You are here » Home » Companies » Company Overview » Magma Fincorp Ltd

Magma Fincorp Ltd.

BSE: 524000 Sector: Financials
NSE: MAGMA ISIN Code: INE511C01022
BSE 00:00 | 24 Sep 32.55 -1.40






NSE 00:00 | 24 Sep 32.50 -1.55






OPEN 33.20
VOLUME 60918
52-Week high 71.00
52-Week low 12.70
P/E 98.64
Mkt Cap.(Rs cr) 877
Buy Price 32.55
Buy Qty 580.00
Sell Price 32.75
Sell Qty 35.00
OPEN 33.20
CLOSE 33.95
VOLUME 60918
52-Week high 71.00
52-Week low 12.70
P/E 98.64
Mkt Cap.(Rs cr) 877
Buy Price 32.55
Buy Qty 580.00
Sell Price 32.75
Sell Qty 35.00

Magma Fincorp Ltd. (MAGMA) - Director Report

Company director report


Your Directors have pleasure in presenting the 40th Annual Report along with theAudited Financial Statements of the Company for the financial year ended 31 March 2020.

Particulars Standalone Consolidated
FY2019_20 FY2018-19 FY2019_20 FY2018-19
Total income 221903.40 226730.66 256287.78 249469.83
Profit before interest and depreciation 122979.54 147067.55 145139.63 161439.46
Less: Interest and finance charges 112397.10 101764.01 129382.18 112223.40
Less: Depreciation 7164.14 5015.63 7478.99 5046.39
Profit before tax 3418.30 40287.91 8278.46 44169.67
Share of profit of joint ventures - - (100.72) 66.42
Tax Expense 4419.38 12775.04 5472.40 13835.46
Profit after tax (1001.08) 27512.87 2705.34 30400.63
Add: Other Comprehensive Income/ (loss) (617.26) (182.29) (82.99) (496.70)
Total Comprehensive Income (1618.34) 27330.58 2622.35 29903.93
Profit available for appropriation
Profit after tax (1001.08) 27512.87 2705.34 30400.63
Balance of profit for earlier years 32540.96 13257.93 46965.00 25498.14
Profit available for appropriation 31539.88 40770.80 49670.34 55898.77
Add: Other Comprehensive Income/ (loss) (288.96) (122.73) (308.33) (136.66)
Transfer to statutory reserve - (5510.00) (852.97) (6200.00)
Less: Dividend paid (2597.65) (2597.11) (2597.65) (2597.11)
Balance carried forward 28653.27 32540.96 45911.39 46965.00


Global Economic Overview

The global economy grew 2.9% in 2019 compared to 3.6% in 2018 clearly showing weaknessin the global business environment. The global trade grew at a mere 0.9% in 2019 due totrade tensions and slower economic growth.

The COVID-19 pandemic has struck a devastating blow to an already-fragile globaleconomy. Lockdowns and other restrictions needed to address the public health crisistogether with spontaneous reductions in economic activity by many consumers and producersconstitute an unprecedented combination of adverse shocks that is causing deep recessionsin many advanced economies as also in emerging markets and developing economies. Accordingto the International Monetary Fund (IMF) the global economy is expected to shrink by over3 per cent in 2020 – the steepest slowdown since the Great Depression of the 1930s.

Uncertainty about the length and depth of this health crisis propelled economic andfinancial crisis. Very well-respected studies have suggested that Emerging Market andDeveloping Economies could suffer output losses of 3-8 percent in the short term.

Governments in many countries have taken fiscal and monetary policy action onunprecedented scales in response to the pandemic to support demand and economicactivities. ndian Economic Overview I

India emerged as the fifth-largest world economy in 2019 overtaking the UK and Francewith a gross domestic product (GDP) of $2.94 trillion. India jumped 14 places to 63 in the2020 World Bank's Ease of Doing Business ranking riding on reforms in several areas and asubstantial bump-up from the insolvency law rolled out in 2016. The country climbed 79positions in the past five years and was among the top 10 performers for the third yearrunning.

GDP growth for Q4 FY20 was 3.1% full year FY20 was 4.2% and FY21 GDP is projected todegrow by 5% year-on-year with a negative bias. The outbreak of COVID-19 and thesubsequent lockdown is expected to significantly moderate aggregate demand. To mitigatethe reality the government announced a H 1.7 lakh crore relief package for the poormigrant workers which included direct cash transfer to farmers increased wages underMGNREGA scheme and utilisation of welfare funds for construction workers among others. Thegovernment also announced an economic package of H 20 lakh crore benefitting the MSMEsegment agrarian sector and provision for free rations to migrant workers. ndustryOverviewI

NBFC Sector

Non-banking finance companies (NBFCs) an integral component of the Indian lendingecosystem could see a major impact of COVID-19 on their liquidity position and assetquality in the financial year 2020-21 due to complete halt of economic activity due tomassive lockdown. Before the coronavirus outbreak RBI and the government took severalmeasures to support NBFCs since August 2019 especially after credit crisis and confidencecrisis in the NBFC sector due to default by some major financial institutions in Infrasector. The COVID-19 pandemic clipped the recovery. Small and medium-sized NBFCs are mostat risk due to the disruption caused by the COVID-19 outbreak. The central bank has soughtto cushion borrowers and lenders against the coronavirus outbreak effect allowingcompanies a six-month grace period on loan repayments. In last 2 months several measureshave been taken by RBI and Finance Ministry to boost liquidity and economy as follows:

Measures taken by RBI

Repo Rate and Reverse Repo rate- Significant reduction of repo rate by 75 bps in Marchand further by 40 bps in May to 4%. Similarly the reverse repo rate has also been reducedto 3.35% CRR- Reduction of Cash Reserve Ratio (CRR) by 1% to 3% applicable from March 28to inject H 137000 crore.

Loan Moratorium- In March RBI Governor announced that lenders could give a moratoriumof 3 months from March 2020 to May 2020 which was further extended by 3 months in May 2020from June 2020 to August 2020 on repayment of all term loans. Those accounts that haveavailed the moratorium facility the period of moratorium will be excluded from the 90-dayNPA classification norms of the RBI.

TLTRO 1.0 & 2.0- Introduction of long-term repo operation (LTRO) facility infusingH 150000 crore worth of liquidity into the economy through banks by launching theTargeted Long-Term Repo Operation (TLTRO) (1.0) and (2.0) facilities. Given that theprimary beneficiaries of TLTRO 1.0 turned out to be public sector entities and largecorporates the RBI also launched TLTRO 2.0 for a further amount of H 50000 crore tocater to the non-banking finance and micro finance sector.

Special Re_nance Facility- Special refinance facility of H 50000 crore to NABARD (H25000 crore) for refinancing regional rural banks cooperative banks and micro financeinstitutions SIDBI H (15000 crore) for on-lending/refinancing and NHB (H 10000 crore)for supporting housing finance.

Measures taken under Economic stimulus package (Atmanirbhar Bharat)

H 30000 crore Special Liquidity Scheme for NBFCs/HFCs/ MFIs- Under this schemeinvestment is to be made in primary & secondary market transactions in investmentgrade debt paper of NBFCs/HFCs/MFIs. Securities will be fully guaranteed by the CentralGovernment.

H 45000 crore Partial Credit Guarantee Scheme 2.0 for NBFCs- Existing PCG scheme to beextended to cover borrowings such as primary issuance of bonds/CPs. Government to provide20% first loss sovereign guarantee to PSBs AA and below rated papers including unratedpapers to be eligible for investment. This scheme will result in the liquidity of 45000crore H 300000 crore Collateral free automatic loans to MSMEs Government to give 100%credit guarantee cover to banks and NBFCs on principal and interest for additional loansup to 20% of the outstanding as on 29th February 20 with Banks/NBFCs/ FIs. The said Schemehas also been extended to HFCs (for LAP segment). The Scheme aims to extend additionalfunding to eligible borrowers in order to help them through the liquidity crunch faced bythem due to the crisis.

Credit Linked Subsidy Scheme for MIG under PMAY(U) extended up to March ‘21- Thisscheme is aimed at achieving government's objective of housing for all. The extension isan action-oriented reform for the revival of affordable housing segment ensuring jobcreation and stimulus to demand and boosting the supply chain.

Overview of underlying asset class

Automobile sector

Auto sales dipped by 18% in FY20 as compared to FY19 and new sales were driven bydemand in semi-urban and rural markets.

Passenger vehicles including Car & MUV would see significant drop in H1 FY21considering reduced discretionary purchases.

A faster recovery of the Rural sector and a good Rabi harvest expected to supporttractor demand immediately post easing of lockdown.

Used vehicle transactions likely to be lesser impacted in FY21 considering lower marketprices BS VI transitioning and extended time gap in regularization of the new vehiclessupply chain.

SME Sector

MSME sector is expected to be directly impacted due to lockdown and the uncertaineconomic situation.

Cash-flows impact likely to remain in the short to medium term even after lockdowneases due to supply chain disruptions and counterparty debtor risk across the valuechain.

Recovery is expected to be slow owing to subdued GDP growth and sluggish demand.However measures from RBI and Government are likely to expedite the recovery process.

