Following the release of the company’s December 2023 business update. In this update, MMFS showcased a robust performance with disbursements reaching approximately INR 49 billion. Demonstrating a noteworthy 5% year-on-year growth. The year-to-date disbursements stood impressively at around INR 410 billion, reflecting a substantial 15% year-on-year increase.
Jefferies On Mahindra & Mahindra Finance
Jefferies, a leading global financial services firm, has maintained its ‘Hold’ rating on Mahindra & Mahindra Finance with a target price of Rs 295, signaling a potential 7% upside from the current market price.
According to Jefferies’ analysis, MMFS displayed noteworthy performance in the third quarter, reporting a 25% YoY growth in Assets Under Management (AUM) to reach Rs 96,900 crore. Although slightly below Jefferies’ estimates, the figures underscore the financial institution’s resilience in a dynamic market environment.
Disbursement metrics also exhibited positive trends, with a 7% YoY growth in Q3. December specifically saw a 5% YoY increase and an 8% MoM growth in disbursements. Jefferies emphasizes the significance of disbursement growth as a key indicator of MMFS’s financial health.
The report delves into interest rate dynamics, noting that the estimated rundown rates for MMFS remained elevated in December. This is attributed to the strategic conversion of trade advances into loans, positioning the company strategically in the lending market.
Jefferies also mentioned that in terms of asset quality and collection efficiency, MMFS maintained an impressive 98% collection efficiency in December 2023. The institution indicated positive trends in asset quality, with a QoQ reduction of 29 basis points in stage 3 assets to 4%, while stage 2 assets remained broadly stable at 5.8%.
Jefferies’ risk and reward analysis suggests that, at 1.8 times the estimated FY25E book value, the risk-reward ratio for MMFS appears balanced. This evaluation considers the prevailing market conditions and the financial outlook for the institution.
Looking ahead, Jefferies anticipates a promising Return on Equity (ROE) outlook of 12-14% over the period from FY24 to FY26E. This projection underscores the positive trajectory envisioned for MMFS’s profitability.
Motilal Oswal on Mahindra & Mahindra Finance
Motilal Oswal, gives a ‘Buy’ recommendation for Mahindra and Mahindra Financial Services (MMFS), following the release of the company’s December 2023 business update. In this update, MMFS showcased a robust performance with disbursements reaching approximately INR 49 billion, demonstrating a noteworthy 5% year-on-year growth. The year-to-date disbursements stood impressively at around INR 410 billion, reflecting a substantial 15% year-on-year increase.
The financial health of MMFS continued to strengthen, with gross business assets as of December 2023 surging to approximately INR 968.5 billion. This figure represents a commendable 25% year-on-year growth and an impressive 17% expansion over the March 2023 numbers. The collection efficiency for December 2023 remained robust at 98%, showcasing consistency with the same period in the previous year and a notable improvement from November 2023’s 94%.
Motilal Oswal’s positive outlook is further supported by the positive trend observed in asset quality indicators. Gross Stage 3 (GS3) assets demonstrated improvement, with a quarter-on-quarter increase of approximately 30 basis points to 4.0%, while Gross Stage 2 (GS2) assets remained stable quarter-on-quarter at 5.8%. The overall business update aligns closely with market expectations, revealing no explicit positive or negative surprises.
As analysts look ahead, the anticipation is that MMFS’s Net Interest Margin (NIM) will maintain its course within a range, potentially witnessing a modest improvement of 5-10 basis points in the third quarter of FY24. Additionally, as of December 2023, MMFS reported a comfortable liquidity position equivalent to around 2.5 months of funding requirements, further reinforcing the financial stability of the company.