Mahindra Financial Expects Loans to Surge on India Monsoon Boost
Mahindra Financial expects sales to improve on efforts by makers to reduce stockpiled units before upcoming holidays.
(Bloomberg) -- Heavier monsoon rainfall is likely to help drive growth at Mahindra & Mahindra Financial Services Ltd., which provides loans for tractors, utility vehicles and other equipment.
“The monsoon fortunately turned out to be better after a delayed start,” Chief Financial Officer V Ravi said in a phone interview. The Mumbai-based company sees its loan growth increasing to 10%-12% in October-March from about 3% in the first half of the fiscal year that began April 1.
Monsoon season, which typically runs from June through September, provides essential water for more than half of the farmland in India, the world’s second-biggest producer of rice. This year’s monsoon rainfall was 5% above normal as of Sept. 24, accelerating in the past few weeks, according to data from the India Meteorological Department in New Delhi.
The government expects 2019-20 production of monsoon-sown food grains to be 8.4 million tons higher than the average over the five previous years on account of favorable rainfall in major growing areas. Ravi noted that the slow start for the monsoon delayed the sowing of seeds, pushing back customer cash flow to the fourth quarter of the fiscal year.
India’s auto sector has been hurt by slowing consumer demand, the cost of compliance with stricter emissions standards and the liquidity crunch at shadow lenders. In addition to the rain, Mahindra Financial’s CFO expects sales to improve on efforts by manufacturers to reduce stockpiled vehicles before upcoming holidays.
“As we transition to BS-VI emission norms, there is a lot of push from the companies ahead of festivals in terms of promotion and discounts to clear the remaining inventory,” Ravi said.
To contact the reporter on this story: Nupur Acharya in MUMBAI at nacharya7@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler, Naoto Hosoda
©2019 Bloomberg L.P.