Shares of Mahindra & Mahindra Financial Slump More than 11% after Weak Results

Shares of Mahindra & Mahindra Financial Services slumped by more than 11 per cent on Monday after reporting weak financial results.

M&M Financial Services was down 11.65 per cent on BSE at Rs 245.

Centrum Broking said in a research that the company reported disappointing earnings for 2QFY24. NIMs compression due to rising CoB is NBFC wide narrative however Mahindra Finance faced twin challenges - yield compression (upgrade to better customer segment and high proportion of interest free advances this quarter) and rising CoB.

2Q witnessed higher credit costs due to rise in provisions and write-offs led by tractor segment which faced an erratic monsoon. Opex/avg assets (2.85 per cent) stays above the management guidance of 2.5 per cent. AUM growth continues to remain strong however its translation into profitability is unpredictable, Centrum Broking said.

Motilal Oswal Financial Services said in a report that Mahindra & Mahindra Financial (MMFS)’s 2QFY24 PAT declined 48 per cent YoY to Rs 2.35b (44 per cent miss). Reported NII rose 9 per cent YoY to Rs 16.7b (6 per cent miss), while PPoP grew 9 per cent YoY to Rs 9.4b (10 per cent miss). Annualised credit costs of 2.8 per cent (vs. 2.5 per cent in 2QFY23) were higher than expectations and included Rs 3.5b of write-offs (vs Rs 3.1b in 1Q).

“We cut our FY24E EPS by 12 per cent to factor in a higher NIM compression and elevated credit costs in 1HFY24," the research said.

Until two quarters ago, MMFS had managed to reduce volatility in its NIMn and earnings performance by streamlining operations and enhancing risk management. MMFS has now reported two consecutive quarters of NIM volatility and elevated credit costs (despite minor improvements in asset quality). Such repeated volatility in NIM and credit costs could affect investor confidence in its transformation journey, the research said.