M&M Financial Stock Falls Most In Six Months After Q3 Results
With the Ideal Finance JV, Mahindra Finance aims to replicate its business model in Sri Lanka. (Photographer: Dhiraj Singh/Bloomberg)

M&M Financial Stock Falls Most In Six Months After Q3 Results

Shares of Mahindra & Mahindra Financial Services Ltd. fell the most in six months after the non-bank lender suffered a loss in the third quarter.

The company’s net loss stood at Rs 223.2 crore in the three months ended December compared with a net profit of Rs 474.9 crore a year ago, according to an exchange filing. A consensus estimate of analysts tracked by Bloomberg had pegged the profit at Rs 369.9 crore.

Its net interest income, or core income, fell 3% year-on-year to Rs 1,646.2 crore.

  • Disbursement for the quarter fell 36% year-on-year to Rs 6,270 crore.
  • Gross stage 3 assets stood at 9.99% compared with 7% in the preceding quarter, while net stage 3 assets stood at 6.57% against 4.7%.
  • Provisions and write-offs stood at Rs 1,474 crore compared with Rs 665.8 crore in the July-September period and Rs 420.2 crore a year ago.
  • The company had a cumulative management overlay of Rs 1,180.9 crore as on Dec. 31, 2020 for covering the contingencies that may arise due to Covid-19.

“Not taking away prudence to let assets flow to stage-3, large quantum of divergence makes us nervous,” Ambit Capital said in a post-earnings note. “Expecting this, we keep our credit cost estimates high.” Also, the captive nature of the book and poor underwriting track-record leaves M&M Finance with little room for error, Ambit Capital said.

Shares of M&M Financial fell as much as 8.3% — the most since July 27, 2020 — to Rs 150.6. The stock is also trading at its lowest since November last year. Of the 34 analysts tracking the company, 22 have a ‘buy’ rating, nine suggest a ‘hold’ and three recommend a ‘sell’. The average of Bloomberg consensus 12-month price target implies an upside of 25.8%.

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