Mahindra & Mahindra Financial Services has posted a net profit of ₹223 crore for Q1FY23 as against a loss of ₹1,529 crore a year ago, largely owing to a 77 per cent on-year fall in provisions to ₹645 crore.

The company’s loan book increased sequentially by 4.2 per cent to ₹67,693 crore, led by of ₹9,472 crore during the quarter. The SME business grew 30 per cent on quarter on a low case, with total assets at about ₹2,800 crore as of June 30, which the company said it will further scale up in the coming quarters.

Operating metrics

“The company has been able to report a satisfactory top line and bottom-line performance on the back of growth in asset book and control on asset quality. We look forward to this momentum to continue in subsequent quarters,” Vice-Chairman and MD Ramesh Iyer was quoted as saying in the release.

He added that the disbursement trends continue to indicate demand momentum, as contact intensive businesses have also been doing well with increase in tourism and higher utilisation of vehicles.

Net interest income for the quarter was higher by 34 per cent on year at ₹1,567 crore, on the back of low-cost borrowings during the 12-month period, it said in a release. 

The net interest margin was at 8.2 per cent, but it may be hit in the coming quarters due to the expected rise in the borrowing costs, the company said.

Asset Quality

Gross stage 3 assets increased slightly to 8 per cent as of June 30 from 7.7 per cent in the previous quarter. The company held a provision cover of 58 per cent against its gross stage 3 assets, and additional management overlay provisions of ₹1,060 crore as of June 30.

 Stage 2 assets declined sequentially to 11.7 per cent from 14.3 per cent a quarter ago, with Mahindra Finance saying that it continues to maintain 100 per cent provisions on loan contracts “which have an ageing above 18 months”. Total liquidity buffer stood of around ₹8,700 crore at the end of June. 

The quantum of restructured loans too declined to ₹3,591 crore from ₹4,019 crore at the end of FY22 as the company has initiated focused efforts to contain NPAs based on IRACP norms scheduled to be effective from October 2022, it said.

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