We hosted Kailash Baheti, CFO of Magma Fincorp, at Jefferies' BFSI day on 24 August. Management highlighted the implementation of various strategic initiatives, including: (1) changes in business structure, branch grading in terms of portfolio quality; (2) higher focus on CV and used assets within its ABF segment; (3) greater focus on home loans, especially in the affordable housing segment, and the decision to increase the direct sourcing mix. Management highlighted that it has made changes to its business structure to improve portfolio quality. The business originating team is responsible for early-stage portfolios. Branches have been graded based on portfolio quality. Branches with lower NPAs have flexibility to raise LTV levels and offer lower loan rates, and vice versa. As a result, the proportion of branches with higher portfolio quality (grade A & B) has improved from 40% to 80%. Gross Stage 3 assets have fallen to 9.5% in Q1 (11.7% Q1FY18). Management said that it intends to increase the CV and used CV mix, and lower the mix of tractor portfolio. Management highlighted that the CV disbursal mix has increased to 15% in Q1 from 8% last year. Disbursal in the tractor segment has been flat y-o-y. Management highlighted that it stopped disbursing large ticket LAP (over Rs 50 million) a few years ago. It is now focusing on home loans in the affordable housing segment. Management highlighted that the mix of home loans has increased from 27% in Q1FY18 to 51% in Q1FY19. In addition, the average ticket size of loans has fallen to Rs 1.25 million. The company has also been focusing on building direct distribution capabilities and reducing dependence on DSAs. The mix of direct loan sourcing has increased from 24% in Q1FY18 to 67% in Q1FY19. Management expects disbursal to grow 25% and AUM to grow 15-16% in FY19. It expects NIMs to be stable and credit costs to fall to 1.5% by Q4FY19.