Mahin­dra & Mahin­dra Fi­nan­cial Ser­vices Ltd

Money Times - - News - By Pratit Nayan Pa­tel

(BSE Code: 532720) (CMP: Rs.400.30) (FV: Rs.2)

We had rec­om­mended this stock ear­lier at Rs.469.05 on 23 July 2018, where-af­ter it zoomed to Rs.527.45. The stock has slipped to Rs.400.30 in line with the re­cent mar­ket crash and there­fore, we be­lieve that this is a good op­por­tu­nity for in­vestors to en­ter or av­er­age the stock based on its ex­cel­lent Q1 num­bers.

Com­pany Back­ground: Mahin­dra & Mahin­dra Fi­nan­cial Ser­vices Ltd (M&M Fi­nance) is a sub­sidiary of Mahin­dra & Mahin­dra Ltd (M&M), In­dia's largest trac­tor and util­ity ve­hi­cle man­u­fac­turer. M&M Fi­nance started its jour­ney in the ru­ral non-bank­ing fi­nance in­dus­try two decades back and has steadily di­ver­si­fied its of­fer­ings and ex­tended its reach over the years. To­day, it is a lead­ing non-bank­ing fi­nance com­pany (NBFC) cater­ing to cus­tomers pri­mar­ily in the ru­ral and semi-ur­ban ar­eas. It pro­vides fi­nanc­ing for auto and util­ity ve­hi­cles (UVs), trac­tors, cars, com­mer­cial ve­hi­cles (CVs) and pre-owned ve­hi­cles. It is also en­gaged in mu­tual fund dis­tri­bu­tion, fixed de­posits and per­sonal loans.

Sub­sidiaries: Mahin­dra In­sur­ance Bro­kers Ltd (MIBL) dis­trib­utes in­sur­ance prod­ucts through tie-ups with var­i­ous lead­ing in­sur­ance com­pa­nies. Mahin­dra Ru­ral Hous­ing Fi­nance Ltd (MRHFL), an­other sub­sidiary, has as­sets un­der man­age­ment (AUM) worth Rs.7168.15 crore (up 34%). In the hous­ing fi­nance seg­ment, it has strength­ened its op­er­a­tions in Ma­ha­rash­tra, Gu­jarat, Ra­jasthan, Tamil Nadu, Andhra Pradesh, Te­lan­gana, Chhattisgarh, Ker­ala, Kar­nataka, Mad­hya Pradesh, Ut­tar Pradesh, Ut­tarak­hand and Bi­har. Through Mahin­dra As­set Man­age­ment Co. Pvt Ltd (MAMCPL), it of­fers a va­ri­ety of mu­tual fund schemes with spe­cial fo­cus in ru­ral and semi-ur­ban ar­eas. Mahin­dra Fi­nance USA LLC is a joint ven­ture be­tween M&M Fi­nance and a sub­sidiary of the Rabobank group that of­fers whole­sale in­ven­tory fi­nanc­ing to deal­ers and re­tail fi­nanc­ing in USA to pur­chase Mahin­dra group prod­ucts.

Fi­nan­cials: With an eq­uity cap­i­tal of Rs.123.55 crore and re­serves of Rs.9792.31 crore, M&M Fi­nance’s share book value works out to Rs.163. The pro­mot­ers hold 51.19% of the eq­uity cap­i­tal, Mu­tual Funds hold 11.95%, FPIs hold 28.10% and DIIs hold 0.41%, which leaves 8.35% stake with the in­vest­ing pub­lic. Per­for­mance Re­view: For FY18, M&M Fi­nance re­ported 19% higher in­come of Rs.8533.15 crore with 98% higher PAT of Rs.1051.43 crore and an EPS of Rs.17.62. Dur­ing Q1FY19, it re­ported 34% higher PAT of Rs.269.05 crore on

28% higher in­come of Rs.1925.84 crore and an EPS of Rs.4.38. It paid 200% div­i­dend for FY18 and 120% div­i­dend for FY17.

