M&M Financial Services hits over 2-year low on weak June quarter results

The NBFC reported a sharp 75 per cent year on year (YoY) decline in its standalone net profit at Rs 68 crore in the April-June quarter (Q1FY20), due to higher provisioning for stressed assets.

Shares of Mahindra & Mahindra (M&M) Financial Services tanked 15 per cent to trade at Rs 289 per share, also its 52-week low on the BSE on Wednesday, after it reported a sharp 75 per cent year on year (YoY) decline in its standalone net profit at Rs 68 crore in the April-June quarter (Q1FY20), due to higher provisioning for stressed assets. The company had profit of Rs 269 crore in the year-ago quarter. The stock of non-banking finance company was trading at its lowest level since March 15, 2017.

Net interest income (NII) during the quarter grew 17 per cent YoY to Rs 1,266 crore from Rs 1,080 crore in the corresponding quarter of the previous fiscal. The provisioning more than doubled from Rs 294 crore to Rs 620 crore during the reported quarter.

Asset quality for the automotive and tractors finance improved on an annual basis but deteriorated sequentially. Gross non-performing assets (GNPAs) ratio came in at 5.7 per cent for Q1FY20, up by about 90 basis points from 4.8 per cent in March 2019 quarter. GNPA for the year-ago period was 6.3 per cent. Net NPA rose to 7.4 per cent during the quarter from 5.9 per cent in the previous quarter.

The management said muted growth of small cars and UV in FY20 and FY21 shall significantly reduce the 5-year growth projection. The higher cost of ownership (increased fuel price, higher insurance expense, dearer interest rates, increased safety norms) has resulted in reduction in growth rate.

"The lower finance availability is hurting MHCV sales, while CV lending rates increased marginally. The reduction in sale price of second hand vehicles is resulting in slower buying of new vehicles. The advancement of purchase expected since BS-VI implementation shall increase prices," the company said in result presentation.

At 10:34 am, M&M Financial Services was trading 10 per cent lower at Rs 305, as compared to a 0.51 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped an over five-fold with a combined 13 million shares changing hands on the NSE and BSE so far.