management) was at Rs 87.6bn. Moreover, the company reported robust
bottom-line with PAT (Profit after Tax) of Rs 427 mn during the same period.
Excellent asset quality – a feather in Magma’s cap

Magma witnessed 'NIL' NPA's on its books over past 5 years owing to superior risk
management practices and prudent accounting policies followed by the company,
wherein all contracts with more than 180 days past due are treated as loss assets
and are written off as bad debts. On the credit cost front, we have conservatively
built in a rise in absolute terms as well as percentage terms owing to the

33
company’s aggressive write-off policies, which necessitate delinquencies to be
written-off beyond 180 days.
Magma has proved successful in containing write-offs to below 0.5% of total
assets.
The strategy to segregate business vertical from the credit vertical has enabled
the company strengthen the credit analysis by empowering the credit filters
across all product categories thereby enriching their asset book. The company
also formed a dedicated asset reconstruction division in April- May 2008 which
would help focus on collections of the non performing assets. The collection
efficiency also has improved from 96.2% during the first half of the last financial
year to 99.2% in Q3FY10 and is expected to record closer to 100% levels in the
ensuing quarter enabling the company to maintain its superior asset quality.
SREI INFRASTRUCTURE FINANCE LTD
DIVERSE BORROWING PROFILE
SREI has been raising funds from a mix of different resources including short Term
debentures, Term loans from foreign as well as domestic institutions, public
deposits and other loans from banks and Financial Institutions, majority of such
borrowings were at floating rates on interest. Around 17% of SREI’s total
borrowings in 2005-06 were from foreign institutions, which typically are typically
of longer tenure. Around 13% of foreign currency borrowings were unhedged as
on December 2006, exposing the company to foreign currency risk. However,
management’s close monitoring of such unhedged position is likely to protect it
against any significant losses in the event of adverse foreign currency
movements. Over and above the borrowings, SREI also securitizes / co brands /
assigns its portfolio to banks, outstanding against the assigned
portfolio was as Rs. 11.38 billion as on March 31, 2006 and Rs. 10.29 billion as on
December 31, 2006. In the past the main investors have been ICICI Bank, UTI
Bank,ING Vysya Bank and Development Credit Bank. In majority of assigned
portfolio, SREI gives a corporate guarantee to bear the 5 %-10% of credit losses.
During 2005-06, Rs. 10.19 billion (around 60% of funds mobilized) was raised
through [Source: ICRAI Credit Perspective]

OPERATIONS
Magma FinCorp
MFL is entirely in retail financing with lease & HP income accounting for about
91% of total operating income (net of financial lease depreciation) in FY09.
Despite the adverse economic scenario in FY09 along with reluctance of banks to
lend to NBFCs and conservative approach of mutual fund houses/institution from
investing in this sector led to a tight liquidity situation (especially in the third
quarter of FY09), MFL managed to make marginally higher disbursements of
Rs.3590 crore in FY09 as
against Rs.3512.8 crore in FY08. The increase was mainly on account of increase
in disbursements in passenger cars & construction equipment segments and
providing of SME loans which, in turn, was due to company’s focus on relatively
underpenetrated rural and semi-urban areas. Besides, MFL’s association with
reputed strategic partners
like Maruti, Mahindra & Mahindra, Hyundai and General Motors (for the passenger
cars & utility vehicles segment), Tata Motors, Ashok Leyland, Eicher, Bajaj and
Volvo India (for commercial vehicles) and JCB, Telecon, L&T, Caterpillar, Hitachi,
Tractors & Farm Equipments, etc for construction equipments also helped in
maintaining significant level of disbursements in FY09. MFL generally enters into
securitization transaction with 5-10% recourse. During FY09, the aggregate
amount of securitization transactions entered into by MFL was Rs.2982.4 crore,
with outstanding assigned/securitized assets “with recourse” of Rs.3418 crore and
“without
recourse” of Rs.1547.8 crore as on Mar.31, 2009.
Against the securitized assets, MFL’s liability was restricted up to Rs.666.7 crore
(of which Rs.514.5 crore was cash collateral in the form of bank deposits). The
remaining amount was liability contingent on MFL. MFL has a well diversified

