New Delhi, 21 September 2020: Asset finance company Magma Fincorp which is among the leaders in the vehicle loan segment, has miserably failed to comply with its Corporate Social Responsibility (CSR) obligation in the year 2019-20. As per the company’s financial reports, it could not spend close to 50% of the prescribed CSR budget as it failed to implement many of its planned CSR activities.
As per the mandatory CSR provisions, the non-banking financial company which made an average profit of Rs 223.75 Crore over the last three financial years prior to 2019-20, had an obligation to spend Rs 4.47 Crore on CSR activities in the financial year ending March 2020.
However, the company did only spend Rs 2.26 Crore, which is just half of its prescribed CSR budget.
The prescribed CSR budget for a company in a particular year is calculated as the 2 % of the average annual profit over the past three financial years.
Further the Kolkata-headquartered company could also not spend close to Rs 5 Crore that it carried forward from the previous year’s CSR budget.
Magma Fincorp Limited has a "diversified product portfolio" and has a strong presence in semi-urban and rural areas. The company’s product portfolio includes loans for cars and utility vehicles, commercial vehicles, construction equipment, tractors, used vehicles, SME businesses, mortgage finance as well as Housing Finance and General Insurance.
Majority CSR projects remained on papers only
Though the company had a total CSR budget outlay of Rs 6 Crore which included the unspent CSR amount carried forward from the previous year, for the year 2019-20, it could not spend even the 40 % of the planned budget. In fact, many of its planned CSR projects could not see the light of the day.
For example, the company had made a provision of Rs 200 Lakh for CSR projects related to Rural Development initiatives across India. The project, however, was never picked further from the planning stage. Thus, the company did not spend a single penny on this CSR programme despite having the budget outlay for the same.
Another example is Magma Green Park initiative. The company had planned to spend Rs 200 lakh on this initiative in West Bengal, but the actual spent was just a token amount of Rs 1.83 lakh.
The company’s CSR implementation in the mid-day meal project was also disappointing.
The company could not even spend 20 % of its budget outlay on the mid-day meal programmes. The budget outlay had the provision for Rs 25 lakh to be spent on the initiative whereas the actual spent was only Rs 4.5 lakh.
Similarly, for the Magma Swayam-Corporate Volunteering Program, the company had a budget outlay of Rs 135 Lakh, but the actual spent was only Rs 35.31 Lakh.
Notably, the majority of CSR activities were planned for implementation by Magma Foundation, the company’s philanthropic arm which is registered as a Trust with an objective to undertake projects/programmes on health,education and environmental sustainability.
The Corporate Social Responsibility Committee at the company is presently led by Mr. Mayank Poddar who serves as the Chairman of the Committee and also designated as Chairman Emeritus & Whole time Director of the company.
A perception built on shaky grounds
The company which boasts that its "CSR initiatives are undertaken with a long-term view," seems to be actually taking its CSR activities casually. The company describes a detailed process for ensuring the sustainability of the project activities, but it hardly reflects in its project execution.
Last year (2018-19) also, the company was required to spend Rs 362.92 lakh, but it did spend only Rs 292.98 lakh on its CSR activities.
Commenting on the reasons for not spending the minimum allocated CSR budget, the company cited some unavoidable circumstances and lack of quality projects from credible NGOs.
It noted that the Company wanted to purchase a piece of land and develop it into a mini forest and also planned to set up orphanages/old age homes. But due to some unavoidable circumstances it could not purchase the same in FY19. The company’s annual report 2019-20 also noted that the company could not spend the prescribed budget also "due to lack of quality projects from credible NGOs Company."
The company’s wish to develop a ‘mini-forest’and unavoidable circumstances due to which it could not be completed, remained the reasons for not spending its complete CSR budget last year as well.
Still, the company managed to build a perception of excellence for its CSR activities by winning multiple CSR awards. Despite its non-compliance of CSR provisions, it kept on winning awards. For example, it won IPE Best CSR Practices Awards 2020 - Innovation in CSR; and UBS Forums, Corporate Social Responsibility Summit & Awards 2019 for ‘Best CSR Impact’.
Last year also, the company won multiple awards at different CSR forums. However, the company’s CSR record worsened as its CSR award list continued growing.
