Mahindra & Mahindra Financial Services’ Q3FY25 PAT of ₹900 crore exceeded expectations due to a provision write-back on the past portfolio, resulting in negligible credit costs. NII growth was in line with estimates, and disbursements increased, driven by PV and tractors, leading to steady AUM growth.
Asset quality remained stable, with management indicating sustainable credit costs. New partnerships are expected to boost fees, and with improving operating leverage, RoA/RoE of 2% and 14% respectively are projected by FY27E. The company aims to raise capital in the near future given the low Tier I ratio of 15%.
SME segment is growing on a low base, while the pre-owned segment experienced muted growth, prompting management to focus on accelerating growth in this area. In the PV segment, Mahindra & Mahindra Financial Services will continue to emphasize premiumization and has partnered with M&M for financing new EVs.
The company remains cautious on the CV segment, with steady AUM growth and SME segment picking up pace. Tractor NPAs improved as expected.
NIM improved by 20 bps due to better loan yields and rising fee income. Cost of funds increased slightly on liabilities repricing. The company expects NIM to stay at similar levels, targeting around 7% in the medium term.
Overall, the management’s guidance suggests a positive outlook for Mahindra & Mahindra Financial Services, with a focus on sustainable growth and improving financial performance.