34
funding mix with a judicious combination of long and short term resources.
Further, the company tries to optimize its interest cost by placing various short
term instruments. MFL continued to have good asset quality with zero gross and
net NPAs as on Mar. 31, 2009.
SREI Infrastructure Finance
In view of transfer of business w.e.f Jan.1, 2008 and change in business segment
thereafter, the various operational and financial parameters in FY09 are not
comparable with earlier years. On a combined basis (i.e., Srei and SEFPL
together), Srei’s disbursement in FY09 was Rs.6704.7 crore, indicating a growth of
about 17% in FY09 over FY08. However, on a standalone basis, disbursement was
Rs.1185.8 crore in FY09. The business levels were low mainly on account of
squeezed liquidity and slowdown in the third quarter of FY09 leading to decline in
demand and postponement of certain projects. Moreover, the delay in integration
of operations due
to the transfer of business led to decrease in business level. The company’s major
focus areas are telecom, urban infrastructure, power and oil & gas sectors.
Income from operating lease & project loans were the major source of income
contributing about 38% of total income during FY09. The other major source
(forming about 23%) was fee based income arising out of infrastructure advisory
services provided to clients which include consultancy in project
conceptualisation, project engineering, contract structuring, project monitoring
and fund mobilization. Besides, Srei also earned one-time income of Rs.89 crore
arising out of advances made for acquiring telecom towers. Srei has a well
diversified funding mix with a combination of long & short term resources. Funds
by way of cash credit (incl. CP and MIBOR linked debentures) formed a small
portion of the total resources due to the ongoing
process of tying up bank limits, since existing limits were transferred to SEFPL.
FINANCIAL PERFORMANCE
MAGMA FINCORP
Latest Result Update
• The disbursals for 2009 stood at Rs 1049 crore, which is 19% higher than the
corresponding figure of Rs 883 crore in 2008. The disbursals also went up
18% sequentially on a Y-on-Y basis, against 2007 figure of Rs 892 crore.
• For 9MFY10, topline expanded by 12.3% to Rs 505.91 crore from Rs 450.48
crore in the corresponding period, while the bottom-line expended by 38.9%
to Rs 44.95 crore, against Rs 32.36 crore in 9MFY10.
Operating Income:
In the period FY2006-09, MFL registered a CAGR of 102.46% in Operating Income.
However, going forward, for the period FY2010-12, we expect the company to
register CAGR of 35.68% in Operating Income.
• The rise in Income from Leasing is going to drive the surge in Operating
Income for the next few years.
• The SME Loans segment is expected to contribute substantially
more in FY11 & FY12, from the current contribution level of 5%.
• ROA (Return on Assets)
o MFL had a RoA of 2.18% and 1.36% in FY08 and FY09 respectively.
• Going forward, RoA is expected to be 2.01% in FY10, following which it is
expected to be 2.63% and 2.95% in FY11 and FY12 respectively.

SREI INFRASTRUCTURE FINANCE

Being a NBFC, SREI does not have access to cheaper sources of fund compared to
banks. Even then, SREI has been able to maintain its NIMs at healthy level. SREI
will be able to raise funds more easily with RBI categorizing NBFIs further into
equipment financing NBFC and easing norms on External Commercial Borrowing
(ECB) is expected to help SREI to lower its cost of funds. In addition to the above,
SREI has entered into 2 new business segments: Medical and IT equipment
financing, which are expected to contribute to NIMs
[Source: SREI Infrastructure Finance]
SREI has been able to maintain healthy NIMs as:

35
• It provides an end to end solution to the customer and hence charges a
premium for same
• It serves MSMEs segment where the yield on assets is higher at 13-16%
• SREI effectively uses alternative mode of financing

