Mahindra Finance gains 3% as RBI lifts ban on outsourcing loan recovery

Shares of Mahindra & Mahindra Financial Services (Mahindra Finance) were up 3 per cent at Rs 240.60 on the BSE in Thursday’s intra-day trades after the Reserve Bank of India (RBI) lifted restrictions on the company wherein the company was stopped from carrying out any recovery or repossession activity through outsourcing arrangements.

At 09:52 AM, the stock traded 2 per cent higher at Rs 238.05, as compared to 0.11 per cent decline in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 247.05 on January 3, 2023.

On September 22, 2022, the RBI had directed company to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders.

Based on the submissions made by the company and its commitment to strengthen its recovery practices and outsourcing arrangements, tighten the process of onboarding third party agents and strengthen accountability framework as per its board approved action plan, the RBI, vide its letter dated January 04, 2023, informed the company of its decision to lift the aforementioned restrictions imposed on the company with immediate effect, Mahindra Finance said in an exchange filing. READ MORE

Meanwhile, in past three months, shares of Mahindra Finance outperformed the market by surging 20 per cent, as compared to 4.4 per cent gain in the S&P BSE Sensex. In past six months, the stock has rallied 30 per cent, as against 14 per cent rise in the benchmark index.

Mahindra Finance reported a healthy disbursement number for December 2022, up 67 per cent year-on-year (YoY) at Rs 4,650 crore, on the backdrop of positive macro environment. The December quarter (Q3) disbursements at approximately Rs 14,450 crore registered a growth of 80 per cent YoY. The YTD disbursement of approximately Rs 35,750 crore registered a YoY growth of 95 per cent.

Stage-3 and Stage-2 assets have seen sequential improvement in the current month and quarter. Stage 3 assets are expected at approximately 6.2 per cent and Stage 2 assets at approximately 8.5 per cent as at December end, the company said in an exchange filing.

Mahindra Finance continued to report healthy disbursement numbers, exhibiting strong underlying demand and market share gains. Asset-quality metrics are expected to improve further on account of strong collection efficiency. Additionally, the company plans to diversify its growth engines and increase its non-vehicle financing share in SME, LAP, and digital segments. We believe the earnings trajectory is going to positively surprise going forward, led by strong business growth and moderation in credit cost, analysts at Sharekhan said in December report. The brokerage firm reiterates Buy rating on the stock with an unchanged price target of Rs 275.