M&M Financial Services soars 7%, hits 52-week high on strong Q4 results

On outlook, the management said the macro-economy tailwinds should help the sector and the company continue its growth journey

Shares of Mahindra & Mahindra Financial Services rallied 7 per cent to hit a 52-week high of Rs 277.95 on the BSE in Tuesday’s intra-day trade as the company's assets under management (AUM) grew 27 per cent year-on-year (YoY) as at March-end 2023 

The AUM growth to Rs 82,770 crore came on the back of continued buoyancy in rural demand.

Rural cash flows will further improve as normal monsoon is expected and infrastructure spends are rising. The company believes rural cash flow will continue to do well in the next 3 years. Also, company has gained market share in each of its product offerings and demand remains strong across geographies.

In the January-March quarter (Q4FY23), the company’s gross net performing assets (GS-3) improved to 4.5 per cent from 5.9 per cent in Q3FY23, supported by focused collection initiatives and macro tailwinds. Provision coverage on stage-3 loans was maintained at 59.5 per cent.

Credit cost was negligible during the quarter as asset quality improvement and resumption of repossession activity led to provision reversal in stage 2 and stage 3 assets.

The company reported a 14 per cent YoY increase in the standalone net profit at Rs 684 crore against Rs 601 crore in the year ago quarter mainly due to a sharp fall in provisions and better other income.

Net interest income (difference between revenue from operations and finance cost) was up 10 per cent YoY at Rs 1,660 crore versus Rs 1,507 crore in the year ago quarter.

The board has recommended a dividend of Rs 6 per equity share of face value of Rs 2 each or 300 per cent for the financial year ended March 31, 2023.

On outlook, the management said the macro-economy tailwinds should help the sector and the company to continue its growth journey. The company will focus on protecting and growing its market shares in vehicle segments – both new and pre-owned.

Recent partnerships as mentioned above are expected to aid company improve its penetration in respective segments. In SME, the company said it will continue its focus on business loans & LAP for micro and small industry segments and vendor bill discounting. In leasing, the focus on new customer acquisition will further accelerate, it said.

Analysts at Prabhudas Lilladher maintained ‘hold’ rating on the stock with a target price of Rs 280 per share. "M&M Financial Services reported healthy AUM growth with stable margins of 7.4 per cent amid rising interest cost environment. Write-offs of Rs 60 crore were taken compared to Rs 490 crore taken in Q3FY23. Primary focus of the management is to better asset quality and customer experience and choose right customers to mitigate credit risk", the brokerage said in a result update.