Asset quality concerns are expected to pose challenge over the next few years.

Mortgage Sector

Overall Housing demand expected to be subdued in FY21.

Project completion may get delayed and prospective buyers in turn may delay purchasedecision especially in large cities.

Retail segment especially ready self-construction housing demand likely to pick up.There will be housing demand in Tier 2 3 and 4 cities.


Despite volatile economic environment the Company focused on capital preservationcollections stringent operating expenses management and strengthening Balance Sheet.

The new initiatives undertaken by the Company continues to show positive impact in allareas during the current year.

Disbursements and Loan Assets

During the year FY2019-20 the standalone disbursements declined by 33% i.e. from767204 lakh in FY 2018-19 to H 511319 lakh in FY2019-20. Similarly the consolidateddisbursements declined by 27% i.e. from H 875736 lakh in FY2018-19 to H642832 lakhin FY2019-20. The decline was mainly due to the degrowth in Car CV CE Tractor and SMEloans and the focus of the Company was on maintaining the portfolio quality in the lightof adverse economic trends and therefore be conservative in incremental lending andrestricting it to customers with existing track record and/or good security.

Total Loan Assets as on 31 March 2020 on standalone basis decreased by 12% y-o-y basisto H1285086 lakh and the total Loan

Assets on consolidated basis decreased by 5% to H1613353 lakh.

Asset Quality

The consolidated Stage 3 Assets (Gross Non-Performing Assets (GNPA)) ratio on 3 monthoverdue basis on loans increased from 4.8% in March 2019 to 6.4% in March 2020.Similarly the Net Non-Performing Assets (NNPA) ratio on loans has increased from 3.1% inMarch 2019 to 4.2% in March 2020. The increase is mainly due to higher delinquencies inCV CE and Tractor portfolio due to sluggish demand and weak macro-economic scenario.While the fresh slippages during the year were lower than previous year the NPA customersdidn't have enough money to roll back the contracts to standard buckets and thecollections suffered due to the same and finally in the last fortnight of March 2020 onaccount of disturbance due to COVID 19 and later lock down the field activities wereseverely curtailed.


Magma has been able to steer through this liquidity crisis well primarily because ourBusiness Model both in NBFC and HFC is focused on retail lending with –a. Averageticket size of H 4 to 6 lakh for ABF H 9-13 Lakh for

Mortgage and H 17-20 lakh for SME Business; b. Pan India presence through its 314branches spread across 21 States; c. Diversified product mix with no single productcomprising more than 20% of the portfolio; d. Our robust track record of assetsecuritization having done securitization of over 248 pools for total asset value of overH 45817 Crore over past 13 years with diverse investors namely Public Sector BanksPrivate Sector Banks Foreign Banks and Mutual Funds. e. We exited March 2020 withliquidity of H 1527 Crore comprising of available cash in hand of H 226 Crore andunutilized credit limits of H 1301 Crore.

f. Our borrowings are principally in form of Term Loans Securitisation and WorkingCapital facilities. Hence our scheduled repayments in the months of April and May 2020are less than H 100 Crore.

Given our liquidity position we decided against taking moratorium from our lenders andsent a suo moto communication to all Banks informing them of our intent to make allpayments as per agreed repayment schedule.

Even while we made our offer to all our customers to take moratorium and we did notseek any moratorium from our lenders the inflow from our customers was good enough to payall our expenses and liabilities and as a result we closed the first Moratorium periodwith the same level of liquidity as we had on 31 March 2020.

Business – Strategy and Outlook

Key Initiatives FY2020:-

A brand-new cloud-based loan origination system (LOS) along with credit approval engine(rule-based decision making) was implemented for SME line of business.

Data Analytics: Implementation of three new cloud enabled data marts namely Financedata mart Risk data mart and Cross sell data mart; data marts and downstream analyticswill accelerate delivery of business insights and performance reporting.

Introduction of robotic process automation (RPA) technology for intelligent automationof back-office processes is bolstering efficiency and accuracy at a lower cost ofoperations.

A robust Business Continuity Plan as a response to COVID addressing financial planningbusiness strategy realignment employee productivity re-focus IT enablement and renewedcustomer engagement.

Asset Backed Finance (ABF)

Disbursement declined by 31% from H 587673 lakh in FY2018-19 to H 405497 lakh inFY2019-20. The decline is mainly due to sluggish demand in Car CV & CE products andweakening credit profile of the customers due to deployment issues.

Healthy disbursement growth in focus products namely Used

Assets which achieved YOY growth of 11% in FY2019-20.

Used Assets AUM contribution increased from 19% in FY2018-19 to 25% in FY2019-20

Direct channel contribution significantly grew from 31% in

Q1FY2017-18 to 41% in Q4FY2019-20.

ABF business continued portfolio re-shaping by increasing contribution of focusproducts which is yielding positive results.

Mortgages Business

The Company showed a significant growth this year with disbursement increasing by 24%over previous year. The overall disbursement increased from H 109182 lakh in FY2018-19to H135508 lakh in FY2019-20. The increase is due to the following:-

Stellar growth in Home loan portfolio of 28%. The disbursement in home loans grew fromH 64700 lakh in FY2018-19 to H 82671 lakh in FY2019-20 in line with "GO HOMELOAN" strategy implemented by the Company.

The contribution of home loan portfolio increased from 25% in

FY2016-17 to 47% in FY2019-20 in the overall housing AUM.

Company's "GO DIRECT" strategy for transition from DSA model to direct salesmodel improved direct sourcing from 28% in Q1FY18 to 78% in Q4FY20.

Focused deep market penetration in 103 locations across 19 states using unit modelimplementation.

The push for affordable housing by the Government of India will further expand theCompany's current housing portfolio. The Company is poised towards being a uniqueaffordable finance Company having a national presence.

SME Business

Disbursement declined from H 178880 lakh in FY2018-19 to H101827 lakh in FY2019-20 asa result of tightening of SME lending on account of overall economic slowdown and itsimpact on the SME segment. The asset under management decreased by 18% i.e. from 227755lakh as on 31 March 2019 to H 185860 lakh as on 31 March 2020.

The key initiative for the SME business during the year was launch of the MScore CreditRule Engine launched along with back-tested Credit Scorecards for improvement in creditquality.

With geographical expansion and focus on portfolio quality the SME business is expectedto return growth in the coming years and will contribute significantly to the bottom lineof the Company.

Insurance business achieved H129392 lakh Gross Written Premium for FY2019-20registering a growth of 26.1% YoY vs the industry growth of 11.5%. The insurance businessreached a customer base of 1.9 million in FY2019-20 with 6500+ partners as at March 2020.The business continues to witness productivity improvements in retail agency OEM and bancassurance channels. The Company is empaneled with six OEMs as at March 2020 of which 5were added in FY2019-20. The Company has commenced business with 3 OEMs and systemintegration is under process for the others. The Company continues to increase its Nonmotor commercial portfolio backed by strong panel of reinsurers. The servicinginfrastructure for retail and group health business has been put in place which will helpgrowth in health insurance business in the coming years.

Branch network

Magma's branch network stood at 314 branches in FY2020 as compared to 310 branches inFY2019. The Company has a pan India presence with good geographical diversification. TheCompany continues to exploit the untapped potential of existing branches and ensure thatmore products are available across our branch network.


Opportunities Challenges and Outlook


Diversified portfolio products across asset finance business finance and mortgagefinance.

Pan-India presence with 314 branch offices primarily in Rural and Semi Urbanlocations.

A well- and scalable organizational structure based on product territory and processknowledge.

Complete Digital process through entire customer lifecycle.

Customer focus Product innovation and superior delivery.

Experienced senior management team.

Strong relationships with public private as well as foreign banks institutions andinvestors.

Ability to meet the expectations of a diverse group of investors and excellent creditratings.

Innovative resource mobilisation techniques and prudent fund management practices.


Business and growth directly linked with the GDP growth of the country.

Liability profile and dependence on banks for leverage and ALM mismatch.

Company's Customers are more vulnerable to negative effects of economic downturn.

Uncertain economic environment.


Focus on MSME segments traditionally not serviced by banks

(non-salaried professionals individuals traders and transporters).

Large untapped rural and urban markets.

Enhance digital solutions for business/collections.


Slower economic activity and weak rural demand could lead to high credit costs due toCOVID-19 pandemic.

Increased competition across the Company's product segments from captive financecompanies and small finance banks.

Inadequate availability of bank finance and upsurge in borrowing cost

External risks associated with liquidity stress political uncertainties fiscalslippage concerns etc.

Growing number of Fintech companies.


(All figures are on consolidated basis unless specifically mentioned otherwise)

The Company's Profit after Tax (PAT) on consolidated basis decreased to H 2705 lakh inFY2019-20 compared to H 30401 lakh in FY2018-19.

The Company has maintained stable net interest margin (NIM) of

7.7% despite facing a high interest rate scenario. Better interest cost management anda prudent mix of products helped the Company maintain its net interest margin (NIM).

Net Income from Operations (i.e. total income less finance cost) on a consolidatedbasis decreased by 7.5% from H 137246 lakh in FY2018-19 to H126906 lakh in FY2019-20.

