Shares of Mahindra & Mahindra Financial Services (M&M Financial) rallied 10 per cent in Thursday's trade after its September quarter results came in better than expectations.
The NBFC reported a 55 per cent year-on-year (YoY) drop in consolidated net profit at Rs 492 crore for the September quarter compared with a profit of Rs 1,103 crore in the corresponding quarter last year.
Analysts were largely expecting profit for the quarter to fall in excess of 50 per cent on yearly basis. M&M Financial said consolidated total income for the quarter rose 3 per cent to Rs 3,029 crore compared with Rs 2,951 crore in the corresponding quarter last year.
Disbursement for the quarter rose 79 per cent YoY to Rs 12,249 crore from Rs 6,839 crore in the year-ago quarter.
Analysts said while the company's operating performance disappointed on the back of decline in net interest margin (NIM) and higher opex, disbursement growth accelerated and asset quality also improved.
Disbursement growth during the quarter was broad-based with a YoY growth of 83 per cent and a sequential growth of 25 per cent. Collection efficiency remained strong indicating cash flow generating capability of customer segment, M&M Financial said.
"We continue to maintain leadership position in financing of Tractor and Mahindra Auto segment. With evolving segment and customer mix, we expect to maintain quality growth. We are witnessing strong demand in the Tractor segment, aided by above average monsoon conditions and continued spending by government on rural projects. Increasing penetration in the used vehicles financing continues to be our focus area to help improve margins," the company said.
"While M&M Financial has exhibited a volatile operating performance and weak asset quality in the past, the various strategic initiatives undertaken by the management, if executed correctly, have the potential to script a credible transformation," said Motilal Oswal Securities.
The brokerage said that a strong liability franchise and deep moats in rural and the semi-urban customer segment positions the company well to reap rewards going ahead.
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