M&M Financial gains 3%, hits 52-week high on healthy business outlook

Shares of Mahindra & Mahindra Financial Services (MMFSL) hit a 52-week high of Rs 206.85 on the BSE, gaining 3 per cent in Tuesday’s weak trade on a strong business outlook. The stock of the Mahindra group company surpassed its previous high of Rs 206.40 touched on November 9, 2021. In comparison, at 11:49 am, the S&P BSE Sensex was down 0.50 per cent at 54,125 points.

Thus far in July (last eight days), MMFSL has rallied 18 per cent, as compared to a 2 per cent rise in the S&P BSE Sensex.

In June 2022, the company had delivered a 115 per cent year on year (YoY) and a 27 per cent sequential month on month (MoM) growth in disbursement at nearly Rs 3,750 crore aided by macro tailwinds.

The year to date disbursement at around Rs 9,450 crore registered a YoY growth of 145 per cent. As of June 30, the company estimates the gross business assets at Rs 67,500 crore, a YoY growth of 6 per cent.

The company further said its stage 2 assets have seen improvement over March 31 level. The company expects stage 3 assets as on June 30 to be marginally higher than at March end. 

"Stocks like MMFSL is likely to perform better in coming trading sessions along with the ongoing recovery seen in sectoral peers. The stock witnessed significant delivery based activity in early April and May 2022 at Rs 170-180, which is a crucial support level for the stock. Since accumulation was seen in this stock last weeks, we believe downsides are limited and positive momentum is likely to remain intact in the stock above the mentioned levels,"  said ICICI Securities.

MMFSL is one of India’s leading non-banking finance companies (NBFCs) offering quality products and services to a wide customer base in India’s semi-urban and rural areas. The company is primarily in the business of financing purchase of new and preowned auto and utility vehicles, tractors, passenger cars, commercial vehicles, construction equipment and SME financing.

The NBFC sector is expected to deliver a double-digit loan growth in FY23, on top of a 6-8 per cent growth projected for FY22. This will be driven by improvement in economic activity and strengthened balance sheets of NBFCs.

According to MMFSL, asset quality metrics are expected to improve supported by the expected improvement in macro-economic activity, sharper focus on collections and adequate provisioning.

However, the performance of restructured portfolios, as and when their regular payments begin, and impact from a potential resurgence of the pandemic are key risks.  

"NBFCs are seeing a rise in demand for used vehicle financing amid Covid-19. The pandemic preference for owning second and third cars in households, upgrades by two-wheeler owners to preowned cars and lower cost of used vehicles are some of the drivers for the increase in demand for used vehicles. NBFCs offering loans for used vehicles are bullish about rapid growth in the financial year," MMFSL said in its FY22 annual report.