Total Income increase by 2.7% from H 249470 lakh in FY2018-2019 to H 256288 lakh inFY2019-2020.

The write offs and provision increased from H 24671 lakh in FY2018-19 to H 48579 lakhin FY2019-20 inclusive of one time COVID Provisions to the extent of H 10903 lakh.

On a Standalone basis the Capital Risk Adequacy Ratio (CRAR) for the year FY2019-20was 25.9% against the RBI stipulated norm of 15% for non-deposit taking Asset FinanceCompanies.

Details of significant changes (i.e. change of 25% or more as compared to theimmediately previous financial year) in key financial ratios:

1. Debt Equity ratio has fallen from 4.60 to 3.98 at standalone level and from 4.79 to4.36 at consolidated level. This represents a fall of 13% and 9% at standalone andconsolidated level respectively.

2. There is a significant decrease in Return on Assets (ROA) by 91.2% and Return onEquity (ROE) by 92.4% in FY20 (as compared to FY19) due to increase in Net Credit Cost by96.9% on a YoY basis from H 24671 lakh to H 48579 lakh primarily on account ofprovision created due to the pandemic (COVID-19) and a onetime impact due tore-measurement of opening net Deferred Tax Assets as a result of opting to pay income taxat a concessional rate.


During the year there was no change in the nature of business of the Company or itssubsidiary.


There are no material changes or commitments affecting the financial position of theCompany that have occurred between the end of the financial year and the date of thisReport.


In accordance with the requirements in terms of Regulation 34 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter referred to as‘Listing Regulations') your Company prepared Consolidated Financial Statements inaccordance with

Ind AS 110 - "Consolidated Financial Statements" and Ind AS 27

- "Separate Financial Statements". The Consolidated Financial Statementsforms part of this Report.


Magma Housing Finance Limited (MHFL) is a wholly owned subsidiary of the Company. MHFLhas made disbursements of H 131513 lakh in FY2019-20 against H108532 lakh in previousyear. MHFL has earned a PBT of H 5429 lakh for the year ended 31 March 2020 against H4700 lakh in previous year.

During the year under review the Company had infused capital aggregating to Rs. 100crore in Magma Housing Finance Limited by subscribing to its Equity Shares on Rights Issuebasis.

The Company's Joint Venture with HDI Global SE for General Insurance Business in Indianamed Magma HDI General Insurance Company Limited (Magma HDI) (the ‘JV Company') hasshown good growth in the current year. Magma HDI has reported Gross Written Premium (GWP)of H 129392 lakh in FY2019-20 against H 102582 lakh in FY2018-19. Magma HDI has earnedPBT of H 568 lakh for the year ended 31 March 2020 as against negative PBT of H 841 lakhfor the year ended 31 March 2019.

Jaguar Advisory Services Private Limited (JASPL) a Joint Venture with HDI Global SE isan advisory services Company domiciled in India. Presently JASPL provides manpowerservices. JASPL has earned a PBT of H 0.58 lakh for the year ended 31 March 2020 against H1.05 lakh in previous year.

None of the companies have ceased to be subsidiary/joint venture of your Company duringthe year under review

Pursuant to Section 129(3) of the Companies Act 2013 a statement in Form AOC-1containing the salient features of the Financial Statement of your Company's subsidiaryand joint ventures forms part of this Report and hence not repeated here for the sake ofbrevity.


In view of Net loss during the year the Company is not proposing any Transfer toStatutory Reserve as required under Regulation 45-IC of Reserve Bank of India Act 1934issued by RBI.


As stipulated in Regulation 43A of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has in place the Dividend Distribution Policywhich is available on the Company's website at its weblinki.e. same also forms part of the Board's Report and is annexed as Annexure 6.

With a view to conserve capital given the challenging situation caused by the ongoingCOVID-19 pandemic the Board of Directors has not recommended any dividend on EquityShares of the Company for the financial year ended 31 March 2020.


Being a non-deposit taking Company your Company has not accepted any deposits from thepublic within the meaning of the provisions of the Non-Banking Financial CompaniesAcceptance of Public Deposits (Reserve Bank) Directions 2016 and the provisions ofCompanies Act 2013.


Your Company had formulated and implemented Magma Employees Stock Option Plan 2007(MESOP 2007) and Magma Restricted Stock Option Plan 2014 (MRSOP 2014) in accordance withthe SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines1999 and SEBI (Share Based Employee Benefits) Regulations 2014 including any amendmentsthereto (‘SEBI Guidelines/Regulations').

The Nomination and Remuneration Committee of the Board of Directors of the Companyinteralia administers and monitors the MESOP 2007 and MRSOP 2014 in accordance with theapplicable SEBI Guidelines/Regulations.

The details of the options granted and outstanding as on 31 March 2020 along with otherparticulars as required by Regulation 14 of the SEBI (Share Based Employee Benefits)Regulations 2014 is available on the website of the Company at and the Auditors' Certificate would be placed at theforthcoming Annual General Meeting pursuant to Regulation 13 of the said Regulations.


Equity Shares

During the year the following changes were effected in the Share Capital of theCompany:

Issue of Equity Shares under the Magma Employees Stock Option Plan 2007:

During the year the following Equity shares were allotted upon the exercise of stockoptions by the employees:

1. 132600 Equity Shares of the face value of H 2/- each were allotted to theeligible employees at a price of H 2/- per Equity Share.

2. 58476 Equity Shares of the face value of H 2/- each were allotted to the eligibleemployees at a price of H 39.45/- per Equity Share (including a premium of H 37.45/- perEquity Share).

After the close of financial year 4800 Equity Shares of face value of H 2/- each wereallotted to the eligible employees at face value upon the exercise of stock options by theemployees.

Consequent to the issue of the additional Equity Shares as above the issuedsubscribed and paid up Equity Share Capital of the Company as on the date of this Reportstands increased to H 539040224/- (Rupees Fifty Three Crore Ninety Lakh Forty ThousandTwo Hundred and Twenty Four only) divided into 269520112 Nos. (Twenty Six Crore NinetyFive Lakh Twenty Thousand One Hundred and Twelve only) of Equity Shares of H 2/- each ason date.


Public Issuance of Secured Redeemable Non-Convertible Debentures

Your Company raise funds through Term loans Securitisation and Non-ConvertibleDebentures to meet its business needs. Your Company in its maiden retail issue of SecuredRedeemable Non-Convertible Debentures (NCDs) of face value of H 1000/- each for an amountof H 200 crore ("Base Issue Size") with an option to retain over subscriptionup to H300 crore aggregating to H 500 crore (the "Overall issue size/ Tranche IIssue") had allotted 2014145 nos. of NCDs on 6 May 2019 for an amount of H 201.41crore. These securities are listed with National Stock Exchange of India Limited and BSELimited. This new instrument of retail NCDs helped broaden the liability mix as well asdiversifying the investor base and profile.

The net proceeds received from the Issue have been used for the purpose of onwardlending financing and for repayment/ prepayment of interest and Principal of theexisting borrowings of our Company and for general corporate purposes as mentioned in theTranche I Issue Prospectus. Details of the Issue and the end use were duly furnished tothe Audit Committee.

Private Placement Issue of Debentures and Bank borrowings

During the year the Company has raised H 350.00 crore through issuance of 3500 nos.of Unrated Unlisted Senior Secured Redeemable Non-Convertible Debentures of face valueH 10 lakh each under Voluntary Retention Route (VRR) for investment in Indian debt byNederlandse Financierings Maatschappij Voor Ontwikkelingslanden N.V. (FMO) a DutchEntrepreneurial Development Bank to support the Company's on-going growth plans. Theproceeds of the issue have been utilized for the Company's ongoing business operationsincluding expansion and growth of its Micro and Small and Medium Enterprise (MSME) loanportfolio.

During the year the Company has raised fresh long term Secured Loans of H1025.00 crorefrom Banks and Financial Institutions. The Company has also raised funds of H 2646.15crore from Banks Mutual funds and NBFCs through fresh issue of Pass Through Certificates(PTCs) and Direct Assignment under the Partial Credit Guarantee (PCG) Scheme of the Govt.of India.


The Company continues to comply with all the applicable regulations prescribed by theReserve Bank of India ("RBI") from time to time.


During FY2019-20 rating for Short-term debt instruments from CRISIL were re-affirmedat CRISIL A1+. CARE Ratings reaffirmed its ratings on the Company's Short term debtinstruments at CARE A1+ Bank Facilities long term Secured and Subordinated Debtinstruments at CARE AA- and Perpetual Debt instruments at CARE A+. The long term SecuredDebt instruments and Bank Facility ratings of the Company have been reaffirmed by ICRA& India Ratings & Research Private Limited at ICRA AA - and IND AA- respectively.AA- reflects that these instruments have high degree of safety regarding timely payment offinancial obligations and carry very low credit risk. ACUITE (erstwhile SMERA) andBrickwork Ratings have reaffirmed AA rating for Unsecured Subordinated Debt Instrumentrated by them. Brickwork ratings & ACUITE have also assigned AA rating for the SecuredRedeemable Non-Convertible Debenture of the Company. However Outlook has been revisedfrom ‘Stable' to ‘Negative' by ICRA ACUITE CARE Ratings and India Ratings hasplaced the rating under ‘rating watch negative'.

