Mahindra & Mahindra Financial Services Ltd. | Q3FY15 Result Update | We don’t have a formal rating on the stock :: IndiaNivesh, report

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--> Mahindra &Mahindra Financial (M&M Finance) reported disappointing set of
numbers for Q3FY15 led by lower than expected growth in all metrics along with
deterioration in asset quality. AUM growth was muted at 11% yoy to Rs 365 bn led
by lower disbursements of Rs 67 bn, down 8% yoy. Net profit was down 17% yoy led
by significant increase in provisioning expense by 50% yoy. Asset quality deteriorated
with increase of 80 bps and 30 bps qoq in Gross and Net NPAs respectively. On back
of higher slippages, NIMs (calc) declined by 24 bps qoq to 8.2%.
Result update:
Moderating growth in AUM:
AUM growth of M&M Finance moderated to 11% yoy (2% qoq) to Rs 365 bn led by
disbursements of Rs 67 bn, down 8% yoy. AUM growth (calc) in Auto / Utility
vehicles was up 19% yoy, Tractor by 11% yoy Cars by 11% yoy while CV / CE were
down 10% yoy. Management specified that there is no significant pick up in demand
in rural markets and expect gradual recovery going forward. Further the company
has added another 31 branches in Q3FY15 taking the total branches to 1086. The
company has gone more deep in rural markets by increasing its branch network.
Rs mn Q3FY15 Q3FY14 % YoY Q2FY15 % QoQ
Auto/ Utility vehicles 109507 92003 19.0 103513 5.8
Tractors 69354 62431 11.1 64250 7.9
Cars 83955 75574 11.1 82097 2.3
CV / CE 47453 52573 ‐9.7 49972 ‐5.0
Pre Owned 54753 46002 19.0 57111 ‐4.1
AUM 365023 328583 11.1 356942 2.3
Source: Company, IndiaNivesh Research
NIMs declined on back of higher NPAs and Lower AUM growth:
Lower AUM growth and significant increase in NPAs have led to lower than expected
growth in interest income. As a result, NIMs declined by 24 bps qoq to 8.2%. Net
Interest income was lower than our and street expectation at Rs 7.4 bn, up 9% yoy.
Management specified that company is not planning to reduce their lending rates
immediately even if interest rates come down marginally.
Rs mn Q3FY15 Q3FY14 bps YoY Q2FY15 bps QoQ
NIM 8.2 8.5 ‐27 8.4 ‐24
Yield on funds 15.4 15.8 ‐46 15.5 ‐11
Cost of funds 10.0 10.1 ‐8 10.0 7
Source: Calculated, IndiaNivesh Research
Asset quality deteriorated:
Asset quality of M&M Finance deteriorated with increase of 80 bps qoq in Gross
NPA and 30 bps qoq in Net NPA to 7.1% and 3.4% respectively. In absolute terms,
Gross and Net NPA increased by 17% and 12% respectively to Rs 25 bn and Rs 11.4
bn. Provisioning expense increased by 50% yoy to Rs 2.7 bn. As a result, Provision
coverage ratio has improved to 54%.

LINK
http://www.indianivesh.in/Admin/Upload/635574288505447500_M_M%20Financial%20Services_Q3FY15%20Result%20Update.pdf