Motilal Oswal Has A Buy Call On The Stock Of Mahindra Finance

Stock Overview, CMP, Market Cap, 52 Week Low & High

Today stock opened at Rs 186.30, while the previous close was Rs 186.45, witnessing a fall of 0.24%. Currently, the stock is trading at Rs 186. Mahindra & Mahindra Financial Services Limited's share price touched the 52-week low at Rs 128, while it hit the 52-week high at Rs 206.35. The company has a market capitalisation of Rs 22,969 crore.

Business update

Mahindra & Mahindra Financial Services Limited reported disbursements of Rs 29.7b in May'22 (up 272% YoY on a low base, impacted by the second COVID wave). Disbursements grew 8% MoM. In FY23 till date, disbursements stood at Rs 56.9b (up 170% YoY). Collection efficiency (CE) stood at 95% in May'22 (v/s 90% in Apr'22). The YoY comparisons are distorted due to the impact of COVID-related lockdowns. It reported a CE, in line with pre-COVID levels. Considering the CE witnessed in Apr-May'22, the management expects lower volatility in Stage 3 assets in 1QFY23. 

Management task at hand

Given the fact that 1QFY23 has historically been a seasonally weak quarter in terms of asset quality and Mahindra & Mahindra Financial Services has in the past reported high volatility in the first quarter, the management's endeavor will be to contain GS3 at levels similar to what it reported in Mar'22 (GS3: 7.7%). 

Rationale for Investment

Disbursement volumes in May'22 seem to suggest that strong demand/business volumes have been feeding into healthy disbursement growth for MMFS as well as other Vehicle Financiers.

The management has noticed nothing unusual in terms of delinquencies in May'22 and the same continues to remain within expected levels.

As of May'22, Mahindra & Mahindra Financial Services maintained a comfortable liquidity position of ~Rs 87.8b, which is equivalent to around three months of its funding requirement.