M&M Financial shares rebound 10% despite 55% drop in Q2 earnings


Shares of Mahindra & Mahindra Financial Services (M&M Financial) rose 10% in Thursday trading after its September quarter results were better than expected.

NBFC reported a 55% year-on-year (YoY) drop in consolidated net profit to Rs 492 crore for the September quarter, compared to a profit of Rs 1,103 crore in the corresponding quarter last year .

Analysts largely expected earnings in the quarter to fall more than 50% on an annual basis. M&M Financial said consolidated total revenue for the quarter rose 3% to Rs 3,029 crore from Rs 2,951 crore in the corresponding quarter last year.

Disbursements for the quarter increased by 79% year-on-year to Rs 12,249 crore from Rs 6,839 crore in the prior year quarter.

Analysts said that while the company’s operating performance was disappointing due to lower net interest margin (NIM) and higher operating expenses, disbursement growth accelerated and asset quality has also improved.

Disbursement growth in the quarter was broad based with year-over-year growth of 83% and sequential growth of 25%. Collection efficiency remained strong, indicating the customer segment’s ability to generate cash flow, M&M Financial said.

“We continue to maintain our leadership position in financing the Tractor and Mahindra Auto segment. As the segment and customer base evolve, we expect to maintain quality growth. We are seeing strong demand in the Tractor segment, aided by above-average monsoon conditions and continued spending by government on rural projects. Increasing penetration in used vehicle financing continues to be our focus to help improve margins,” said the society.

“While M&M Financial has displayed volatile operating performance and poor asset quality in the past, the various strategic initiatives undertaken by management, if executed correctly, have the potential to script credible transformation,” Motilal said. Oswal Securities.

The brokerage firm said a strong liability franchise and deep moat in the rural and semi-urban customer segment positions the business well to reap rewards in the future.

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