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
processes/technology.
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.