Despite delivering exceptional Q2 results with consolidated net profit rising 55% year-on-year to ₹882 crore, M&M Financial Services shares experienced a sharp 10% decline on Thursday, October 22, hitting a 52-week low of ₹268.25 on the NSE. According to LiveMint, the stock had hit a 52-week high of ₹415 on August 10, 2026, but has since shed 35.4% from that peak. The stock closed at 3.41% lower at ₹287.30 on Thursday, with trades of around 63 lakh shares recorded during the session. However, analyst sentiment remains mixed with ICICI Securities maintaining a 'Buy' rating but cutting its target price to ₹415 from ₹420, while Nomura has maintained its 'Buy' rating but lowered its target price to ₹400 from ₹415, and Nuvama has reduced its target price by nearly 7% to ₹340 from ₹365. Among major investment banks, CLSA retains an 'outperform' rating with a target price of ₹405 per share (indicating 35.9% upside), while Citi maintains a 'buy' rating with target price of ₹420, and HSBC has cut its target price to ₹340 from ₹365 while retaining its 'buy' rating.
According to latest reports, Mahindra and Mahindra Financial Services delivered exceptional Q2 results with consolidated net profit rising 55% year-on-year to ₹882 crore, supported by higher business volumes and contained credit costs. The company's total revenue from operations advanced 15% to ₹5,164 crore at the end of September quarter from ₹4,473 crore a year earlier. Net interest income (NII) increased 17% year-on-year to ₹2,834 crore, while consolidated net profit stood at ₹911 crore, up 61%, and total assets expanded 21% to ₹1.80 lakh crore. Interest income earned ₹4,732.46 crore, up 13% from ₹4,177.92 crore in the year-ago period, while dividend income rose 49% to ₹79.89 crore, rental income advanced 17% to ₹48.68 crore and income from fees, charges and commission surged by 40% to ₹275 crore. The company's assets under management (AUM) rose 15% annually with disbursements growing 22% to ₹16,499 crore, led by broad-based growth across passenger vehicles (up 28% to ₹6,826 crore), pre-owned vehicles (up 15% to ₹2,834 crore), commercial vehicles (up 16% to ₹2,657 crore), and tractors (up 13% to ₹1,979 crore). The company's business assets grew 15% YoY, reaching ₹1,46,512 crore. CLSA noted that pre-provisioning operating profit (PPOP) and profit after tax (PAT) beat estimates by 5% and 12% respectively, driven by higher fees and lower credit costs, with PPOP growth healthy at 20% from last year. Credit cost moderated to 1.6% of average total assets from 2.2% in the year-ago period, indicating improved operational efficiency.
Despite strong profitability, margin pressures persisted with reported Net Interest Margin (NIM) remaining flat at 7% year-on-year, as per Business Standard. However, as per Citi's analysis, the 30-basis-point sequential contraction in NIMs was offset by contained credit costs of 1.55%, fee income equivalent to 1.6% of assets and moderation in operating expenses, keeping return on assets stable at 2.2%. CLSA highlighted that calculated net slippages declined 15 basis points from last year and the stage 2 + 3 loans ratio declined to a multi-year low, with collection efficiency improving to 97% from 96% sequentially. The company faces rising funding costs and limited pass-through likely to keep margins under pressure, though Citi expects the company to maintain NIMs above 7%. Loan spreads narrowed by 30 basis points as growth tilted toward trade advances (incremental 3% QoQ delta) and lifted liquidity to 10% of balance sheet size. Nomura has flagged rising funding costs as a concern and cut its net profit estimates for FY27-FY29 by 1-9%, factoring in a 70-basis-point increase in funding costs over the next five quarters. Nuvama noted that potential interest rate hikes could intensify margin pressure, while caps on insurance commissions could weigh on FY28 earnings. Emkay Global has cut earnings estimates for FY27–FY29 by 1-2% accounting for the company's September quarter performance and recent slowdown in growth due to higher cost of funds and insurance commission norms.
The company's diversification efforts outside traditional vehicle finance have yielded significant results, with 20% of consolidated lending AUM being non-wheel business and 80% from the wheel business. M&M Finance is targeting a return on assets of 2.2%-2.5% by FY31, compared with 2.2% reported in the September quarter. According to The Economic Times, disbursements rose 22% to ₹16,499 crore, led by growth in SME and mortgage lending, with Raul Rebello, MD & CEO, noting that the effort to diversify outside passenger and commercial vehicle finance has yielded results. The company's pre-provisioning operating profit grew 20% to ₹1,791 crore with provisions and write-offs declining 16% to ₹630 crore from ₹751 crore, indicating improved operational efficiency. CLSA noted that disbursement growth has accelerated over the past two quarters and should translate to stronger AUM growth in coming quarters, with the diversification strategy showing positive results. The company maintained its leadership position in tractor financing business and remained amongst the leading NBFCs for financing passenger vehicles (PVs), used passenger vehicles and light commercial vehicles (LCVs). Udaan, the company's flagship transformation program, is now fully embedded across vehicle lending and collections.
Post Q2 earnings, Systematix Institutional Research initiated coverage on M&M Finance with a 'Hold' rating and target price of ₹340, valuing the standalone entity at 1.6x FY28E P/B using a residual income model while subsidiaries add ₹37 based on sum-of-the-parts approach. As per Systematix, the reported PAT was 4% ahead of estimates driven by higher-than-expected other income, with the brokerage noting merit in the medium-term strategy through better product mix, higher yields and operating efficiencies. However, the near-term earnings trajectory remains vulnerable to margin compression and asset-quality risks, with 45-45% of borrowings linked to floating rates and rising funding costs potentially weighing on NIMs. Jefferies has maintained its 'Hold' rating and reduced its target price to ₹330 from ₹365, reflecting concerns over margin pressures from trade advances and elevated liquidity, along with potential fee-income risks from tighter insurance regulations. HSBC noted that healthy operating performance was driven by higher fee income and lower credit cost led to beat in their 2QFY27 estimates but cut its target price to ₹340 from ₹365, citing a valuation of 1.5 times estimated FY28 book value per share compared with 1.7 times earlier. IDBI Capital has maintained its 'Buy' rating with a target price of ₹342, while Emkay Global has reduced its target price by nearly 10% to ₹370 from ₹410 while maintaining its 'buy' rating. The brokerages are also cautious on the NBFC's earnings growth in the upcoming quarter due to concerns over possibility of further interest rate hikes, an El Niño-related impact on rural incomes and changes in insurance commission norms.
