Non banking finance company Magma Fincorp is expecting to slash securitisation exposure by 50% with the recent R440 crore equity infusion from private equity firms Kohlberg Kravis and Roberts (KKR) and International Finance Corporation (IFC), said Dhrubashish Bhattacharya, vice-president, Magma while talking to FE.

?The NBFC was able to mop up R440 crore by a stake sale of 27.5% to KKR and IFC during last month. We hope with this infusion we would be able to lower the securitisation exposure that would be reflected in the next fiscal,? he added.

According to financial experts securitisation is a process by which NBFCs take some portion of their loan receivables off their balance sheet and repackage them to be sold as marketable securities to banks for debt capital.

?Last financial year, out of the whole R5,415 crore loan disbursal, around 40% was the securitisation portion. This financial year we are targeting a disbursal of around R8,000 crore and correspondingly aim to achieve a securitisation reduction of around 50%. Securitisation has both its upside and downside. On the upside it enables quick access to the liquid debt capital, contrarily on the downside too much leverage of securitisation would stunt the growth of loan book size as the portion of securitisation would not add to the overall book size,? Dhrubashish said.

Expressing concern over the recent RBI policy rate hikes that is expected to hit the net interest margin (NIM) of financial institutions like banks and NBFC, Bhattacharya said, ?This is the 11th policy rate hike in the series of recent hikes that is bound to leave a telling impact on the soaring cost of funds in the domestic borrowing market.The NIM in fiscal year 2010-11 was hovering at around humble 5% for us. We expect to up it to 5.3% by focusing on high yield portfolio including tractor financing, SME lending and used commercial vehicle borrowing segment.?

These are growth engines that offer a margin of around 8 to 9% as against our other portfolios that traditionally log an average margin of about 4%.