Instrument Rating Rating Agency
Rating Under Basel Guidelines
Fund Based & Non Fund AA- CARE
Based from Banks AA- ICRA
AA- India Ratings
Short Term Debt (Commercial A1+ CARE/CRISIL
Secured Redeemable Long AA- CARE/ICRA/India Ratings
Term Bond/Note AA BWR/ACUITE
Unsecured Subordinate Tier AA- CARE
II Bonds AA Brickwork/ACUITE
Perpetual Debt Instruments A+ CARE
AA- Brickwork

A status of ratings assigned by rating agencies and migration of ratings during theyear is provided in note no. 54(i) to the standalone financial statements of the Company.


Particulars of loans guarantee and investments outstanding during the financial yearis furnished in note nos. 6 7 45 and 53 to the standalone financial statements of theCompany.


The Risk Management Committee (RMC) functions in line with the Non-Banking FinancialCompanies – Corporate Governance (Reserve Bank) Directions 2015 and ListingRegulations. The Committee met four times during the year its terms of reference andfunctioning are set out in the Corporate Governance Report. The Company understands thatrisk evaluation and risk mitigation is a function of the Board of the Company and theBoard of Directors are fully committed to developing a sound system for identification andmitigation of applicable risks viz. systemic and non-systemic. The Company has alsoimplemented/adopted Risk Management Policy duly approved by the Board.

To make the current Risk Management practice more robust and aligned to the industrypractice the management has set up an internationally accepted forward looking IntegratedRisk Management (IRM) Framework. This covers all risks families including but not limitedto Credit Risk Market & Interest Risk Compliance Risk Operational RiskReputational Risk and Financial Risk. The said framework facilitates identificationmeasurement mitigation and reporting of risks through constant monitoring of Key RiskIndicators within the organisation. Involvement of the Senior Management team inimplementation of the IRM framework ensures achievement of overall organisationalobjectives across all business units.

The risk management infrastructure operates on five key principles:

1. An overarching Risk Appetite Statement that defines the shape of the portfoliodelivering predictable returns through economic cycles and optimizing enterprise-widerisk-return and capital deployment.

2. Independent governance and risk management oversight.

3. Establishment of forward looking Strategic Risk Assessment with pre-emptive creditand liquidity interventions to ensure proactive early action in the event of emergingmarket adversity.

4. Maintenance of well-documented risk policies with performance guardrails.

5. Extensive use of risk and business analytics and credit bureau as an integral partof decision making process.

The Integrated Risk Management group is headed by the Chief Risk Officer who isresponsible for overseeing Magma's risk functions including credit risk market riskcompliance risk operational risk reputational risk and financial risk across allbusinesses products and processes.

Credit Risk

Magma adopts an independent approval process guided by product policies customerselection criteria credit acceptance criteria and other credit underwriting processes forsanctioning and booking each loan. This allows each customer to be independently assessedbased on both financial and non-financial measures.

All credit policies are clearly documented and approved by the Risk ManagementCommittee of the Board. Credit policies are reviewed on a periodic basis driven by changesin macro-economic industry/segment and credit bureau in addition to internal portfolioperformance.

Credit approval and administration is managed through a judicious use of Credit RuleEngine assessment by seasoned credit appraisal experts and an appropriate delegation ofcredit authority.

Portfolio quality improvement is a constant exercise. We use the statistical benchmarkof Early Warning Indicators and Continuous Portfolio Monitoring Indicators and basis theseindicators carry out Hind sighting exercise to make appropriate intervention in the CreditPolicy to further improve the portfolio quality and reduce the ultimate losses. During theend of financial year we have been faced with unprecedented health and economic crisis onaccount of COVID-19 which has led us to further enhance the credit processes due touncertain economic conditions. All Credit approved customers were again approached tounderstand the need for loan in uncertain scenario and appropriate actions viz.withdrawing of Credit approval has been taken where we found that the customer may notneed the loan anymore. We have surveyed more than 200000 customers to understand theeffect the crisis has on them and obtained invaluable feedback which will help us furthermodify our credit policies and processes.

Operational Risk management

Operational risk framework is designed to cover all functions and verticals towardsidentifying the key risks in the underlying processes.

The framework at its core has the following elements:

1. Documented Operational Risk Management Policy.

2. Well defined Governance Structure.

3. Use of Identification & Monitoring tools such as Loss Data Capture (LDC) Riskand Control Self-Assessment (RCSA) Key Risk Indicators (KRIs).

4. Standardized reporting templates reporting structure and frequency.

5. Regular workshops and training for enhancing awareness and risk culture.

Magma has adopted the internationally accepted 3-lines of defense approach tooperational risk management.

First line - Each function/vertical undergoes transaction testing to evaluate internalcompliance and thereby lay down processes for further improvement. Thus the approach is"bottom-up" ensuring acceptance of findings and faster adoption of correctiveactions if any to ensure mitigation of perceived risks.

Second line – Independent risk management vertical supports the first line indeveloping risk mitigation strategies and provides oversight through regular monitoring.All key risks are presented to the Risk Management Committee on a quarterly basis.

Third line – Internal Audit conducts periodic risk-based audits of all functionsand process to provide an independent assurance to the Audit Committee.

In FY20 the Operational Risk (OR) team has helped identify assess monitor andmitigate risks across the organization. RCSA exercises and OR reviews have been conductedfor key business units / support functions and action plans have been developed to plugprocess gaps. The OR team helps senior management monitor risks through quarterlyreporting of OR information to the RMC.

The OR team has also developed an Event Risk register to document the risks theorganization is exposed to and corresponding controls put in place to deal with theCOVID-19 situation.

Fraud Risk Management


Fraud can undermine the effective functioning and divert scarce and valuable resourcesof the organization. Moreover fraudulent and corrupt behavior can seriously damagereputation and diminish trust to deliver results in an accountable and transparent manner.To combat the fraud the organization has effective corporate governance and framework forpreventing identifying reporting and effectively dealing with fraud and other forms ofcorruption. Magma is consistently putting effort to prevent detect and contain frauds.There is an independent Unit (Fraud Risk Management) to monitor investigative detect andprevent frauds.


Magma is committed to preventing identifying and addressing all acts of fraud againstthe organization whether committed by the staff members or other personnel or by thirdparties. Magma Fincorp has zero tolerance for fraud. To this effect Magma Fincorp iscommitted to raising awareness of fraud risks implementing controls aimed at preventingfraud and establishing and maintaining procedures applicable to the detection of fraud.

Governance Structure

As a second line of defense Fraud Risk Management monitors & checks compliance andreport all fraud risks in the institution on ongoing basis. The independent functionreports into the Chief Risk Officer. All frauds as specified by the regulator are beingmonitored by the Audit Committee and Board of Directors.

Roles and Responsibility of Fraud Risk Management

Component Principle
Control Environment Fraud Risk Operating manual is developed and reviewed periodically.
All processes are being reviewed through
ORM and Fraud risk to mitigate unforeseen gaps
Risk assessment Comprehensive fraud risk assessments are done in support with ORM.
Processes are being reviewed to plug the gaps.
Learning through investigations is shared to mitigate the open risks for more effective policy.
Control activities Preventive and detective fraud control activities are deployed to mitigate the risk of fraud events occurring or not being detected in a timely manner.
Customer Screening through documents review
Fraud prevention tool for sophisticated de- duplication
Investigations & Mystery Shopping
Post Disbursement Checks
Branch Assurance
Negative Database Repository
Regulatory reporting
Information & communication Magma has established a communication process to obtain information about potential fraud through whistle blower policy and has deployed a coordinate approach to investigation and corrective action to address fraud appropriately and in a timely manner.
Monitoring All frauds are reported to the regulator and are reviewed by the Audit Committee as well as board of directors.

Enhanced surveillance during lockdown

In the COVID 19 scenario intensified surveillance activities by FRM are now happeningon a regular basis. Findings are being shared with respective businesses and correctiveactions monitored.

The FRM department also focuses on the training of other functions (credit andoperations) for better fraud prevention by the first line of defense.

Market Risk

Any mismatch in tenures of borrowed and disbursed funds may result in liquidity crisisand thereby impact the Company's ability to service its loans. Thus it is imperative thatthere exists nil or minimal mismatch between the tenure of borrowed funds and assetsfunded. Magma has well-defined treasury policies for managing liquidity investmentsinterest rate and borrowings. The Company has endeavored to maintain appropriate assetliability maturity with regard to its tenure and interest rates.

The Company has taken the following measures to rectify/bridge the cumulative negativemismatch and diversify the borrowing profile in the FY2019-20:

1. Raised long term funds from banks and financial institutions.

2. Raised long term funds through Securitisation

3. Raising long term funds through private placement and public issue of Secured NCDs.

4. Fully repaid the short-term Commercial Paper

Foreign exchange risk

The Company does not have any exposure to foreign exchange risk since itsdisbursements are in rupee terms and the nature of its borrowings are also in domesticrupee debt.

