A farmer uses a Mahindra & Mahindra Ltd. tractor to fill an area at the edge of his corn field where recent heavy rains washed out the soil in Princeton, Illinois, U.S. (Photographer: Daniel Acker/Bloomberg)

Rural Cash Flows, State Elections To Boost Growth: M&M Financial Services

Mahindra & Mahindra Financial Services Ltd. remains bullish on rural India on the back of even distribution of monsoon as well as farm and infrastructure cash flows.

The next two years look very strong for the rural business, the management said in an analyst meet. The company maintained its guidance of 20 percent growth in assets under management for the ongoing financial year. The non-banking financial company won’t need to raise capital for two years, it said.

Impact Of Elections

The upcoming state elections, pick-up in infrastructure activities and strong relationships with vehicle manufacturers bode well for the company over the next two years. Historically, overall repayments have improved for the company a year after elections even as growth rates moderate.

Plans For Housing Finance Business

The company expects to grow its housing finance business multifold over the next few years. Its housing finance book is at Rs 7,000 crore, of which Maharashtra and Tamil Nadu constitute 50 percent and 20 percent, respectively. The company has expanded its presence in Andhra Pradesh, Karnataka, Gujarat, Rajasthan, Uttar Pradesh and Bihar. The vehicle financier’s exposure to flood-hit Kerala is about 1 percent of its total loan book.

Open To Acquisition

The company is focusing on growing internally, while it continues to look for buying opportunities in the auto financing as well as rural and affordable housing spaces.

The NBFC, however, expects to meet its assets under management guidance for the ongoing financial year through organic route, mainly because of lack of good assets to buy. “We have no interest in entering into the microfinance space,” said Ramesh Iyer, managing director of M&M Financial Services. It has a different culture and cost structure compared to its vehicle financing and rural home improvement financing businesses, he said.