­­Established management in micro-finance segment

Magenta Finance Services Private Limited is engaged in extending microfinance in rural, semi-urban and urban areas for income generating activities under Joint Liability Group(JLG). It operates in 4 districts of Haryana ,1 district of Punjab and 2 district in UP with its network of 8 branches. The company’s loan portfolio stood at Rs. 37.00 Cr. as on March 31, 2024 as compared to Rs. 24.99 Cr. as on March 31, 2023 . Magenta Finance Service’s promoters have over two decades of experience in micro finance lending. Magenta Finance Services Private Limited is promoted by Nellcome Ltd. and Gulab Unity Trust. Magenta benefits in the form of financial support and board representation from its promoters. Mr. Rajkumar Singh, the director, representing Gulab Unity Trust, has close to two decades of experience where more than a decade is in the micro finance industry. Magenta also have Mr. Kim Peter Hansen, representing Nellcome Ltd., who has more than two decades of experience in trading and trade finance. They have Mr. Asokkumar Rathnam who has served as AGM in SBI and DGM in Axis Bank and has more than four decades of experience. They have Mr.Tribikram Nayak, who has more than two decades of experience in training, teaching and social welfare activities as a member of board of directors. They also have Mr. Biswa Bandhu, who has retired from NABARD and has significant experience and achievements as an Independent Director.
Acuité believes that established presence of the promoters in the microfinance segment will be central to support the business risk profile of the company in the near to medium term.

­Modest scale of operations and the Financial Risk profile
Magenta Finance Services Private Limited has been in the micro-finance lending segment since 2018. The company has been able to build a portfolio of Rs. 37.00 Cr. as on March 31,2024. The company’s AUM stood at Rs 37.00 Cr. as on March 31, 2024 as compared to Rs 24.99 Cr. as on March 31, 2023. However, the AUM observed a decline to Rs. 31.56 Cr. (provisional) as on September 30, 2024. Magenta reported a moderated ROAA of 0.51 percent during FY2024 as compared to 1.72 percent in FY2023. Similarly, PAT stood at a modest level moderating to Rs. 0.18 Cr. in FY2024 from Rs. 0.40 Cr. in FY2023. MFSPL’s GNPA (90+dpd) and NNPA stood at 1.14 percent and 0.85 percent respectively as on March 31, 2024 from 1.44 percent and 1.30 percent as on March 31, 2023. However, the GNPA and NNPA stood at 5.77 percent and 2.20 percent (provisional) respectively as on September 30, 2024. The on-time portfolio stood at 96.04 percent as on March 31, 2024 which has slightly detereorated from 98.09 percent as on March 31, 2023; the on-time portfolio stood at 89.83 percent (provisional) as on September 30, 2024. 
Going forward the ability of the company to access timely capital infusion and its ability to mobilise low cost debt, will be a key factor in the scalability of a business.

Risk inherent to the microfinance segment
The activities of microfinance companies like Magenta are exposed to the concentration risks. The company has presence in 3 states with a concentration in Haryana (~45 percent), UP (~39 percent) and Punjab (~16 percent) of total on-book portfolio as on March 31,2024. This exposes the company to high geographical concentration risk. Besides geography, the company will be exposed to competition and any changes in the regulatory framework, thereby impacting the credit profile of Magenta Finance Services Private Limited.