M&M Financial Services surges 9% on healthy business growth in Q2FY23

In October 2022, Mahindra Finance estimates the total disbursement of approximately Rs 5,250 crore, thus delivering 97 per cent growth over October 2021.

Shares of Mahindra & Mahindra Financial Services (Mahindra Finance) surged 9 per cent to Rs 211.40 on the BSE in Thursday’s intra-day trade after the company reported healthy business growth in September quarter (Q2FY23), with disbursement up 83 per cent year-on-year (YoY) and 25 per cent sequentially at Rs 11,824 crore.

However, in Q2FY23, Mahindra Finance’s net interest income grew 2 per cent YoY and declined by 2 per cent QoQ at Rs 1,517 crore. Net interest margins came in at 7.5 per cent in line with what management had guided.

The profit after tax (PAT) came at Rs 448 crore, down 56 per cent YoY, but doubled on QoQ basis. Asset quality improved as stage 3 declined from 8 per cent in Q1FY23 to 6.7 per cent in Q2FY23.

Meanwhile in October 2022, Mahindra Finance estimates the total disbursement of approximately Rs 5,250 crore, delivering 97 per cent growth over October 2021.

The collection efficiency (CE) was at 91 per cent for October 2022, similar to the CE reported for October 2021. The Gross Stage 3 (GS 3) as of October end is estimated at 7.0 per cent.

Based on the IRACP norms, the GNPA is higher by approximately Rs 900 crore, as of October end, in comparison to GS 3 (under IND-AS). As per company’s assessment, there may not be any requirement of making additional provisions during FY23 on account of IRACP migration, Mahindra Finance said in monthly update.

The company further said it continued to hold adequate liquidity buffer which covers around 4 months’ funds requirement.

“The company has maintained its leadership position in the Tractor and Mahindra UV financing segments, which has always been its strength. While MMFS has exhibited a volatile operating performance and weak asset quality in the past, the various strategic initiatives undertaken by the management, if executed correctly, have the potential to script a credible transformation,” Motilal Oswal Financial Services said in result update.

A strong liability franchise and deep moats in rural and the semi-urban customer segment positions MMFS well to reap rewards of the hard work that is currently going into evolving this franchise, the brokerage firm said.

Technical View

Bias: Consolidation likely

Support: Rs 205.50; Rs 198.60

Resistance: Rs 214.60; Rs 216.20

The share price of M&M Financial Services has exhibited high amount of volatility in the last six months, swinging between bullish and bearish bias. 

Similarly, earlier this week, the stock dipped below the 20-DMA (Daily Moving Averatge) placed at Rs 205.50 and the 100-DMA at Rs 198.60, but with today's gap-up it has once again bounced sharply above both the moving averages. The stock is currently seen testing support around the 50-DMA placed at Rs 207-level.

However, the upside seems to be limited, as the stock is likely to face considerable resistance around the trend line resistance at Rs 214.60 and the higher-end of the Bollinger Band on the daily chart at Rs 216.20.

In the near term, the stock price may consolidate and dip back towards the 100-DMA, below which the next major support stands at Rs 181.50 - its 200-DMA. 

(With inputs from Rex Cano)