Kailash Baheti, CFO, Magma Fincorp Ltd, talks about the March quarter results and NPA levels in the housing finance segment during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

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How were the asset quality numbers in March quarter FY20 and what led to the loss in the quarter from a profit?
Our net asset quality is quite stable. Our gross NPA in this quarter has reduced from the level at which it was in the previous quarter; however, it has deteriorated on a year-on-year basis. It was hit due to

1] Last year, there was a liquidity crisis which increased our cost;
2] Economic crisis due to which there was a stress on the portfolio ; and
3] COVID-19.

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In these given circumstances, we have been able to maintain a portfolio and that’s why I think that we have performed credibly. As far as the loss in the quarter is concerned then extra provisioning amid COVID across is a reason for it. We follow Ind-AS in our accounting and that’s why we were supposed to do extra provisioning and we have done it. We did additional provisioning of Rs 117 crore at the consolidated level. Secondly, on the tax front, we have also moved from a high tax regime to the lower tax regime, which led to a write off a tax of Rs 37 crore. These are the two factors that affected our profit in this quarter. If we have a look at the Profit Before Tax (PBT) for the entire year after removing the COVID provisioning than it stands at Rs 199 crore. Given the circumstances, we are quite satisfied with the performance that we have produced. 

The NPA figures of the full financial year particularly in the housing finance segment stood at 1.6% in FY20 Vs 1.8% Year-on-Year basis. How have you managed the NPA in this challenging situation, are these levels sustainable?
Our housing finance business has progressed significantly. Earlier, we were lending more in the form of a loan against property and high-ticket loans. But we have transformed the company completely and turned it into an affordable housing finance company. Our company today stands at the fourth position in the list of companies who are lending in the affordable finance segment. Secondly, we are in a business where the underline asset in our entire portfolio lies only in the residential property segment. Interestingly, delinquencies remain low in residential properties as people have an emotional attachment with their houses and that’s why he doesn’t turn delinquent on that part. 

So, it was reasonable – with the kind of portfolio that we have at present - to bring down our NPAs from high level to low levels. Our GNPA and NNPA stood at 1.8% and 1.2% last year respectively and it has moved below 1% level this year and will try to bring it down from the existing level this year. But, we will have to watch the kind of impact the moratorium and economic situation will have on it but the early trends don’t suggest that our current levels will move up, which means our performance will be similar to this year’s performance. However, the situation is evolving at present and that’s why it is difficult to guess what will happen.