M&M Financial Profit Up 3% On Year, Down 6% On Quarter As Credit Costs Rise

Mahindra & Mahindra Financial Services Ltd. reported a net profit of ₹5.30 billion for the June quarter, up 3.2% on year but down 6% sequentially, largely in line with estimates. The drop in quarterly profit was due to higher credit costs and modest disbursement growth.

Revenue from operations rose 18.7% on year and 4.2% on quarter to ₹44.19 billion, aided by a 15.3% on-year increase in interest income to ₹41.65 billion. Net interest income, including dividend and other income, grew 18% on year and 6% sequentially to ₹22.85 billion, beating the estimate of ₹20.70 billion. Net interest margin improved to 6.7% from 6.6% a year ago and 6.5% in January-March.

Credit costs rose to 1.9% in April-June from 1.4% a quarter ago and 1.5% a year ago. Impairment on financial instruments jumped to ₹6.60 billion from ₹4.48 billion last year. Provision coverage on Stage 3 loans was 51.4% at the end of June.

Disbursements fell 18% sequentially but rose 1% on year to ₹128.08 billion. Tractor disbursements, however, rose 21% on year. Collection efficiency improved to 95% from 94% a year ago. Stage-3 assets edged up to 3.8% from 3.7% a quarter ago, while Stage-2 assets stood at 5.85%.

Assets under management rose 15% on year to ₹1.22 trillion. Capital adequacy was at 20.62%, and liquidity coverage ratio at 322% as of June 30, supported by a liquidity buffer of over ₹101 billion.

The company is working to reduce high-risk exposure in its vehicle finance book and diversify its portfolio. The non-vehicle finance portfolio grew 30% on year, while the MSME book rose 28% to ₹65.23 billion. Within MSME, secured loans—primarily loan against property—accounted for 44% of the segment's assets, up from 33% a year ago. Stage-3 assets in the MSME segment were 1.4% at the end of June.