BUY. MAGMA FINCORP LIMITED Result Update (CONSOLIDATED BASIS): Q1 FY16 SYNOPSIS. CMP Target Price SEPTEMBER 9 th, 2015 ISIN: INE11C01022

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1 BUY CMP Target Price MAGMA FINCORP LIMITED Result Update (CONSOLIDATED BASIS): Q1 FY16 SEPTEMBER 9 th, 2015 ISIN: INE11C01022 Index Details Stock Data Sector Finance (NBFCs) BSE Code Face Value wk. High / Low (Rs.) /74.05 Volume (2wk. Avg. Q.) Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) (QUARTERLY) As on Jun-15 As on Mar-15 PROMOTER FIIs DIIs OTHERS Year Comparative Graph MAGMA FINCORP LTD BSE SENSEX SYNOPSIS Magma Fincorp Ltd provides a bouquet of financial products including financing of Utility Vehicles & Cars, Commercial Vehicles, Construction Equipment, Used Commercial Vehicles, Tractors and SME Loans. The company s consolidated net sales rose by 11.36% y-o-y of Rs million in Q1 FY16 compared to Rs million in the corresponding quarter of previous year. In Q1 FY16, Net profit after tax and minority interest jumps to Rs million an increase of 4.19% y-o-y against Rs million in Q1 FY15. Operating profit is Rs million as against Rs million in the corresponding period of the previous year. Profit before tax at Rs million in Q1 FY16 compared to Rs million in Q1 FY15, registered a growth of 11.58%. In the 1 st Quarter of FY16, Revenue from Finance and mortgages segment rose by 12% y-o-y of Rs million as compared to Rs million in the 1 st quarter of FY15. Share of Tractor, Used Assets, Mortgage and SME, tractors and used assetsini its incremental portfolio during the quarter resulting in improvement of Net Interest Margins by 63 bps and 5% increase in loan book at Rs mn as on June Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 20% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) MAGMA FINCORP LTD MAHINDRA & MAHINDRA FIN SERVICES LTD IDFC LTD POWER FINANCE CORPORATION LTD

2 QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS) Results updates- Q1 FY16, Magma Fincorp Ltd possesses a diversified product portfolio: loans for cars and utility vehicles, commercial vehicles, construction equipment, tractors, used vehicles, SME businesses, mortgage finance as well as gold loan financing, housing finance and general insurance. The company has reported it s financial result for the quarter ended 30 th June, Rs. In million June-15 June-14 % Change Net Sales PAT EPS (16.33) EBITDA The company has achieved a turnover of Rs million for the 1 st quarter of the financial year 2016 as against Rs million in the corresponding quarter of the previous year. EBITDA of Rs million in Q1 FY16 and increase of 5.61% against the corresponding period of last year. In Q1 FY16, net profit of Rs million compared to Rs million in Q1 FY15. The company has reported an EPS of Rs for the 1 st quarter as against an EPS of Rs in the corresponding quarter of the previous year. Break up of Expenditure Break up of Expenditure (Rs. In million) Q1 FY16 Q1 FY15 % Chg Employees Benefit Expenses % Depreciation & Amortization % Provision for non performing assets & bad debts % Brokerage and commission % Other Expenses %

3 Segment Revenue Segment Revenue Q1 FY16 (Rs. In million) Q1 FY15 % Change Finance and mortgages % Others % COMPANY PROFILE Magma Fincorp Limited ("Magma") is a non-deposit taking non-banking finance company (NBFC), registered with the Reserve Bank of India (RBI) as an Asset Finance Company. The Company, having started operations over two decades back, is listed on the Bombay Stock Exchange Limited and the National Stock Exchange in India. Magma provides a bouquet of financial products including financing of Utility Vehicles & Cars, Commercial Vehicles, Construction Equipment, Used Commercial Vehicles, Tractors and SME Loans. It also operates in Affordable Housing Finance and General Insurance segments. Magma has a dedicated base of around 5 Lac active customers. The company operates through 238 branches in 25 states / UT and employs around 10,443 people. In year, Magma launched loans for mortgaged finance following the acquisition of the mortgage business of GE India. Magma entered the business of gold loan financing while general insurance business was operationalised through Magma HDI General Insurance Company, a joint venture with HDI Gerling. The HDI- Gerling brand, is a part of Hannover based Talanx group, the third-largest German insurance Group operating in around 150 counties of the world.

