Mahindra Fin Q1 net up 38% on lower NPAs

Mahindra Finance, the financial services arm of auto major Mahindra & Mahindra, today reported a 37.84% jump in its net profit for the quarter ended June 30, as compared to Rs 74 crore in the year-ago period.

Total income grew by 40.65% to Rs 564 crore as against Rs 401 crore in the year-ago period.

"Having a diversified portfolio has helped us achieve this performance across the board. We have been aggressively financing commercial and construction equipment vehicles," Mahindra Finance Managing Director Ramesh Iyer told PTI.

Iyer attributed the higher numbers to the lower non-performing assets, coupled with buoyant rural cash flow.

"We have improved our collection efficiency, bringing the NPAs down. This is the main reason for our profits," he said.

The firm's gross NPA currently stands at 4%, while the net NPA is much lower at 1%, he added.

Gross advances of the company, which has 559 offices, grew 34.34% to Rs 3,834 crore over Rs 2,854 crore, he said, adding that the network will touch 600 by March.

Mahindra Finance is a non-banking finance company and is into vehicle finance, both new and old, insurance brokering and rural housing finance.

Though Iyer sounded bullish on growth, especially on the rural home finance front, he admitted that the recent 50 bps hike by Reserve Bank would put pressure on volumes.

On whether they would increase the lending rates, Iyer said, "We are awaiting how the banks are responding to the RBI action. If the banks pass the hike to borrowers, then we would have to take a view. But we don't believe in passing on every rate hike burden to our customers."

The company's average lending rate is 16%.

The RBI raised its short-term lending (repo) rate by 50 basis points to 8% and the short-term borrowing (reverse repo) rate by a similar margin to 7% to bring down inflation, this was the 11th hike in 15 months.

Headline inflation for June stood at 9.44%.