Mahindra Finance ~ Rural Focused NBFC

Rural Resurgence

Mahindra and Mahindra Financial Services (MMFS) is a subsidiary of the Indian conglomerate Mahindra & Mahindra (M&M). It is a leading NonBanking Financial Company (NBFC) which serves the financing needs of the growing population residing in rural and semiurban areas of India.

Asset Under Management : Rs. 46,776cr
Capital Adequacy Ratio : 17.2%
Total loan disbursed: Rs. 31,659cr
Total loan disbursed growth in 2016-17: 18.5 %

  1. Personal Loans
    Children’s Education
    Medical Treatment
    Working Capital
  2. Vehicle Financing
    Auto and Utility Vehicles
    Commercial Vehicles
    Construction Equipment
  3. PreOwned Vehicle Financing
    Multi-utility Vehicles
    Commercial Vehicles
  4. Insurance Broking ( Through subsidiary Mahindra Insurance Brokers Limited)
    Retail Customers
  5. SME Financing
    Project Finance
    Equipment Finance
    Working Capital Finance
  6. Housing Finance (Through subsidiary Mahindra Rural Housing Finance Limited)
    New House
    House Renovation and
  7. Investments and Advisory (under the brand Mahindra Finance Finsmart)
    Investment Products
    – Fixed Deposits
    Advisory Services
    – Investment planning
  8. Mutual Fund Schemes (Through Mahindra Mutual Fund, managed by subsidiary Mahindra
    Asset Management Company Pvt Ltd)
    Liquid Scheme
    Equity Linked Saving Scheme (ELSS)
    Equity Oriented Balanced Scheme
    Short Term Debt Scheme

Compounded Sales Growth for last 10 years is 21% and TTM sales growth is 19%
Compounded Profit growth TTM is 100%
Other income has increased dramatically : 91.08 crore
Net profit is 1023.91cr compared to 511.64 cr last year
Current PE is at 28


Strong cash flow:

Increasing sales and operating profit:

Share capital: no much equity dilution

Disc: Not invested, tracking

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Mahindra Finance’s total income rose to ₹1,939.67 crore in April-June period of 2018-19 as against ₹1,508.70 crore a year ago

Capital adequacy is good due to increase in book value. However, NPA is a bit high at 7.4%.


The breakup of NPAs by sector is below:

Mahindra n Mahindra financial services

Key takeaways
Growth and strategy
 Within segment, growth in UVs has remained positive and expected to remain so.
Used assets have grown strongly and ~18% growth is estimated. Tractors may
grow seasonally, but sustenance is difficult. HCVs will be the last to revive while
LCVs have better prospects. Cars are positive incrementally.
 Overall, growth in H1FY21 will be in low single digits, but things are expected to
improve post festival season (on lower base).
 For CVs, scrappage policy can take care of absorbing excess capacity.
 Focus remains on protecting asset quality, controlling costs and improving
 Has started a pilot with platform based (digital) lending in a few locations. If
successful, will look into entering small ticket loans (e.g. two wheelers).
 Various cost optimisation initiatives are underway (security guard costs, telecom
costs, rentals). Cost-income should decline to 35% in a few quarters.
 Housing finance: While the NPAs have been sticky, the second crop season is
expected to be good leading to better recoveries. A detailed analysis reveals that
borrowers do have intent to repay.
 The strategy is to diversify in 9-10 states to reduce risk and focus more on
affordable housing with an aim to have a balanced book.
Asset quality
 No significant differentiation with respect to various states in NPA levels.
 Asset quality in housing finance business remains weak (especially due to
Maharashtra) and will take two-three quarters to normalise.
 CV constitutes 20% of GNPA, tractor will be similar to CV, followed by UVs,
passenger cars and SMEs.

Can somebody guide me about the underwriting practices at M&M Financial Services.

Thanks in advance.

Hi. I want to check the NCD & CP redemption data of Mahindra Finance as well as some other players that is due in next 3-6 months. Anyone know any portal/report where I can get this data?