In­dus­try Over­view: The In­dian fi­nan­cial sec­tor, which com­prises com­mer­cial banks, NBFCs, co-op­er­a­tives, pen­sion funds, in­sur­ance com­pa­nies, mu­tual funds and other fi­nan­cial en­ti­ties, is un­der­go­ing rapid ex­pan­sion. A fast-grow­ing econ­omy, ris­ing in­come lev­els, higher fi­nan­cial sav­ings, greater propen­sity to spend and im­prov­ing life ex­pectancy rates are some of the en­cour­ag­ing fac­tors that are likely to boost growth in this sec­tor in the com­ing years. Over the past few years, the RBI has taken steps such as in­tro­duc­tion of small fi­nance banks and spe­cial­ized pay­ment banks to broaden the scope of fi­nan­cial ser­vices in In­dia. NBFCs are an in­te­gral part of the In­dian fi­nan­cial sys­tem that com­ple­ments the bank­ing sys­tem. The ex­pected re­forms and drive to­wards var­i­ous core sec­tors will pro­vide more op­por­tu­ni­ties to NBFCs to cre­ate sig­nif­i­cant fi­nan­cial in­clu­sion and em­ploy­ment op­por­tu­ni­ties across the coun­try. In line with the gov­ern­ment’s vi­sion to achieve in­clu­sive growth, the next key step is to in­clude the un­banked pop­u­la­tion in the for­mal fi­nan­cial sys­tem. This will em­power them and re­sult in a sig­nif­i­cant rise in the av­er­age per capita in­come. The In­dian ru­ral mar­ket has emerged as a key growth engine in the coun­try’s econ­omy. Sev­eral mea­sures were pro­posed to strengthen the ru­ral econ­omy in the Union Bud­get 2018-19 - Min­istries to spend Rs.14.34 lakh crore on the liveli­hood in ru­ral ar­eas; Na­tional Liveli­hood scheme to get Rs.5750 crore; Hous­ing for All by 2022 scheme; One crore houses to be built un­der the Prad­han Mantri Awas Yo­jana in ru­ral ar­eas, etc. M&M Fi­nance has 1,284 of­fices across 27 states and 4 union ter­ri­to­ries with over 5.34 mil­lion ve­hi­cles. The gov­ern­ment’s aim of dou­bling farm­ers’ in­come as well as a nor­mal mon­soon will boost the sen­ti­ment and earn­ings of the com­pany.

Con­clu­sion: Dur­ing FY18, M&M Fi­nance raised ~Rs.2111 crore via a pref­er­en­tial al­lot­ment and QIP. It al­lot­ted 2,50,00,000 shares on a pref­er­en­tial ba­sis at Rs.422/share and 2,40,00,000 shares to QIP in­vestors at Rs.440/share. It has AUM of more than Rs.5000 crore in the SME fi­nanc­ing busi­ness and Rs.3980 crore in the Mu­tual Funds busi­ness. Na­tional Hous­ing Bank owns 11% stake in MRHFL. Its to­tal AUM rose 21% to Rs.58711 crore from Rs.48468 crore while over­all dis­burse­ments grew 35% to Rs.10338.68 crore from Rs.7639.9 crore. Gross NPA (non-per­form­ing as­sets) de­clined from 14.5% to 9.4% while net NPA de­clined from 9.3% to 6.3% in Q1FY19. Cur­rently, the stock trades at a P/E of 22.27x and looks quite at­trac­tive based on its fi­nan­cial pa­ram­e­ters. In­vestors can ac­cu­mu­late the stock be­tween Rs.415-390 with a stop loss of Rs.360 for a price tar­get of Rs.600-625 in the next 15-18 months. The stock’s 52-week high/low is Rs.537.5/353. Its mar­ket cap stands at Rs.24729.13 crore.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.