The weakness may be a perfect time to accumulate the stock for the long term.
Mahindra & Mahindra Financial Services (M&M Finance) reported a weak headline number in Q3 FY19, although some of its core parameters have been gaining strength. The headline number was muted on account of the Rs 65 crore exceptional income in the year-ago quarter as well as a surge in operating expenses.
Key positives
Business momentum remains strong, with assets under management growing by over 30 percent at the end of December 2018, driven principally by commercial vehicles (CVs), pre-owned vehicles as well as lending to small & medium enterprises (SMEs). Growth in disbursement was in excess of 24 percent.
The quarter under review saw the lingering impact of the Infrastructure Leasing & Financial Services (IL&FS) crisis and tightness in liquidity. However, the management said there was no funding constraint for M&M Finance, although the company carried some excess liquidity as a precaution. The end-market still looks good, with no pressure on lending yields. Despite the challenges, the company was able to maintain its interest margin.
Asset quality improvement continues with Q3 witnessing a 10 percent sequential decline in gross non-performing assets (NPAs). Gross and net NPAs at the end of the quarter stood at 7.7 percent and 5.8 percent, respectively.
Some of the important subsidiaries of the company are showing improvement. Mahindra Rural Housing (88.75 percent stake) reported 32 percent growth in after-tax-profit for the first nine months of FY19, with a gradual improvement in asset quality. Mahindra Insurance Brokers (80 percent stake) reported a 46 percent growth in profit after tax for 9M FY19.
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