Billionaire Poonawalla has put the money where his mouth is⁠— housing finance and general insurance

Feb 11, 2021

By: BI India Bureau

Vaccine maker Adar Poonawala decided to take charge of Magma Fincorp and the stock spiked 10 percent

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Poonawalla bought Magma Fincorp⁠ because he saw what many others didn’t: agility

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Magma mainly lend money to those who buy cars, tractors and homes; and all three segments are struggling

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Still, Magma Fincorp managed a strong recovery from the slump in the March-June quarter. How?

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In Oct-Dec 2020, every additional rupee lent towards car loans went to those buying used cars

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Similarly, it focussed on the affordable housing, where loan disbursement was back to 80 percent of pre-COVID

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Govt has extended sops for affordable housing and that will benefit Magma, and therefore, Poonawala, further

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The more lucrative mortgage biz has gone from a fifth of its loan book (in FY17) to a quarter in last 3 years

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The company cut operating expenses by over 23 percent in the latest quarter

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And the net interest margin at 8.5 percent is at the widest it has been in over two and a half years

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Latest budget hiked FDI limit in insurance firms to 74 percent leaving room for more value to be unlocked

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All this enticed the billionaire Poonawalla, to buy a controlling stake in the company

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Now it will be called Poonawalla Finance...

...which will “further invest in its housing finance and general insurance,” the co said.

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The stock of Magma Fincorp didn’t do much in the first 9 months since the pandemic broke.

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​While the Nifty fin services index including likes of Bajaj Fin, HDFC along with top banks surged...

... Magma was in the shadows

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But the real surge in Magma came after third quarter earnings, the stock has doubled in Feb alone

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​Invest wisely

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