Liquidity risk management

Magma over a period of 3 decades has worked meticulously to diversify its borrowingprofile and has repeatedly enhanced the set of institutions it borrows from. Suchdiversified and stable funding sources emanate from several segments of lenders such asBanks Insurance Companies Mutual Funds Pension funds Financial and other institutionsincluding Corporates and Foreign Portfolio Investors. In addition to this the Company hasestablished an excellent track record in its access to the securitization / assignmentmarket. As a matter of prudence and with a view to manage liquidity risk at optimumlevels Magma keeps suitable levels of unutilized bank limits to effectively mitigatepossible contingencies arising out therefrom.

The Company has in place an Asset Liability Management Committee (ALCO) comprising ofBoard Members which periodically reviews the asset-liability positions cost of fundsand sensitivity of forecasted cash flows over both short and long-term time horizons.

It accordingly recommends for corrective measures to bridge the gaps if any. The ALCOreviews the changes in the economic environment and financial markets and suggestssuitable strategies for effective resource management. This results in proper planning onan on-going basis with respect to managing various financial risks viz. asset liabilityrisk foreign currency risk and liquidity risk.

The Company has a comfortable liquidity position by way of unutilized Bank line andinvestment in Fixed Deposits and further supported by funds raised through Term LoansSecured Debentures and Securitization.

People Risk

Magma provides a conducive work environment to its employees that enables them toperform well and hone their skills. Our policies are designed to ensure a healthy and safeworkplace free from discrimination or harassment. Our people are our most valuable assetand we are committed to attract engage and retain talent to create long-term value forour customers and stakeholders.

People risks that Magma focuses on includes following:

Inadequate availability of skilled manpower:

Limited availability of candidates with appropriate skillset experience and culturefitment.

Productivity Risk:

Longer learning curve leads to low output.

Time taken to filling of required manpower hampers installed capacity.

Succession planning:

Risk to business continuity due to lack of leadership succession.

Magma is proactive in identifying and addressing risk aspects around people and addressthem in a timely and comprehensive manner.

Further the Board is of the opinion that at present there are no material risks thatmay threaten the functioning of the Company.


Internal Control and Audit

Magma has an adequate system of internal control in place. The Company has documentedits policies controls and procedures covering all financial and operating activities. ITgeneral controls designed to provide a reasonable assurance with regard to reliability onfinancial reporting monitoring of operations protecting assets from unauthorised use orlosses compliances with regulations prevention and detection of fraudulent activitiesetc. The Company continues its efforts to align all its processes and controls withleading practices.

A well-established independent Internal Audit team reviews monitors and evaluates theefficacy and adequacy of internal control systems in the Company its compliance withoperating systems procedures and policies of the Company and its subsidiary. The scopeand authority of the Internal Audit division is derived from the Audit Charter dulyapproved by the Audit Committee.

The Audit Committee of the Board of Directors comprising of independent directorsregularly reviews the audit plans significant audit findings adequacy of internalcontrols compliance with accounting standards as well as reasons for changes inaccounting policies and practices if any. nternal Financial ControlI

The Company has in place adequate internal financial controls with reference tofinancial statements commensurate with the size scale and complexity of its operations.Review of the internal financial controls environment of the Company was undertaken duringthe year which covered testing of Process IT and Entity level controls including reviewof key business processes for updating Risk Control Matrices etc. The risk and controlmatrices are annually reviewed and control measures are tested and documented. Moreoverthe Company continuously upgrades its systems and undertakes review of policiesguidelines manuals and authority matrix. The internal financial control is supplementedby extensive internal audits regular reviews by the Management and standard policies andguidelines to ensure reliability of financial and all other records to prepare financialstatements its reporting and other data. The Audit Committee of the Board reviewsinternal audit reports given along with management responses. The Audit Committee alsomonitors the implemented suggestions. The Company has in material respect an adequateinternal financial control over financial reporting and such controls are operatingeffectively. The statutory auditors of the Company have also certified on the existenceand operating effectiveness of the internal financial controls relating to financialreporting as of March 2020.


Pursuant to Section 177(9) of the Companies Act 2013 and Regulation 4(2)(d)(iv) of theListing Regulations the Company has in place a vigil mechanism named "Breach ofIntegrity and Whistle Blower (Vigil Mechanism) Policy" to provide a formal mechanismto the Directors and employees to report their concerns about unethical behaviour actualor suspected fraud or violation of the Company's Code of Conduct or ethics policy. ThePolicy provides for adequate safeguards against victimisation of employees who avail ofthe mechanism and also provides for direct access to the Chairman of the Audit Committee.

The details of the said Policy is explained in the Corporate Governance Report and isavailable on the website of the Company at


At Magma we believe that key pillars to business are people processes product andtechnology. Our endeavour is to create a conducive environment in which all four pillarswork in harmony for the success of the organisation and its people.

Dealing with the situation arising from COVID 19 –

The global coronavirus (COVID-19) pandemic has upturned life for the mankind. Nearly1/3rd of the world's population including a large part of India has been under lockdownsince middle of March 2020. Magma navigated the crisis well. As mature organization wehad planned our Business Continuity

Plan (BCP) well ahead of the lockdown and moved to ‘Work from Home' immediatelywhen the lockdown was announced. Resultant we continued to perform with least disturbancein situation of lockdown. Some key happenings prior to and immediately post lockdown–

Each business and support function had developed SOPs on work from home and circulatedto the teams at HO Zones Regions and Branches and conducted online training throughmultiple sessions.

All our branches and offices adopted BCP since 19th March

2020 as the pilot was done in advance.

All business/functions had daily huddle at multiple levels over

VC/calls to guide the teams below and review the situation and take decisions onevolving basis.

At top leadership level we were having daily huddle to review and ensure peoplesafety and collections to the extent possible with help of digital platforms.

We set up 24*7 helpline and Emergency Response Team of

85+ people on Pan India basis to support 6300+ employees working on any health-relatedissues for self and their families and created a fund to support them financially.

The risk management team increased its vigil and sampling on cash and bank transactionsand IT teams intensified information security features.

The Board was appraised of the situation and our response to deal with emergingsituation. They were appraised on employee safety and welfare biz continuity andcontingency plans beefing up additional liquidity and maintaining cash flows.

IT systems were beefed up in terms of cloud server capacity bandwidth VPN at homes ofpeople operating from home security features augmented and surveillance systems upped toprotect against any data leakage hacking or theft in such situations.

Magma's priorities continue to be ensuring employee safety maintaining sufficientliquidity and protecting asset quality while treating our customers with care. We aredeeply concerned about our customer's health and safety and we will stand by them inthese difficult times.

Learning and development

In continuation of our efforts to make Magma a self-developing Organization we havetaken various learning initiatives delivered through an e-Learning platform and instructorled programs. This year special emphasis has been on developing ‘digital learningmediums' though Magma has been using webinars way before COVID came. We have been doingwebinars since June 2019 and have converted our Induction program to a digital medium.

Few Key Learning Initiatives taken during the year across businesses:

1) A program named Neenv for Assistant Managers and Branch Managers (AM/BM) to helpbuild performance driven culture. Managerial effectiveness Session are conducted to helphandhold team members to deliver enhanced productivity and add to the overall growth andsuccess of our organization: a. Huddle Day - Monthly knowledge intervention at Branches byAM/BM to update Field Officers on new developments share knowledge Inputs and Gapsnoticed chalk out plan on last month's improvement and identify focus areas andappreciate performers.

b. Performance Coaching - Great managers strive to do right for their employees - treatthem well motivate them to succeed and provide the support and coaching each personneeds. Keeping with the ethos a focused group of AMs & BMs are regularly made topractice on the skills on factual scenarios.

2) Functional Learning Support through - Nuggets/Videos/ Webinars.

3) Support in times of COVID 19 -a. Inform Guide and Nurture employees to sustainduring COVID and lockdown times b. Create a platform for Idea Generation quizzes andcontests c. Prepare for "bounce back" scenarios d. Constant reskilling –Nuggets/Videos/Webinars

The key focus is to leverage L&D and business partnership to co-create novellearning methods and embedding them to deliver business outcomes.

Driven by technology

We have embedded technology to ease our people processes. Our onsite PeopleSoftplatform has all modules which are delivered on the internet including recruitmentemployee confirmation performance management separation for employees and real-timedashboard for leaders to take informed decisions. We continue to ensure a great new joineeexperience through our online Onboarding program right from joining formalities to theinduction in the Organisation and subsequently all employee Policies and information allof it happens online.

Incentive schemes

Incentive is an important driver of business outperformance. We have schemes foremployees in Line (revenue generating customer facing) roles designed with clear keyperformance indicators (KPIs). The scheme design incorporates specific nuances to ensurethat each plan is aligned with the business objectives. At the frontline we have monthlyincentive schemes while at supervisory roles the frequency is quarterly and annually.These are dynamic schemes that reflect changes in the external macroeconomics environmentand revisited each year.

We also launched the" Monthly Performance Review Management" (MPRM) program– first of its kind in Magma where monthly performance communications were sent tothe frontline staff. With the help of this program we institutionalized the "MonthlyManager Review" as a performance culture practice.

