The company made the announcement during trading hours on Monday, 24 June 2013. Shares of Mahindra & Mahindra Financial Services tumbled 8.07% to Rs 236.40 on that day. The stock is down 11.71% in two sessions from Rs 257.15 on 21 June 2013.
Meanwhile, the S&P BSE Sensex was down 1.45 points, or 0.01%, to 18,539.44.
On BSE, 2.31 lakh shares were traded in the counter as against an average daily volume of 2.58 lakh shares in the past one quarter.
The stock hit a high of Rs 237 and a low of Rs 220 so far during the day. The stock had hit a record high of Rs 287.50 on 19 June 2013. The stock had hit a 52-week low of Rs 125 on 25 June 2012.
The stock had outperformed the market over the past one month till 24 June 2013, sliding 4.19% compared with the Sensex's 5.90% fall. The scrip had also outperformed the market in past one quarter, rising 21.51% as against Sensex's 1.04% fall.
The large-cap company has an equity capital of Rs 113.75 crore. Face value per share is Rs 2.
Mahindra & Mahindra Financial Services (M&M Financial Services) said its board has decided not to proceed with the application for a banking license after reviewing the implications of the present guidelines issued by the Reserve Bank of India (RBI) for such an application, alongwith the clarifications issued by RBI on 3 June 1013.
The company said its board expressed full confidence in Mahindra Finance's plans and prospects for growth as an independent NBFC.
The company said that the RBI guidelines provide for the conversion of non-banking financial companies (NBFCs) into a bank, but do not provide any flexibility for a NBFC and a bank to co-exist for a resonable period of time. The regulations provide that cash reserve ratio (CRR) and statutory liquidity ratio (SLR) will be applicable from inception, even though building of current and savings account (CASA) will take some time for a newly converted bank.
This anomaly, unfortunately, will impose an undue penalty on large successful asset finance NBFCs with a pan-India network that wishes to convert into a bank, as compared with small NBFCs with a limited network. The current set of guidelines, as clarified, has as adverse economic and operational impact on the business of larger NBFCs. A time bound co-existence of a NBFC and a bank in the same group would help set up a sustainable model and address the concerns of all stake holders, including the customer base both current and future. Such an approach is also consistent with the current structure in place in the Indian banking system, the company said.
The board of Mahindra Finance therefore decided not to apply for a banking license under the current set of guidelines read with clarifications and to imitate RBI accordingly alongwith the reasons for its decision. Should the guidelines be amended, to permit co-existence of NBFC and a bank in the same group, or should these concerns be addresses in any other manner, the company will be happy to apply for a bnking license, the compand added.
Mahindra & Mahindra Financial Services' consolidated net profit rose 42.9% to Rs 346.37 crore on 36.8% growth in total income to Rs 1219.85 crore in Q4 March 2013 over Q4 March 2012.
Mahindra & Mahindra Financial Services, part of the US $15.9 billion Mahindra Group, is one of India's leading non-banking finance companies with a pan India presence. Focused on the rural and semi-urban sector, it provides finance for vehicles and tractors and has the largest network of branches amongst NBFC's operating in these areas.
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