Mahindra Finance - Business Trajectory Firmly On Track For Vision 2025: ICICI Securities

ICICI Securities Report

Mahindra and Mahindra Financial Services Ltd. has disclosed that the Reserve Bank of India has revoked the ban imposed on the company from using third-party agencies for repossessions. This will likely further boost the already improving asset quality.

Separately, Mahindra Finance continues to report robust growth of ~22% / 4% QoQ in disbursements / assets under management respectively in Q3 FY23 and improvement in gross stage II/III assets to 8.5% / 6.2% from 9.7% / 6.7% in Q2 FY23.

As such, the company is on the path to achieve its vision 2025 goals of gaining two times AUM growth, less than 6% GS-III and ~2.5% return on asset.

There is room for further increase in the multiple given the company’s long-term one-year forward price/book average of 1.9 times.

Rerating of the stock will depend on sustained higher growth (leverage remains low due to lower growth in the past) given that FY24E return on equity still remains less than 13%. Risks include higher-than-anticipated provisions, net interest margin shrinkage and an uncertain macro-environment impacting rural demand.

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