On the Rights issue here is my small note : One has to have the shares in demat delivered by record date to be eligible for the rights issue on 23rd , considering t+2 days for delivery , Monday seems safe to buy if interested in rights issue , but stock is in 10% circuit , so looks like a mess to me if price discovery has to happen on monday,tuesday (unless the circuit is removed on monday ) . Wednesday seems price should correct to ex rights issue as eligibility is lost by then. Correct me if i am wrong…

Pre rights issue :
#shares = 62 cr
EPS : 17.5
Book value : 12,000 cr
Market cap : 12,800 cr
BVPS : 193
CMP = 207
PBV = 1.1
PE = 12

Post rights issue : at Share price 207
#shares = 124 cr
EPS = 8.5
Book value : 15,200 cr
BVPS : 122
Adjusted CMP : 129
PBV =0.95
PE = 15

Consider a drop of 10% in Price on Monday : at Share price = 186
EPS = 8.5
Book value : 15,200 cr
BVPS : 122
Adjusted CMP : 118
PBV = 1.03
PE = 14

Consider a drop of 20% in Price to Tuesday : at Share price = 167
EPS = 8.5
Book value : 15,200 cr
BVPS : 122
Adjusted CMP : 109
PBV = 1.11
PE = 12.8

A data dump of MMFS I have collected from my financial services sector collection.

Annual Data above, GNPAs and NNPAs are troubling, especially when vehicle financing for parent company forms a large chunk of the loan book. Provision coverage ratio has been reducing, which is a bad trend, I doubt the loan book composition has changed so drastically over the past 5 years that such a drop is warranted.

One can argue that the lending is secured, but vehicles are a depreciating asset, high LTVs in this space could be problematic as well. I was not able to find the LTV norms the company follows in my data collection. I am sure it can be attained if one contacts the management.

Quarterly Data for FY19, the ROA/ROE data is annualized, credit cost figures are interesting.

Quarterly Data for FY20, ECL trending up.

Book value per share has seen good growth, leverage maintained.

Loan book doubled in 5 years.

The sudden spike FY17 in NPA figures could be due to an acquisition or a subsidiary merging into the company.

FY19 Quarterly Asset & Liability trend.

FY19 was a good year for the company overall.

FY20 Quarterly Asset & Liability trend.

FY20 was steady overall, Q3 saw good demand for loans, while the auto sector was struggling. Would be a good exercise to check the segmented disbursements for that quarter.

Share of MSME in the loan book is reducing. Geographical diversification is maintained. Share of Commercial vehicles in the loan book is inching up. 27% and 17% of the book is built by financing parent’s private vehicles and tractors.

Majority of the capital is sourced from banks, the portion of capital sourced from mutual funds via commercial paper had reduced.

Company has a 12% market share vehicle financing sector.

Steady disbursement and loan book mix in FY17.

Commercial and used vehicles financing gaining share in FY18 within vehicle loan book.

Focus on commercial vehicles further increased in FY19.

Steady mix in FY20.

Unfortunately, we do not have more data to check the troublesome parts in the loan book. It would have been better to compare credit costs, NPAs, LTVs segment by segment and perhaps even by geographies.

Hope this will help you form a better understanding of the company.

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And a month old interview

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One question - In TTM Profit and loss, I see an increase in expenses to 8232Cr from 6046Cr… Unable to find the reasoning behind this…
Can anyone share information regarding this ?

Checked out the jun21 report at

So, there seems to be a impairment allowance made due to covid-19 and moratorium etc

Given this looks like the stock is depressed due to the negative numbers (PAT etc) .

Is there any value that we can apply to the %age of the impaired allocation that might be repaid and hence will add to future profits ?

Source: Telegram Channel ‘Beat the Street’.

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Hitesh ji’s opinion on M&M Finance as a techno-funda pick.

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The company got hit by the unfortunate incident. Am of opinion that almost all financial services companies are doing the same, but unfortunately MMFS got the bad end of it.

Still, I have trust in mgmt to overcome this, though it would take at least a quarter.

The Ken had recently covered Mahindra Finance.

Sharing summary points for reference:

  • An RBI notification banning Mahindra Finance from using third-party agents for recovery has forced the legacy firm to think on its feet
  • Fresh from a Covid war, the recuperating NBFC now has to battle a new villain amid rising cost-to-income ratio and volatile profits
  • The accident has laid bare the rot that is corroding the lending industry, usually accepted as part of trade practices
  • The onus is back on Mahindra Finance to convince RBI to lift the ban after an internal audit proves there are no big holes to plug