Covid-19 hits M&M Finance; pre-tax profit plunges by 67% in Q4FY20

Mahindra & Mahindra Financial Services (M&M Fin), on Friday post market hours, reported a 67 per cent year-on-year decline in standalone profit before tax to Rs 292.5 crore in March 2020 quarter (Q4), due to Covid-19-led disruptions hitting the overall business of the company in terms of lower disbursements and higher bad loan or non-performing asset (NPA) provisioning. The reported pre-tax profit was significantly lower than analysts’ expectations of Rs 567.2 crore according to a Bloomberg poll, while the net profit fell at a relatively slower pace of 62 per cent year-on-year to Rs 220.9 crore due to lower tax rate.

The vehicle finance  major, provided Rs 562.6 crore towards Covid-19 related shocks. With this, the total provisions and write offs during the quarter were Rs 674.1 crore against Rs 114.5 crore of provisioning write back in March 2019 quarter. Apart from a sharp jump in provisioning, muted top-line growth also hurt the bottom-line. The company’s net interest income (NII) rose by a paltry 3 per cent year-on-year to Rs 1,347.4 crore, which can be attributed to a subdued loan offtake.

Loan disbursements of M&M Fin drifted down by 21 per cent year-on-year in Q4, lowest at least in the last 14 quarters, while its assets under management (AUM) was up 12 per cent year-on-year to Rs 77,160 crore.

“The outbreak of Covid-19 pandemic has resulted in further slowdown in economic activities across the country, which even otherwise was on a slow pace. As an organization, we have been strictly adhering to social distancing norms and lockdown announcements by the government, on account of this we had impacts on business and recovery in the last quarter of the financial year,” the company said in its press release.

Though M&M Fin’s reported gross non-performing assets (NPAs/stage-3 under IND-AS) of 8.4 per cent were almost flat at the quarter-ago level (199 basis point up year-on-year), according to the management, the company’s inability to recover the dues in March had around 1.5 per cent impact on reported NPAs. March quarter is typically strong for M&M Fin in terms of recovery. As per informed by the company, during the analyst call, around 75 per cent of the company’s customers (in value as well as volume terms) have availed the moratorium and it does not see any significant business at least till July. The company has not availed any moratorium from its lenders (banks).

M&M Fin’s capital adequacy stood at 19.6 per cent as of March 2020 with 15.4 per cent of tier-1 capital.

On a consolidated basis, the company’s profit before tax declined by 71 per cent year-on-year to Rs 306.4 crore in Q4.

The stock of M&M Fin was flat on Friday at Rs 168.4 apiece on BSE