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Sunday, Aug 04, 2002

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M&M Financial Services — Running well

Sowmya Krishnan

THE fixed deposit programme of Mahindra and Mahindra Financial Services is an attractive option. Interest rates are quite attractive.

On a stand-alone basis, its performance has been quite good.

MMFSL, a subsidiary of Mahindra and Mahindra (M&M), accepts only cumulative deposits.

It offers 9.25 per cent for 12 months, 9.75 per cent for 18 months, 10.25 per cent for 24 months and 10.75 per cent for 36 months.

The cumulative effective annual yield works out to 9.25 per cent, 10.07 per cent, 10.78 per cent and 11.95 per cent respectively for the same tenures.

Minimum deposit amount is Rs 10,000. Further information can be obtained from its registered office at Gateway Building, Apollo Bunder, Mumbai — 400 001.

MMSFL provides hire-purchase finance, primarily for utility vehicles and light commercial vehicles. It mainly caters to the dealers and customers of Mahindra and Mahindra.

But, of late, it has also been financing non-M&M products and vehicles sold in the secondary market.

Flush with funds from IFC (it has received a Rs 84-crore long-term loan from IFC at an interest rate of around 10 per cent), it plans to further expand its business and foray into new businesses such as distribution of insurance products.

Despite a tough phase that its parent is going through, MMSFL was able to increase its disbursements 17 per cent to Rs 1,166 crore for 2002.

Its income form operations rose 38 per cent to Rs 191.34 crore and net profit, 188 per cent to Rs 27.72 crore.

One notable aspect is the sizeable reduction in finance charges.

For the year ended March 2002, finance charges accounted only 38.9 per cent of its revenues as against 47.47 per cent in the previous year. This expanded its margins 22.7 per cent in 2002 (14.75 per cent).

Its main strength is its dealer network, which further expanded during the year to 151 outlets.

The capital-to-risk assets ratio at 17.05 per cent on March 2002 (15.4 per cent) provides a good cushion for further growth without fresh equity expansion.

This gives the company considerable flexibility in planning its fund base.

Though the automobile sector is a cyclical one, investors can go for all the options available.

Though the three-year option carries a higher degree of risk, it may be worth it due to the returns on offer.

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