Expectations of heavy showers this year have boosted sentiments of agriculture and related businesses. Non-banking financial companies are expecting their loan book to swell as farm income rises and along with it the demand for tractors, two-wheelers, small cars and utility vehicles.

Speaking to Bloomberg TV India , Mahindra & Mahindra Financial Services Vice-Chairman and Managing Director Ramesh Iyer outlines the company’s strategy to cash in on the revival of rural demand. The company has increased resources and staff strength, and opened more branches to sustain growth, he said.

Do you think the worst is behind for the financial services sector? What’s the outlook for M&M Financial Services?

I am not too sure whether we should call it the worst. These are cyclical impacts, which you will have in any business. The rural sector has been passing through some difficult times on the back of two years of poor monsoons and lack of economic activity.

But we do believe very clearly that we have a long-term vision in play in this market. We have been in this market for 20 years and have seen many such cycles — it may not be across the country, but across different geographies.

Therefore, we have the experience to handle such a situation. We have added resources. We saw benefit of this coming through in the fourth quarter.

Financial indicators have indeed improved — your margins have increased and the provisioning for NPAs has come down. Do you think this trend is going to continue during FY17? Have you been able to arrest all the problems?

We look at our business State by State. We did have pressure in South India, Maharashtra and Madhya Pradesh. Andhra and Telangana have done well. We have seen improvements in Tamil Nadu and Kerala.

I guess, we also had some benefit of a few States going through elections; some extra activity around there benefitted us. We don’t see it deteriorating over what it was, but it is too early to say things have been fully sorted.

The first two quarters are always tougher than the next two. Come the festivals, they harvest; then the marriage season, the buying begins, and the cash flow improves. We have picked up from last year, but we will still wait for a good monsoon; we will wait for the season to open up and may be after that we will declare how things turn up.

Will your Q1 and Q2 results depend on the monsoon this year?

Our preparedness is for medium to long term. We have added resources, and people; branches are being opened and relationships are being developed. We are not overly worried if there is pressure in one or two quarters.

Normally, the volumes in the first and second quarters are not very high. It starts to pick up from June. Many new products have been launched in the rural market, which will benefit us. We are prepared to take advantage of that.

Focus will continue to be on recovery and quality maintenance until the market conditions improve. And we will wait for the monsoon to take off.

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