M&M Finance suffers huge Q1 loss at Rs 1,529 cr on sharp rise in provisions

Makes expected credit loss provision of Rs 2,124 cr

Auto-financier Mahindra and Mahindra Financial Services (M&M Finance) suffered a standalone loss of Rs 1,529 crore in the first quarter ended June 2021 (Q1FY22) on a sharp rise in provisions and write-off for stressed loan portfolio.

It had booked a profit of Rs 156 crore in the same quarter last year (Q1FY21).

Reflecting market concerns over performance, its stock closed 5.02 per cent lower at Rs 146.2 per share on BSE.

The total standalone income declined by 18 per cent at Rs 2,187 crore in Q2FY22 from Rs 2,655 crore during the corresponding quarter last year.

This reflects the slowdown in activity including collections as partial lockdowns were imposed in various parts of the country to contain spread of Covid-19 during the second wave in April-June 2021.

Its provisions and write-offs were up by 234.5 per cent from Rs 843 crore in Q1FY21 to Rs 2,819 crore in Q1FY22, M&M Finance said in a statement.

Detailing on losses made in Q1FY22, the company said the expected credit loss provision (ECL) in the quarter amounted to Rs 2,124 crore. It made additional overlay provision of Rs 393 crore taking the total overlay to Rs 2,709 crore (up from Rs 2,316 crore in March 2021).

M&M Finance in filing with BSE said the decision to make provision was driven by covid-related liquidity issues for consumers and limited restructuring. The provision reversals are expected for 80-90 per cent of loan contracts over Q3/Q4 FY22.

Its loan book shrunk from Rs 63,840 crore in June 2020 Rs 56,409 crore in June 2020.

The gross Non-performing assets (NPAs) shot up 15.46 per cent in June 2021 from 9.19 per cent a year ago. Similar trends seen in prior periods of economic stress like demonetization when GNPA touched peak of 14.5 per cent, after three quarters they declined to nine per cent and leater they went down further, to 6-7 per cent level on back of economic recovery, it said.

The net NPAs also moved up to 7.81 per cent in June 2021 from 5.72 per cent in June 2020. The provision coverage ratio (PCR) stood at 53.7 per cent in June 2021 as against 40.1 per cent a year ago.

Its capital adequacy stood at 23.8 per cent in June 2021.