Magma Fincorp tumbles after ICRA revises outlook

Magma Fincorp dropped 4.37% to Rs 53.60 after credit rating firm ICRA revised rating outlook on the company's term loans and non-convertible debenture programme (NCDs) to 'negative' from 'stable'.

ICRA reaffirmed its ratings on bank term loans and non-convertible debenture programme to [ICRA]AA-(Negative) while revising outlook from stable to negative.

The revision in the outlook on the group's rating factors in the deterioration in the asset quality indicators following the reduced collection efficiencies in certain geographies and loan segments (commercial vehicles and construction equipment). Consequently, the credit costs were high and adversely impacted the profitability metrics of the group. While there could be some recovery in H2 FY2020, ICRA expects the group's profitability to remain subdued over the medium term. Moreover, ICRA expects the group to continue having relatively weaker asset quality indicators compared to the peer set. Given the relatively moderate borrower credit profiles (first-time buyers, small entrepreneurs, self-employed and non-income proof category), the group's ability to profitably grow its business while improving the asset quality from the current levels and maintaining prudent capitalisation would be a key rating sensitivity. The filing was made after trading hours yesterday, 16 December 2019.

The Nifty 50 index was up 75.45 points or 0.63% at 12,129.40.

On a consolidated basis, the company's net profit fell 61.4% to Rs 29.53 crore on 6.6% rise in total income to Rs 679.87 crore in Q2 September 2019 over Q2 September 2018.

Magma Fincorp, a non-deposit taking non-banking finance company (NBFC), is registered with the Reserve Bank of India (RBI) as an asset finance company.

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