Mahindra Finance Q2 net profit surges 55% to Rs 882 crore on volumes, lower credit cost

Revenue from operations rose 15% to Rs 5,164 crore. Net interest income increased 17% to Rs 2,822 crore. Pre-provisioning operating profit grew 20% to Rs 1,791 crore. Provisions and write-offs declined 16% to Rs 630 crore from Rs 751 crore.

Credit cost moderated to 1.6% of average total assets from 2.2% a year earlier, while net interest margin remained unchanged at 7%. The company is targeting a return on assets of 2.2%-2.5% by FY31, compared with 2.2% in the September quarter.

Disbursements rose 22% to Rs 16,499 crore, led by growth in gold loans, SME and mortgage lending, Raul Rebello, MD & CEO said speaking at analyst call. He said that effort to diversify outside passenger and commercial vehicle finance has yielded results with 20% of consolidated lending AUM is non-wheel business and while wheel business contributed 80%.

M&M Finance is targeting a return on assets of 2.2%-2.5% by FY31, compared with 2.2% reported in the September quarter. Rebello said that the liquidity buffer is at all time high and may not raise it further even if it does not dip into it.

Business assets under management grew 15% year on year to Rs 1.47 lakh crore. Non-vehicle finance disbursements, including SME loans, personal loans and housing finance, increased 52%.

Passenger vehicle disbursements increased 28% to Rs 6,826 crore, while financing for pre-owned vehicles grew 15% to Rs 2,834 crore. Commercial vehicle and construction equipment disbursements rose 16% to Rs 2,657 crore, and tractor financing increased 13% to Rs 1,979 crore.

Asset quality improved from a year earlier, with gross Stage 3 assets declining to 3.4% from 3.9%. Stage 2 assets fell to 4.7% from 5.8%, while collection efficiency improved to 97% from 96%. The provision coverage ratio on Stage 3 assets stood at 56.6%.

The lender’s capital adequacy ratio stood at 18%, including Tier-I capital of 16.2%, at the end of September. Its liquidity buffer was more than Rs 16,150 crore.