M&M Financial Services Q3 net down 12% on higher expenses, provisions

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Mahindra & Mahindra Financial Services posted a net profit of ₹553 crore for Q3 FY24, down 12 per cent on year, largely due to a 16 per cent rise in total expenses at ₹753 crore. A jump in provisions and write-offs to ₹328 crore from ₹155 crore also weighed on the bottomline.

Sequentially, the profit after tax was up over two-fold from ₹235 crore in Q2. Net interest income (NII) grew 10 per cent y-o-y and 8 per cent q-o-q to ₹1,779 crore. Net interest margin (NIM) for the quarter was at 6.8 per cent, up from 6.5 per cent a quarter ago, but lower than 7.4 per cent a year ago.

loan book

The NBFC’s loan book grew 25.5 per cent on year to ₹97,048 crore. Disbursements for the quarter were ₹15,436 crore, led by broad-based growth across auto/utility vehicles, cars, CV/CE and pre-owned vehicles. However, tractor disbursements fell 18 per cent and SME fell 47 per cent on year. Year-to-date disbursements as of December 2023 were ₹40,916 crore, up 14 per cent on year.

Collection efficiency for the quarter was 95 per cent, flat on year, but slightly lower than 96 per cent a quarter ago.

Gross stage 3 assets ratio improved to 4 per cent from 4.3 per cent in the previous quarter and 5.9 per cent in the previous year. Provision cover on stage 3 loans was at 62.7 per cent.

Credit cost improved to 1.2 per cent from 2.4 per cent, with the company saying it is on track to 1.5-1.7 per cent credit cost for FY24

Business strategy

Mahindra Finance said it is investing in the used vehicle finance segment, and has two partnerships with Car&bike and ‘CarDekho’. Used vehicle disbursements grew 19 per cent YTD, accounting for 17 per cent of total disbursements as of December 2023.

Partnerships will play an important role in achieving company’s vision of providing financial solutions, it said, adding that they will also allow the company to expand its distribution and maximise the fee income potential over the next 2-3 years. 

The NBFC has tied up with State Bank of India, Bank of Baroda, NBFC Lendingkart, IPPB (India Post Payments Bank) and CSC (Common Service Centres by Ministry of Electronics and Information Technology) for lead generation.

Mahindra Finance also plans to enter the insurance sector through partnerships with insurance providers, acting as a corporate agency. Initial investments will be directed toward technology, manpower, and certification, and the NBFC will now apply to IRDAI for approval.