Key HR Initiatives

Our retention strategy starts from the hiring stage and continues through the entireemployee life cycle management. We are having the following retention strategies:

Hire people who meet the job role and Value system of


Promote people Internally as the first choice for a vacant position

To strengthen our new joinees experience we launched

"Aarambh" and "Maitree 3.0"

Launched performance recognition programs-"MPRM"

Launched a technology platform to facilitate resolution of employee queries

Launched monthly Reward & Recognition programs to achieve business outcomes


In the coming year Magma is focusing upon following areas in the People Agenda:


Initiatives are being deployed to create stories and symbols that manifest the Valuesof integrity collaboration and respect.


- Managerial capability enhancement through training and coaching - To drive successionplanning and career progression

- Leverage the Talent Council framework for internal promotions.


- Re-enforcement of Supervisor accountability and responsibility.

- Deploy performance review framework.


- Promote and conduct organisation level communication initiatives such as Leadershipinteraction through webcast

- "Vartalaap" Annual day celebration-"Magma Mahotsav".

- Programs for Regular engagement with employees across all levels.

Prevention of Sexual Harassment at Workplace

The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a ‘Policy for Prevention of Sexual Harassment' to prohibit prevent or deterany acts of sexual harassment at workplace and to provide the procedure for the redressalof complaints pertaining to sexual harassment thereby providing a safe and healthy workenvironment in line with the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition & Redressal) Act 2013 and the rules thereunder. We have alsoconstituted an Internal Committee to consider and address sexual harassment complaints inaccordance with Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. During the year under review one complaint of sexual harassment wasreported by the Internal Committee. Appropriate action has been taken and the complaintwas disposed off during the year. To build awareness and appreciation of this area wehave implemented an online knowledge module leveraging our learning management system.

The focus in the coming year is to emphasis and embed ethical work practices andintegrity driven behaviour as one of the prime employee behaviour. For this effect one ofthe core initiatives is to embed evaluation of this behavior in every step of the employeelife cycle i.e. from recruitment to separation.


Magma continues to anchor on technology to drive efficiency and effectiveness ofcritical functions across the value chain of processes encompassing Customer servicesales operations and risk management. This year Information Technology focused onempowering the sales and Customer service teams with reduced turnaround time improveddecision making and higher productivity to improve Customer engagement and the quality ofservice. The controls and the workflow for credit risk assessment were significantlyenhanced through automated policy rules and scorecards. In this year Magma also embarkedupon its digital transformation journey on the cloud.

As part of Project Navodaya a brand new cloud based loan origination system (LOS)along with credit approval engine (rule based decision making) was implemented for SMEline of business with an objective of providing a high availability application that canquickly scale up as per the growth needs of the business. The new application wasdeveloped keeping in mind a workflow driven design that caters to a digital journey withminimal requirement of physical documents. The same is underway for our Mortgage businessand will be launched in FY21. Additionally the Business

Process Re-engineering exercise led revamp of the ABF LOS resulted in substantial gainsin field team productivity.

The analytics based automated Credit Engine for SME business has improved theconsistency in decision making and increased the process efficiency of credit riskassessment through straight-through processing while delivering the economy of scale. TheCredit Engine is directly integrated with the new loan origination solution on cloud toprovide reliable and timely decisions for SME loan products.

A completely automated capability was developed for Field Officers on the ground toenable incentive payment immediately upon deal booking. The automation has improved themorale of Field Officers thus ensuring higher productivity.

The augmentation of the mobile sales and collection applications to support the‘bring your own device' (BYOD) flexibility for the Field

Officers have resulted in increased productivity and efficiency for them along withcost savings for the Company by eliminating the need to procure Company owned tablets.

Data Analytics continues to remain as a top enabler for Magma and the implementation ofoperational data store and data marts is a great stride forward towards elevating maturityin business intelligence and insights driven decision making. The data marts anddownstream analytics will accelerate delivery of business insights and performancereporting and will additionally enhance the architecture of solutions under businessinsights portfolio to be future ready.

The introduction of robotic process automation (RPA) technology for intelligentautomation of back-office processes is bolstering efficiency and accuracy at a lower costof operations. The organization continues to persistently identify opportunities forimproving productivity and turn-around-time in key processes through meticulous leverageof proven technology tools and platforms.

The COVID 19 situation developed rapidly from the end of March 2020 and Magma couldsuccessfully use technology to empower its employees to work from home and remainproductive while not compromising on information and cyber security. During FY2020-2021the Information Technology will continue to deliver digital capabilities by drivingproductivity improvements reducing turnaround-time for disbursements and opening up newavenues of business opportunities.


Some of the key initiatives undertaken by Magma during the year are:

Marketing Activities

Magma continues to tap the markets through organising focused marketing activities suchas Loan Mela in various markets. This accelerated a flow of enquiries strengthened thebrand recall and channel relationships. Our maiden NCD Campaign saw an ATL blitz includingprint electronic outdoor and Digital campaigns which added to the brand awareness andrecall in major markets.

Digital initiatives

We strengthened our presence on digital platforms. The objective is to reinforceconnect with customers and dealers. We beefed up our presence on social media channelssuch as Facebook Linkedin Twitter with regular business updates posts on the variousachievements of the Company. Further Magma posted various articles TV interviewscontributed by the management which helped in Thought leadership.

Internal activities

The internal communication team hosts several business driving contests for our salesand collection teams. These contests motivate our teams and strengthens our relationshipwith the Channels. Regular organisational updates through e-mailers and internal brandingemployee engagement activities virtual town halls such as vartalaap and alaap reward& recognition programmes formed important part of Magma's internal brandinginitiative.

Customer connect programmes

During FY20 we focussed on cross sell to the existing customer base. Red Carpet Day(Grahak Diwas) activation was undertaken at 200 odd branches on a particular day of themonth giving special offering to customers with good track record. Promotional initiativesincluded the use of mass SMS blast tele-calling and branch branding.

Public Relations

Magma maintained its corporate image with external stakeholders and the mediathroughout the year. Our views on the NBFC industry business outlook product innovationshave all been covered by the best in the financial media print and electronic mediachannels. Interviews of senior management authored articles and views on industry changeswere the highlights of the year. We also made our presence felt at large BFSI andTechnology events where the Magma leadership shared their industry views. We won NBFC ofthe Year 2019 at the Indian Banking Summit apart from being recognised at large forum forour achievements in Information Technology Corporate Social Responsibility and CorporateCommunications.

Corporate Social Responsibility (CSR)

Magma continued to invest in our flagship CSR programmes to give back to societythroughout the year. Our initiatives such as Highway Heroes M-Scholar M-Care Swayametc. made large scale impact on society and grabbed industry attention. We were recognisedwith as many as three awards for the excellence in CSR in FY20 from notable organisationsuch as IPE Asian Customer Engagement Forum and UBS Forum.

We continued to invest in ending Class room hunger by way of sponsoring midday meal forkids from underprivileged families in 7 states. Even the employees as part of corporatevolunteering contributed for the same cause through notable NGO Akshay Patra Foundation.


Magma aims to be the most trusted and accessible financial services institutionpromoting financial inclusion and creating value for all its stakeholders. CustomerService is a key focus area for our Company. Our Company also believes in integrity goodgovernance professionalism transparency and client satisfaction.

In FY20 several key initiatives were undertaken to transform Customer Experience:mplementationI of Net Promoter Score (NPS) which is a leading indicator of CustomerLoyalty and Cross Sell. We have tied up with Litmus World a leading brand in CustomerLoyalty Assessment to conduct NPS survey through independent assessment. Customerexperience across key touch points

– Sales Onboarding Service and Exit conducted based on a detailed questionnaire.Projects undertaken based on feedback received during NPS survey has resulted insignificant improvement in NPS which has gone up from 18% to 33% (80% increase)

Asset finance business has an extremely healthy NPS score in the range of 40 -45 whichis one of the best in the industry. As the next step towards strengthening CustomerCentricity Culture Customers are asked to rate their experience with Field O_cers.Structured Customer Engagement program is implemented –Proactive connect to preventcomplaints etc.

Post implementation of Customer Relationship Management solution (Microsoft Dynamics)for Customer Service and Lead Management in FY 2019 Magma continues to track the benefitsrealized and work on the next level of customization needed.

Bene_ts realized in FY20:

Registration of Query Request and Grievance has increased by 3 times Average callhandling time has reduced by 50% Time taken for request & complaint resolution hasincreased by 30% Lead generation has tripled from average 4000 leads to 12000 leads amonth. Cross Sell disbursal volume has also tripled from average H 40 Crore to H 120 Crorea month.

In order to ensure we treat customers fairly we have implemented the following:


Tariff sheet included in Welcome Letter to ensure complete transparency of all charges.SLA for each request & complaint communicated to customer at the time of registration.Voice of customer recorded for every request & complaint that gets resolved to trackcustomer satisfaction.

Servicing customers in their preferred language

Agreement copy in vernacular languages are displayed at branches and uploaded onwebsite. Sanction letter is also provided in vernacular language & acknowledgementtaken.

