M&M Financial gains 4%, hits 52-week high on healthy business in August

Shares of Mahindra & Mahindra Financial Services (MMFSL) hit a 52-week high of Rs 216.75 on the BSE, gaining 4 per cent in Monday's intra-day trade, after the company recorded a strong growth in disbursement in August in the backdrop of  positive macro environment.

The stock of the Mahindra group company surpassed its previous high of Rs 212.70, touched on July 22, 2022. In comparison, the S&P BSE Sensex was up 0.58 per cent at 59,146 points at 10:38 am.

MMFSL said the business continued its momentum with disbursement of approximately Rs 3,740 crore, delivering a 75 per cent year on year (YoY) growth.

"The year to date (YTD) disbursement is at approximately Rs 17,150 crore, and registered a YoY growth of 104 per cent. This has resulted in YoY growth of around 12 per cent and sequential month on month (MoM) growth of around 3 per cent in gross business assets," MMFSL said in August month business update.

The company further said its stage 2 non-performing assets (NPAs) experienced a sequential reduction compared to July 2022 while stage 3 assets remained stable. The company expects improvement in Stage 2 and Stage 3 assets during September 2022.

That apart, the collection efficiency (CE) was at 96 per cent for August 2022, as against CE of 97 per cent for August 2021. The Company continued to enjoy a comfortable liquidity position on its Balance Sheet, with a liquidity chest of over 3 months, MMFSL said.

MMFSL is one of India's leading non-banking finance companies (NBFCs) offering quality products and services to a wide customer base in India’s semi-urban and rural areas. The company is primarily in the business of financing purchase of new and preowned auto and utility vehicles, tractors, passenger cars, commercial vehicles, construction equipment and SME financing.

"The NBFC sector is expected to deliver double-digit loan growth in FY2023, on top of 6-8 per cent growth projected for FY2022. This will be driven by improvement in economic activity and strengthened balance sheets of NBFCs. There is significant pent-up demand in the vehicle finance segment, which can see a strong revival in growth depending on the availability of vehicles, which are facing component shortage due to the pandemic," MMFSL had said in its FY22 annual report.

Asset quality metrics are expected to improve supported by the expected improvement in macro-economic activity, sharper focus on collections and adequate provisioning. However, the performance of restructured portfolios, as and when their regular payments begin, and impact from a potential resurgence of the pandemic are key risks, the company said.

The transition from a benign interest rate environment of FY2022 to a rising interest rate scenario in FY2023, would impact funding costs for incremental borrowings across lenders. While the balance sheet of NBFCs have sufficient liquidity to maintain funding costs for certain quarters, cost of incremental borrowings is likely to rise across capital market instruments and bank funding, it said.

Technical
View Bias: Positive
Support: Rs 212
Target: Rs 240

The stock has been trading with a postive bias since early April 2022, and has since been making higher tops and bottoms. 

With today's strong move, the stock is seen trading firmly above the higher-end of the Bollinger Band on the daily chart. The near 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 - which is the higher-end of the Bollinger Band on the weekly chart, above which the stock can potentially rally to Rs 240 - indicates the monthly chart.

(With inputs from Rex Cano)