Prudent NPA management

Being an NBFC and serving MSMEs segment SREI has been able to maintain its
Gross PAs below 1.5% and Net NPAs below 0.5% (as per Foreign Lending
Institution
Standards). It follows a high provisioning norm of 70%. SREI’s business model is
based on customer relationship and the one stop shop concept. It requires SREI to
be focused on customer requirements and keep a constant eye on the customer’s
project and its development. They make all possible initiative to help customer
succeed in its
business. In a way it is present throughout the project cycle which enables it to
keep a watchful eye on the client’s cash flows, creditworthiness and identify the
NPA at early stage to take corrective action.
[Source: Srei Infrastructure Annual Report 2009]
The data analysis of these companies with Intec Capital Ltd will be done on
different criteria that are important in doing the Competitive Analysis or any
comparative
analysis. The following basis of financial indicators such as:
1) Income- Total Income (Estimated figure from financial statements)
2) Profitability- Focusing on Profit after Taxes (PAT)
3) Funding- Sources of Funds (Specific focus on share capital and Reserves and
Surplus)
4) Earning Per Share (EPS)
These financial indicators according to me are the best option for differentiating
between any given companies. The “Total Income” factor contains the total
estimated income at the end of the fiscal year till March 2010. The profitability
factor
contains “Profit after Taxes” contains the estimated figure till March 2010. The
funding contains the sources of funds with specific focus on how these NBFC’s are
getting the source of funds to transact in the market. The “Share Capital” and
“Reserves and Surplus” would be the criteria that would be considered in
comparative analysis. The “Earning per Share” contains the return on
investment on
the earlier invested amount.

36
ROLES AND RESPONSIBILITY

Since I was working in MAGMA FINCORP LIMITED as a finance trainee so my first project at
MAGMA was to analyze the Process of loan and Documentation and analyse the competitors of
MAGMA.I prepared excel report about the current customer base, updated insurance customer data
base, find the cibil and internal of the customer, who have applied for the loan to check their loan
credibility and to find the track of customers.an of the compan. I had prepared an excel data report of
various Financial ratios being calculated. Then the ratios were used to prepare a word report about the
company’s position.The period when I had joined MAGMA FINCORP ltd was the time of auditing. It
was the month of March when all the accounts are closed and completed. Database were being
prepared for insurance, sales, customer enquiry, de dupe and cibil, etc on oracle software based system.
I had updated these consolidated data report by collecting information from the MIS of all the centers,
been prepared by the accountant.I also got to know about cibil data report for verifying the customers
creditworthiness.I learnt complete loan sanction process.I learnt how to change the intrest rate to lure
desired customer and not affecting the companies profit by changing IRR.I handelled customers
querries regarding product profile and intrest rates. I had studied the financial ledgers of MAGMA.

TOOLS AND TECHNIQUE

For preparing the ratio analysis report and the comparison report I had used the tools

and techniques of ratio analysis.

KEY LEARNINGS

The training through which I have undergone helped me to sharpen my analytical and

critical skills to analyze the performance of a company.

This training process helped me to know how the loans are sanctioned and disbursed and

how are they used for further analysis in the company.

37
The preparation of consolidated data I got to know how the auditors use the information of

accounts and credit department and use it to audit the financials of the company.

Training has provided me a real industry exposure that is essential for any mba student.

It has enhanced my communication and soft skills.

RECOMMENDATION

INTENSIVE CUSTOMER CARE UNIT

“The More You Care For Your Customer More The Faith Will Get Develop From
Customer Side.”

As the customers are the king of the ring so a good customer care is vital for organization’s
success.

DIVERSIFIED PRODUCT PORTOLIO

Company should diversify its product portfolio to grab the top notch position.

MORE PENETRATION IN URBAN AREA

Company has penetrated well in rural area and there is thick customer base in urban area also so if company
concentrates more on urban area it can increase its market share.

Toll Free Number

Customers generally want to call to the respective branch for asking some problems or give orders, a
customer can save the money by dialing on the toll free number. It gives a feeling to the customer that
company care for them.

Note:
The recommendations which I have listed here above are strictly based on the knowledge that I have
acquired during my training duration.

All the recommendations are for the improvement in the functioning of the front end operations of the
magma fincorp Ltd alld branch.

The recommendations are purely based on the problems that I had faced as a Management Trainee in
Magma Fincorp Ltd Allahabad.

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