Customer calls & SMS are handled in regional language to maintain & increaseawareness.

Handling Grievances e_ectively:

Mode of Welcome Letter & Agreement copy dispatch changed to registered post toavoid delay in document receipt. 100% of complaints are resolved in 15 days.

Complaints RCA Forum conducted on a quarterly basis to address key process gaps.




On the recommendation of the Nomination and Remuneration Committee Mr. Bontha PrasadaRao (DIN: 01705080) and Mr. Sunil Chandiramani (DIN: 00524035) were appointed asAdditional Directors in the capacity of Non-Executive Independent Directors for a periodof 3 years with effect from 10th December 2019 to 9th December 2022 subject to theapproval of the Members at the ensuing Annual General Meeting (AGM).

Mr. Rao and Mr. Chandiramani were not disqualified from being appointed as Directors asspecified in terms of Section 164 of the Companies Act 2013.

Appropriate resolution seeking your approval to the aforesaid appointment along withbrief profile of Mr. Rao and Mr. Chandiramani is appearing in the Notice convening the40th AGM of your Company.


Mr. Narayan K Seshadri (DIN:00053563) was re-appointed as an Independent Director ofthe Company for another period of five years with effect from 25th September 2019 to 24thSeptember 2024 considering his expertise skills and knowledge particularly in the fieldof finance and accounts. His re-appointment as Independent Director was approved at the39th AGM by the Members. He is not liable to retire by rotation.

Retirement by Rotation

In accordance with the provisions of the Companies Act 2013 and Regulation 36 of theListing Regulations Mr. Mayank Poddar (DIN: 00009409) retires at the ensuing AGMand being eligible offers himself for re-appointment.

The brief resume/details relating to Director who is to be reappointed is furnished inthe Notice of the ensuing AGM.

The Board of Directors of your Company recommends the reappointment of the Directorliable to retire by rotation at the ensuing AGM.


Ms. Madhumita Dutta-Sen (DIN:07885010) Nominee of International Finance Corporation(IFC) who was appointed as a Non-Executive Director of the Company on 28 August 2017resigned as a Director from the close of business hours of 15 May 2019. The Board ofDirectors recognizes and places on record her valued contribution and unstinted support tothe Company in the capacity of director.

Mr. Satya Brata Ganguly (DIN: 00012220) who was first appointed as Non-ExecutiveIndependent Director on the Board of the Company on 16 July 2010 and was reappointed asNon-Executive Independent Director for a term of five consecutive years with effect from25 September 2014 pursuant to the provisions of the Companies Act 2013 has completed thetenure of his directorship on 24 September 2019 and relinquished his office as theIndependent Director of the Company. The Board has placed on record its deep sense ofappreciation of the valuable contribution made by Mr. Ganguly during his long associationwith the Company. ndependent DirectorsI

The Company has received declarations pursuant to Section 149(7) of the Companies Act2013 from all the Independent Directors (IDs) of the Company confirming that they meetthe criteria of independence as prescribed both under Section 149(6) of the Companies Act2013 read with rules framed thereunder and in terms of Regulation 16(1)(b) of ListingRegulations. All the IDs of the Company have registered their names with the data bank ofIDs maintained by Indian Institute of Corporate Affairs (IICA).

In terms of Regulations 25(8) of the Listing Regulations the Independent Directorshave confirmed that they are not aware of any circumstance or situation which exists ormay be anticipated that could impair or impact their ability to discharge their duties.The Board is of the opinion that the independent directors appointed during the year haverequisite experience and expertise (including proficiency).

Separate meeting of the Independent directors was held on 30 January 2020.

Fit and Proper Policy

All the Directors of the Company have confirmed that they satisfy the "fit andproper" criteria as prescribed in Chapter XI of RBI Master Direction No. DNBR. PD.008/ 03.10.119/2016-17 dated 1st September 2016 and that they are not disqualified frombeing appointed/continuing as Directors in terms of Section 164(2) of the Companies Act2013.

Familiarisation Programme for Independent Directors

In compliance with the requirement of Regulation 25 of Listing Regulations the Companyhas put in place a Familiarisation Programme for the Independent Directors to familiarisethem about the Company and their roles rights responsibilities in the Company. Thedetails of the Familiarisation Programme along with the number of hours spent by each ofthe Independent Directors during the Financial Year 2019-20 is explained in the CorporateGovernance Report. The same is also available on the website of the at

Performance Evaluation

The Board of Directors has carried out an annual evaluation of its own performanceBoard Committees and individual Directors pursuant to the provisions of the CompaniesAct 2013 and Listing Regulations.

The Board evaluated the effectiveness of its functioning and that of the Committees andof individual directors by seeking their inputs on various aspects of Board/CommitteeGovernance through structured questionnaire.

The aspects covered in the evaluation included the contribution to and monitoring ofcorporate governance practices participation in the long-term strategic planning and thefulfilment of Directors' obligations and fiduciary responsibilities including but notlimited to active participation at the Board and Committee meetings.

The Chairman of the Board had one-on-one meetings with the Independent Directors andthe Chairman of the Nomination and Remuneration Committee had one-on-one meetings with theExecutive and Non-Executive Directors. Also the Nomination and Remuneration Committee hascarried out evaluation of every director's performance and reviewed the self-evaluationsubmitted by the respective directors. These meetings were intended to obtain Directors'inputs on effectiveness of Board/Committee processes.

The Board considered and discussed the inputs received from the Directors. Further theIndependent Directors at their meeting reviewed the performance and role ofnon-independent directors and the Board as a whole and Chairman of the Company. Furtherthe Independent Directors at their meeting had also assessed the quality quantity andtimeliness of flow of information between the

Company management and the Board that was necessary for the Board to effectively andreasonably perform their duties.

Outcome of evaluation process

Based on inputs received from the members it emerged that the Board had a good mix ofcompetency experience qualifications and diversity. Each Board member contributed inhis/her own manner to the collective wisdom of the Board keeping in mind his/her ownbackground and experience. There was active participation and adequate time was given fordiscussing strategy. Overall the Board was functioning very well in a cohesive andinteractive manner.

Previous year's observations and actions taken

Based on the evaluation undertaken few observations and action taken for FY2018-19inter-alia include: In respect of Regulatory Changes it was suggested that a short smartnote should be circulated to the Board Members as soon as possible highlighting thechanges and implications on the Industry/ Company. The Company regularly updates the Boardon the regulatory changes along with its impact on the Company. Further regulatory updatesand its impact on the industry also forms part of the presentation placed at the Committeeand Board Meetings on a quarterly basis.

Independent interactions with the internal auditors: The internal auditor and thestatutory auditor had a separate session with the independent directors of the Company atthe Audit Committee meeting.

Proposed actions based on current year observations

Based on the evaluation of FY2019-20 some areas of improvement were suggestedspecifically highlighting the following points: In respect of important development inregulatory changes taxation rating and legal environment concerning our business ashort smart note should be circulated to the Board Members as soon as possiblehighlighting the changes and implications on the Industry/ Company.

Introduction of the Pre-audit meeting. Conducting a strategy session.

Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committeeadopted the Remuneration Policy which interalia includes policy for selection andappointment of Directors Key Managerial Personnel Senior Management Personnel and theirremuneration. The salient features of the Remuneration Policy is stated in the CorporateGovernance Report.

Key Managerial Personnel

In terms of Section 203 of the Companies Act 2013 the following are the KeyManagerial Personnel (KMP) of the Company as on 31 March 2020:

1. Mr. Mayank Poddar Chairman Emeritus and Whole Time Director;

2. Mr. Sanjay Chamria Vice Chairman and Managing Director;

3. Mr. Kailash Baheti Chief Financial Officer;

4. Mrs. Shabnum Zaman Company Secretary;

Code of Conduct for Directors and Employees

The Company has adopted a Code of Conduct for its Directors and employees including acode of conduct for Independent Directors which suitably incorporates the duties ofIndependent Directors as laid down in the Companies Act 2013. The said Codes can beaccessed on the Company's website at

In terms of the Listing Regulations all Directors and Senior Management Personnel haveaffirmed compliance with their respective codes. The Vice Chairman and Managing Directorhas also confirmed and certified the same which certification is provided at the end ofthe Report on Corporate Governance.


To the best of our knowledge and belief your Directors make the following statementsin terms of Section 134 (5) of the Companies Act 2013:

a. that in the preparation of the annual accounts for the year ended 31 March 2020 theapplicable Ind AS have been followed along with proper explanation relating to materialdepartures if any; b. that such accounting policies as mentioned in Notes to the annualaccounts have been selected and applied consistently and judgement and estimates have beenmade that are reasonable and prudent so as to give a true and fair view of the state ofaffairs of the Company as at 31 March 2020 and of the profit of the Company for the yearended on that date; c. that proper and sufficient care has been taken for the maintenanceof adequate accounting records in accordance with the provisions of the Companies Act2013 for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; d. that the annual accounts have been prepared on a going concernbasis; e. that proper internal financial controls are in place and that the financialcontrols are adequate and are operating effectively; and f. that proper systems to ensurecompliance with the provisions of all applicable laws are in place and that such systemsare adequate and operating effectively.


