M&M Financial climbs 4% to hit 52-week high in August on healthy business

Mahindra & Mahindra Financial Services (MMFSL) shares hit a 52-week high of Rs 216.75 on the BSE and rose 4 percent in intraday trade on Monday after the company posted strong growth in August amid a positive backdrop of the disbursements had recorded macro environment.

The Mahindra Group company’s stock surpassed its previous high of Rs 212.70 hit on 22nd July 2022. In comparison, the S&P BSE Sensex was up 0.58 percent to 59,146 points at 10:38 a.m.

MMFSL said the business continued its momentum with payouts of approximately Rs 3,740 crore, delivering 75 per cent YoY growth.

“YTD (YTD) disbursements are approximately Rs 17,150 crore, posting a 104 per cent year-on-year growth. This has resulted in year-over-year growth of approximately 12 percent and sequential month-on-month (MoM) growth of approximately 3 percent of gross business assets,” MMFSL said in its August Monthly Business Update.

The company further said that its Stage 2 non-performing assets (NPAs) experienced a sequential reduction compared to July 2022, while Stage 3 assets remained stable. The Company anticipates an improvement in Stage 2 and Stage 3 assets in September 2022.

That being said, the collections efficiency (CE) for August 2022 was 96 percent, compared to a CE of 97 percent for August 2021. The company continued to have a comfortable cash position on its balance sheet with over 3 months cash treasury, MMFSL said.

MMFSL is one of India’s leading Non-Banking Financial Companies (NBFCs) providing high quality products and services to a diverse client base in the semi-urban and rural areas of India. The company is mainly active in the field of financing the purchase of new and used passenger and commercial vehicles, tractors, passenger cars, commercial vehicles, construction machinery and SME financing.

“The NBFC sector is expected to deliver double-digit loan growth in fiscal 2023, on top of the 6 percent to 8 percent growth projected for fiscal 2022. This is being driven by improving economic activity and strengthened balance sheets of NBFCs. increasing demand in the vehicle financing segment, which may experience a strong growth revival depending on the availability of vehicles facing component shortages due to the pandemic,” MMFSL had stated in its FY22 annual report.

Asset quality metrics are expected to improve, supported by expected improvement in macro activity, increased focus on collections and appropriate reserving. However, the performance of restructured portfolios as they begin their regular payments and the impact of a possible resurgence of the pandemic are the main risks, the company said.

The transition from a favorable interest rate environment in FY2022 to a rising interest rate scenario in FY2023 would impact the funding cost of incremental borrowing from all lenders. While NBFC’s balance sheet has sufficient liquidity to sustain funding costs for certain quarters, the cost of incremental borrowing in capital market instruments and bank financing is likely to increase, it said.

Prejudice: positive
Support: Rs 212
Target: Rs 240

The stock has been trading with a positive bias since early April 2022 and has been making higher highs and higher lows since then.

With today’s strong move, the stock is trading firmly above the upper end of the Bollinger Band on the daily chart. The short term bias for the stock is likely to remain bullish as long as the stock holds above Rs 212.

On the upside, the stock has some resistance around Rs. 218 – that is the upper end of the weekly chart’s Bollinger Band, above which the stock can potentially rise to Rs. 240 – shows the monthly chart.

(With contributions by Rex Cano)

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