Shillong, October 30: Shares of Mahindra & Mahindra Financial Services plunged by over 11 percent on Monday following the release of disappointing financial results.
On the BSE, M&M Financial Services experienced an 11.65 percent decline, reaching Rs 245 per share.
As per IANS, Centrum Broking’s research highlighted the company’s underwhelming performance in 2QFY24. The challenges included a net interest margin (NIM) squeeze due to the rising cost of borrowing (CoB), which is a concern across the non-banking financial company (NBFC) sector. However, Mahindra Finance faced additional obstacles, such as yield compression due to an upgrade to a better customer segment and a high proportion of interest-free advances in this quarter.
2QFY24 also saw higher credit costs due to increased provisions and write-offs, primarily in the tractor segment, which was impacted by unpredictable monsoon conditions. Operating expenses as a percentage of average assets (2.85 percent) exceeded the management’s guidance of 2.5 percent. While assets under management (AUM) continued to grow strongly, their translation into profitability remained uncertain, according to Centrum Broking.
Motilal Oswal Financial Services reported that Mahindra & Mahindra Financial (MMFS) witnessed a 48 percent year-on-year decline in 2QFY24 profit after tax (PAT) to Rs 2.35 billion, missing estimates by 44 percent.
Reported net interest income (NII) increased by 9 percent year-on-year to Rs 16.7 billion but fell short by 6 percent, while pre-provision operating profit (PPoP) grew by 9 percent year-on-year to Rs 9.4 billion, missing expectations by 10 percent. Annualized credit costs reached 2.8 percent (compared to 2.5 percent in 2QFY23), exceeding forecasts and including Rs 3.5 billion in write-offs (compared to Rs 3.1 billion in 1Q).
The research remarked, “We cut our FY24E EPS by 12 percent to factor in a higher NIM compression and elevated credit costs in 1HFY24.”
Despite previous efforts to streamline operations and enhance risk management, MMFS has now reported two consecutive quarters of NIM volatility and elevated credit costs, with only minor improvements in asset quality. Such repeated volatility in NIM and credit costs could erode investor confidence in the company’s transformation journey, the research cautioned.