Mahindra & Mahindra Financial Services reported a strong start to FY27 as the consolidated profit after tax (PAT) jumped 75% year-on-year (YoY) to Rs. 927 crore for the quarter ended in June. The improvement was supported by higher net interest income, a reduction in provisions, and asset under management (AUM) growth.
At press time, Mahindra Finance trades at Rs. 374, up 6.69% despite Nifty 50 falling 0.85%.
The PAT rose 70% YoY to Rs. 899 crore compared with the corresponding quarter a year earlier. Total consolidated income rose 14% to Rs. 5,725 crore.
Net interest margin increased to 7.3% from 6.7% in the same quarter a year ago, but declined from 7.5% in the previous quarter.
Raul Rebello, Managing Director and Chief Executive Officer, Mahindra Finance, attributed the improvement to the company's "rights issue, which came in the previous year, in which the company had a better cost of funding". He added that the benefits might comprise some compression in the future, but the company is optimistic that it will be above 7% NIM over the medium term.
“Our performance this quarter underscores the strength of our franchise, with continued expansion in profitability, resilient asset quality and progress in our pivot towards growth agendas,” Rebello said. “Our focused investments in our core vehicle franchise, new growth engines and technology are supporting profitable and disciplined growth.”
Operating profit (pre-provisioning) rose 30% to Rs. 1,756 crore, while return on assets improved to 2.4% from 1.6%.
Disbursements increased by 22% YoY to Rs. 15,564 crore from Rs. 12,808 crore. The company's disbursement is at the highest level ever for the first quarter.
Business AUM rose by 13% to Rs. 1,37,449 crore from Rs. 1,22,008 crore. Mahindra Finance has also started to work towards achieving its 5-year goal of increasing its assets to Rs. 3 lakh crore by FY31.
Vehicle finance continued to be the major business, while tractor disbursements grew by 45%, and passenger-vehicle disbursements grew by 24%.
Non-vehicle finance disbursements (such as Mahindra Rural Housing Finance) rose by 79% YoY. Currently, it has a stake in the non-wheels business, which includes all of its mortgage and small business loans, representing 17% of the portfolio.
Over 44% of the loan book is Mahindra strategic business originated through group companies.
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The impairment provisions fell by Rs. 570 crore from Rs. 660 crore, while credit costs fell to 1.5% from 1.9%.
The increase in stage 3 assets was from 3.8% to 3.5% a year ago, and for stage 2 assets the decline was from 5.9% to 4.9% a year ago. The efficiency of collections was unchanged at 95%.
The capital adequacy ratio was at 18.5%, whereas Tier-1 capital was 16.5%. Moreover, the company had an adequate liquidity cushion of Rs. 14,650 crore.