Minimum four pre-scheduled Board meetings are held annually. Additional Board meetingsare convened by giving appropriate notice to address the Company's specific needs. In caseof business exigencies or urgency of matters resolutions are passed by circulation.

During the year six Board Meetings and five Audit Committee Meetings were convened andheld the details of which are given in the Corporate Governance Report. The interveninggap between the meetings was within the period prescribed under the Companies Act 2013and Listing Regulations.


The Committees of the Board focus on certain specific areas and make informed decisionsin line with the delegated authority.

Pursuant to the completion of tenure of Mr. Satya Brata Ganguly and appointment ofIndependent Directors in the Company the Audit Committee Nomination and RemunerationCommittee Stakeholders' Relationship Committee and Corporate Social ResponsibilityCommittee were reconstituted.

Audit Committee

The Audit Committee presently comprises of Mr. Sunil Chandiramani who serves as theChairman of the Committee Mr. Narayan K Seshadri Mr. V K Viswanathan and Mrs.Vijayalakshmi R Iyer as other members. The terms of reference of the Audit Committee hasbeen furnished in the Corporate Governance Report. All the recommendations made by theAudit Committee during the year were accepted by the Board.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee presently comprises of Mr. V K Viswanathanwho serves as the Chairman of the Committee Mr. Narayan K Seshadri and Mr. Bontha PrasadaRao as other members. The charter of the Nomination and Remuneration Committee has beenfurnished in the Corporate Governance Report.

Stakeholders' Relationship Committee

TheStakeholders'RelationshipCommitteepresentlycomprisesofMr. Bontha Prasada Rao whoserves as the Chairman of the Committee Mrs. Vijayalakshmi R Iyer and Mr. Sanjay Chamriaas other members. The terms of reference of the Stakeholders' Relationship Committee hasbeen furnished in the Corporate Governance Report.

Corporate Social Responsibility (CSR) Committee

The Corporate Social Responsibility Committee presently comprises of Mr. Mayank Poddarwho serves as the Chairman of the Committee and Mr. Bontha Prasada Rao and Mrs.Vijayalakshmi R Iyer as other members.

The Annual Report on CSR activities is annexed herewith and marked as Annexure 1. Theother Committees of the Board are Management Committee Asset Liability ManagementCommittee Risk Management Committee Review Committee and the IT Strategy Committee. Theterms of reference of these Committees have been furnished in the Corporate GovernanceReport.


In line with the requirements of the Companies Act 2013 and the Listing Regulationsthe Company has formulated a Policy on Related Party Transactions and the same can beaccessed on the Company's website at its weblink i.e. transactions with Related Parties are placed before the Audit Committee for approval.All related party transactions that were entered into during the financial year were on anarm's length basis and in the ordinary course of business the particulars of suchtransactions are disclosed in the notes to the financial statements. Disclosures ofrelated party transactions of the Company with the promoter/promoter group which holds 10%or more shareholding in the Company is given in note no. 44 to the standalone financialstatements. The nature of related party transactions require disclosure in AOC-2 the sameis attached with this Report as


The Policy on Related Party Transactions is available on the Company's website at itsweblink i.e.


There were no significant material orders passed by the Regulators / Courts / Tribunalswhich would impact the going concern status of the Company and its future operations.


M/s. B S R & Co. LLP Chartered Accountants Bangalore bearing Registration No.101248W/W-100022 have been appointed as the Statutory Auditors of the Company for a periodof 5 years from the conclusion of the 36th AGM (for FY2015-16) till the conclusion of the41st AGM (for FY2020-21).

The Statutory Auditors have given a confirmation to the effect that they are eligibleto continue with their appointment and that they have not been disqualified in any mannerfrom continuing as Statutory Auditors. The remuneration payable to the Statutory Auditorsshall be determined by the Board of Directors based on the recommendation of the AuditCommittee.

The standalone and the consolidated financial statements of the Company have beenprepared in accordance with Indian Accounting Standards (Ind AS) notified under Section133 of the Companies Act 2013.

The notes on financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors Report does notcontain any qualification reservation adverse remark or disclaimer. However theStatutory Auditor has observed that the managerial remuneration paid to Mr. SanjayChamria Vice Chairman and Managing Director of the Company exceeds the prescribed limitsunder Section 197 read with Schedule V to the Companies Act 2013 for which the Companyproposes to obtain requisite shareholder's approval vide special resolution in the ensuingAnnual General Meeting.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company has appointed M/s. MKB & Associates Practicing Company Secretaries[Membership No-7596] to conduct the Secretarial Audit for the FY2019-20. The SecretarialAudit Report confirms that the Company has complied with the provisions of the CompaniesAct 2013 Rules Listing Regulations and Guidelines and that there were no deviations ornon-compliances.

The Secretarial Audit Report for the financial year ended 31 March 2020 is annexedherewith and marked as Annexure-2. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.


Maintenance of cost records and requirement of cost audit as prescribed under theprovisions of Section 148(1) of the Companies Act 2013 are not applicable in respect ofthe business activities carried out by the Company.


The Company complies with all applicable secretarial standards.


As stipulated in Regulation 34(2)(f) of the Listing Regulations the BusinessResponsibility Report describing the initiatives taken by the Company from environmentalsocial and governance perspective forms part of this Report and is annexed as Annexure- 3.


Your Company complies with the provisions laid down in Corporate Governance laws. Itbelieves in and practices good corporate governance. The Company maintains transparencyand also enhances corporate accountability. In terms of Regulation 34 of ListingRegulations read with Schedule V the following forms part of this Report: (i) Declarationregarding compliance to Code of Conduct by Board Members and Senior Management Personnel;(ii) A certificate from a Practicing Company Secretary that none of the directors on theBoard of the Company have been debarred or disqualified from being appointed or continuingas directors of companies by the Board/Ministry of Corporate Affairs or any such statutoryauthority;

(iii) Report on the Corporate Governance and

(iv) Auditors' Certificate regarding compliance of conditions of Corporate Governance.


Your Company does not have any activity requiring conservation of energy or technologyabsorption and foreign exchange earnings and outgo.


Pursuant to Sections 92 and 134(3) of the Companies Act 2013 and Rule 12 of theCompanies (Management and Administration) Rules 2014 the details forming part of theextract of the Annual Return in form MGT 9 forms part of this Report and is annexedherewith and marked as Annexure-4.


In terms of the provisions of Section 197(12) of the Companies Act 2013 (‘theAct') read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 and Companies (Appointment and Remuneration ofManagerial Personnel) Amendment Rules 2016 a statement showing the names and otherparticulars of the employees drawing remuneration in excess of the limits set out in thesaid rules are provided in this Report and marked as Annexure-5.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 and Companies (Appointment and Remuneration ofManagerial Personnel) Amendment Rules 2016 are also provided in this Report and marked asAnnexure-5.


Pursuant to Section 124(5) of the Companies Act 2013 read with Investor Education andProtection Fund Authority (Accounting Audit Transfer and Refund) Rules 2016 (asamended from time to time) relevant amount which remained unpaid or unclaimed for a periodof seven years have been transferred by the Company from time to time on due dates tothe Investor Education and Protection Fund (IEPF). During the year under review yourCompany has transferred H 513714/- (Rupees Five Lakh Thirteen Thousand Seven Hundred andFourteen Only) to IEPF.

Pursuant to Section 124 (6) of the Companies Act 2013 and read with Rule 6 of theInvestor Education and Protection Fund Authority

(Accounting Audit Transfer and Refund) Rules 2016 (as amended from time to time)all the underlying shares in respect of which dividends are not claimed/paid for the lastseven consecutive years or more are liable to get transferred to the IEPF DEMAT Accountwith a Depository Participant as identified by the IEPF Authority. Accordingly during theyear under review 16099 equity shares of face value of H 2/- each were transferred toIEPF DEMAT Account.

The Company has uploaded the details of unpaid and unclaimed amounts lying with theCompany as on 1 August 2019 (date of last Annual General Meeting) and also the details ofequity shares transferred to IEPF DEMAT Account on the Company's website( and also on the Ministry of Corporate Affairs' website(


During the year under review neither the statutory auditors nor the secretarialauditor has reported to the Audit Committee under Section 143 (12) of Companies Act 2013any instances of fraud committed against the Company by its officers or employees thedetails of which needs to be mentioned in the Board's Report.


Your Directors would like to record their appreciation of the hard work and commitmentof the Company's employees and warmly acknowledge the unstinting support extended by itsbankers alliance partners and other stakeholders in contributing to the results.


Statements in the Board's Report and Management Discussion and Analysis describing theCompany's objectives outlook opportunities and expectations may constitute "ForwardLooking Statements" within the meaning of applicable laws and regulations. Actualresults may differ from those expressed or implied expectations or projections amongothers. Several factors make a significant difference to the Company's operationsincluding the government regulations taxation and economic scenario affecting demand andsupply natural calamity and other such factors over which the Company does not have anydirect control.

For and on behalf of the Board
Narayan K Seshadri Sanjay Chamria
Chairman Vice Chairman and Managing Director
DIN: 00053563 DIN: 00009894
18 June 2020