More Stories

Informist, Friday, Jan. 24, 2025

By Sachi Pandey

MUMBAI – As Mahindra & Mahindra Financial Services Ltd. gears up for the release of its Oct-Dec earnings on Tuesday, market analysts are divided on the company's performance, voicing both optimism and caution. The outlook of Mahindra & Mahindra Financial Services hinges on multiple factors as the results come amid rising credit costs in the sector and sustained margin pressures, leaving investors and brokerages alike to weigh potential risks and rewards. Despite the hurdles, the consensus seems to favour a stable, albeit moderate, growth trajectory for the company.

According to an average of estimates from 10 brokerages, Mahindra Financial's net profit for Oct-Dec is likely to see a modest 6% growth at around INR 5.86 billion. While this figure represents a small improvement over the previous year, some brokerages, such as Elara Securities, said that the sequential growth rate for Oct-Dec may appear unusually high due to the weak performance in Jul-Sept. On a sequential basis, the net profit is expected to surge 58% from INR 3.69 billion reported in Jul-Sept. The estimates for net profit range from INR 4.94 billion to INR 6.89 billion. 

While the outlook for profit growth is positive, analysts focused on the company's net interest income, asset growth, and the management of credit costs. Brokerages see net interest income rising 15% on year to INR 19.57 billion. The net interest income was INR 18.11 billion in the previous quarter. The estimates for net interest income range from INR 18.47 billion to INR 22.43 billion. 

Elara Securities forecasts a notable 9.7% on-year growth in the company's net interest income, driven by improved yields from both loans and fee income. Elara also anticipates the total loan book of the non-banking financier to reach INR 1.15 trillion, a substantial increase from INR 970 billion a year ago, with a modest 2.2% quarter-over-quarter rise.

Despite these encouraging figures, some analysts such as Nirmal Bang remain cautious. They highlighted that the company's disbursements have not met expectations, which could temper overall growth in the short term. On Jan. 3, Mahindra & Mahindra Financial Services said that its overall disbursements are estimated at INR 164.50 billion in Oct-Dec, up 7% on year. The disbursements in the first nine months of the current financial year are estimated at INR 423.50 billion, up 4% on year, the company said.

This subdued growth in disbursements raises questions about Mahindra Financial's ability to meet its broader growth targets, particularly given the ongoing challenges in the broader economy, including high borrowing costs and rising inflation, brokerages said. Nomura continues to maintain a negative view on Mahindra & Mahindra Financial Services due to its historically subdued return on equity profile, despite the strong collection efficiency of 95% and stable asset quality.

On the other hand, Kotak Institutional Equities remained positive about the company's revenue outlook, forecasting a 21% on-year rise driven by strong performances in its tractor and automotive finance businesses.

Bucking an industry-wide trend of rising credit costs, Mahindra Financial is likely to see its credit costs fall, brokerages said. Both Elara Securities and Motilal Oswal Financial Services expect a decrease in credit costs due to improved collections and lower provisions compared to the previous quarter. Nomura projects credit costs to fall to 2.0% of assets under management.

In the preliminary figures, Mahindra Financial reported business assets at INR 1.15 trillion as of Dec. 31, marking an 18% increase from the same time last year. The company may see a slight improvement in its asset quality, with stage-3 assets—those most likely to turn into bad loans—at 3.9%, a slight improvement from 4.0% a year ago. However, stage-2 assets, which show signs of stress, rose to 6.3% from 6.0% in the previous year. 

On Jan. 28, analysts and investors will keep an eye on the company's guidance for the next quarter, particularly on how it plans to manage rising costs and potential pressures on its credit book. With projections of an 18% growth in both assets under management and advances for 2024-25 (Apr-Mar), Mahindra & Mahindra Financial's performance will provide crucial insights into the health of India's non-banking financial sector.

On Friday, shares of the company ended 2.7% lower at INR 268.05 on the National Stock Exchange. 

Following are the Oct-Dec earnings estimates for Mahindra & Mahindra Financial Services based on reports from 10 brokerage firms in descending order by the estimate of net profit:

End

Edited by Tanima Banerjee

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.