4 FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, E I. EQUITY AND LIABILITIES: A. Shareholders Funds FY14A FY15A FY16E FY17E a) Share Capital b) Fair Value change account c) Reserves and Surplus Sub-Total-Net worth B. Minority Interest C. Non-Current Liabilities: a) Long-term borrowings b) Deferred Tax Liabilities [Net] c) Long Term Provisions Sub-Total-Long term liabilities D. Current Liabilities: a) Short-term borrowings b) Trade Payables c) Other Current Liabilities d) Short Term Provisions Sub-Total-Current Liabilities TOTAL-EQUITY AND LIABILITIES (A+B+C+D) II. ASSETS: E. Non-Current Assets: Fixed Assets i. Tangible assets ii. Intangible assets iii. Capital Work in Progress iv. Goodwill on consolidation a) Sub-total Fixed Assets b) Non Current Investments c) Long Term Loans and Advances d) Other non-current Assets Sub-Total-Non-Current Assets F. Current Assets: a) Current Investments b) Trade Receivables c) Cash and Bank Balances d) Short Term Loans and Advances e) Other Current Assets Sub-Total-Current Assets TOTAL-ASSETS (E+F)

5 Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Minority Interest Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 st Dec, 2014 to 30 th Sep, 2015E Value(Rs.in.mn) 31-Dec Mar Jun Sep-15E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Minority Interest Net Profit Equity capital Face value EPS

6 Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) EBITDA Margin (%) 67.65% 63.35% 62.11% 61.26% PBT Margin (%) 9.50% 9.50% 10.41% 10.82% PAT Margin (%) 7.67% 7.96% 8.42% 8.87% P/E Ratio (x) ROE (%) 10.62% 11.32% 11.84% 12.39% ROCE (%) 14.48% 13.20% 12.63% 12.44% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

7 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at 9.68 x FY16E and 8.34 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.9.04 and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 20% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 7.81 x for FY16E and 7.85 x for FY17E. Price to Book Value of the stock is expected to be at 1.11 x and 1.01 x respectively for FY16E and FY17E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. INDUSTRY OVERVIEW Economic Overview The growth in GDP during is estimated to be at 7.4% as compared to growth of 6.9% in , supported by slow improvement in industry and service sector, backed by some improvement in domestic demand. The dip in oil prices and the positive effects of the exchange rate movements helped the economy drift back to the path of recovery. The possible headwinds to such promising prospects, however, emanate from factors like inadequate support from the global economy, saddled with subdued global demand conditions, particularly in Europe and Japan, the recent slowdown in China, on the domestic front from possible spill-overs of sub-par agricultural growth and the challenges relating to the massive requirements of skill creation and infrastructural up-gradation. Advance Estimates for suggest that though the global sluggishness has partly fed into the lacklustre growth in foreign trade; yet this downward pressure has been compensated by domestic demand. Industry Overview The sale of new Passenger Cars & MUVs (Multi Utility Vehicles) recorded a growth of 3.9% during against6.1% de-growth in , mainly on account of growth in Passenger Cars & Utility Vehicles. Within the Passenger Vehicles segment, Passenger Cars and Utility Vehicles grew by 5.0% and 5.3% respectively, whereas, Vans dropped by 10.2% during compared to previous year.

8 All India sales of new Commercial Vehicles recorded a de-growth of 2.8% during against a de-growth of 20.2% in The improved performance was due to an upward trend in performance of M&HCVs (Medium & Heavy Commercial Vehicles), but the growth is still negative due to drop in LCVs (Light Commercial Vehicles) and SCV (Small Commercial Vehicles) segments in Medium & Heavy Commercial Vehicles (M&HCVs) witnessed a growth of 24.7% and LCVs & SCVs dropped by 2.2% and 13.1% respectively. The Construction Equipment segment continued with a dip in sales for the second successive year. The sales witnessed a drop of 13.5% in against 18.7% in Sales of tractors witnessed a de-growth of 13.0% in against a growth of 20.1% in Tractor demand for was subdued primarily due to a market slowdown. The Indian Housing Finance market has crossed the Rs.10 trillion mark translating into a steady growth of 17% (annualised) for 9M FY Given that there is still a large proportion of population which is still underserved by the traditional financial institution, there is still untapped potential for growth especially in certain segments like affordable housing. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.

9 Firstcall India Equity Research: C.V.S.L.Kameswari Pharma & Diversified U. Janaki Rao Capital Goods B. Anil Kumar Auto, IT & FMCG M. Vinayak Rao Diversified G. Amarender Diversified Firstcall Research Provides Industry Research on all the Sectors and Equity Research on Major Companies forming part of Listed and Unlisted Segments For Further Details Contact: Tel.: / / Telefax: / info@firstobjectindia.com