Mahindra & Mahindra Financial Services - Recovery Still Some Time Away ... :: Edelweiss PDF link

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->

We met with the top management of Mahindra & Mahindra Financial Services (MMFS) and they portrayed a cautious outlook: 1) economic activity/sentiments are still weak at the ground level (in rural economy); 2) discounts still prevalent across manufacturers; 3) going ahead collections may also not be as strong as H2 of previous years. In fact, focused efforts on recoveries and tactical move to stay closer to customers will arrest further deterioration in asset quality. Management highlighted that Northern markets (UP, Rajasthan and Punjab) are doing extremely well, but the Western region (Maharashtra, Gujarat and Madhya Pradesh) is weak. While we structurally like MMFS from a long-term perspective underpinned by its sound business model, moderation in growth and elevated credit cost will keep premium valuations (3x FY16E book) under check. We maintain ‘HOLD’ with a TP of INR308.

GNPL: Not to deteriorate further but collections also not buoyant

While management has risen to asset quality challenges with focused efforts and tactical moves towards recoveries, weak operating environment and challenges in few states is keeping momentum in collections under check. Hence, as compared to the 100-150bps improvement in GNPLs generally seen in H2 historically, may not fructify this year and GNPLs will likely remain near 6%. This coupled with seasoning of NPLs will keep credit cost elevated (relatively higher than Street’s expectation). Management also highlighted that the new NPL recognition norms will have minimal operational and financial impact as adequate time (till FY18) is provided for transitioning and only incremental business will have to be reviewed.

LINK

https://www.edelweiss.in/research/Mahindra-And-Mahindra-Financial-Services--Recovery-Still-Some-Time-Away;-Visit-Note/27764.html