Mahindra & Mahindra Financial Services reports impressive 38% increase in net profit

Moneylife Digital Team 22 October 2012

Despite difficult economic climate and high interest rates, the company has reported impressive September quarterly results, with 43% increase in net revenues and 38% increase in net profit

Mahindra & Mahindra Financial Services (MMFS), of which 56% is owned by Mahindra & Mahindra, posted healthy quarterly results. The standalone net revenues increased to Rs915.72 crore, up 43% year-on-year (y-o-y) when compared to the same period one year ago. Its second quarter operating profit was Rs271.06 crore, up 34% y-o-y from Rs201.65 crore. The net profit was at Rs188 crore during the quarter ended September 30th 2012, registering a growth of 38%, as compared to Rs136 crore during the corresponding period last year.

According the Moneylife database, net revenues fell only twice in the last eight quarters, with the latest quarterly sales growth nearly matching the three-month y-o-y growth average of 46%. This means, the company is able to keep up with the difficult economic climate. Likewise, its operating profit three month y-o-y growth average is 45%, which can be taken as an indicator of the sustainability of its business model and cost control. The company valuation doesn’t seem too expensive, with market capitalisation quoting at 8.39 times its operating profit with return on equity a healthy 25%.

MMFS has a focus on disbursing loans in rural and semi-urban areas. Its quarterly performance may come as a surprise. It registered a loan disbursement growth of 25% y-o-y over the same period last year, a positive sign considering that in this economic climate with higher interest rates, lending will normally be curbed. Apart from vehicle and tractor lending, it is also focussing on light & heavy commercial vehicles and construction equipment. In other words, it is diversifying its product offerings. Currently MMFS has 628 offices and total assets under management of Rs23,770 crore.

The stock price of the company rose 1.03% to Rs892.60 on the Bombay Stock Exchange (BSE).

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