Mahindra & Mahindra Financial Services Limited recorded a robust performance in the first quarter of the current financial year. The company’s operational momentum was strong in its key financing industry and growing non-traditional lending segments, as a result of continued demand from its customers. Disciplined disbursement and asset quality management enabled the non-banking financial company to further increase its balance sheet size while providing substantial value-add in its business verticals.

Portfolio expansion and Strategic synergies

The strong performance is driven by the business’s multi-year initiative to improve underwriting standards, develop digital infrastructure, and diversify its product line away from traditional auto financing activities. The non-bank finance company is tapping into new business avenues in areas of mobility, small enterprise, and finance, along with keeping credit demand high in rural and semi-urban settings.

During the first quarter, Mahindra Finance has made disbursements increase by 22% to reach ₹15,564 crore. This growth reflected continued stability across key financing units, including passenger cars and farm equipment. Passenger vehicle financing, which continues to be the dominant class of assets in the portfolio, increased by 24% YOY, and stood at ₹6,525 crore.

The tractor financing segment had seen unprecedented performance during the quarter, rising by 45% to ₹2,480 crore. Favorable rural sentiment and better farm cash flows in primary agricultural areas significantly contributed to this growth. 

Supportive lending to small and medium enterprises increased by 30% to ₹683 crore. There was a 77% gain in personal loans and financing of farm implements and general machinery, respectively, to ₹520 crore. The emerging verticals today represent 7% of quarterly disbursements.

In the standalone Assets Under Management segment, Mahindra Finance increased its position by 13% to ₹1,374.5 billion. Total lending AUM stood over ₹1,46,623 crore on a consolidated basis. The overall loan mix remains dynamic, with non-wheel loans, which include mortgage loans and small enterprise lending, growing their share of the overall loan book to 17%.

Strategic synergies within the larger group remain a critical growth pathway. The current loan book includes more than 44% acquisitions that formed part of the strategic business pipeline. Management highlighted that this achievement would provide a strong foundation for the company to work towards its ambitious five-year strategic blueprint to expand total asset coverage to ₹3 lakh crore by FY31.

Financial execution and operational efficiency

The quarter proved to be highly profitable for the company due to financial execution. Current standalone profit after tax was up 70% YoY to ₹899 crore from ₹530 crore in the same quarter of last year. Net profit increased by 75% to ₹927 crore on a consolidated basis.

The rise in profitability was due to better net interest margins and lower impairment provisions. Net interest margins reached 7.3%, which was an improvement from 6.7% last year because of lower costs of funds by raising capital. 

Impairment provision decreased from ₹660 crore to ₹570 crore. The year-over-year total income trend was unchanged at 13.1%, and the cost-to-income ratio continues to decline, amounting to 36.5% from 40.8% this year.

Asset quality metrics also showed sound stability in the quarter. Net Stage 3 assets totalled 1.5%, and gross Stage 3 assets totalled 3.5%. Those over 90 days have seen a negligible increase of just 0.04%, to 3.45%, and risk-sensitive market adjusted for proactive management.

In order to ensure efficient operations, Mahindra Finance has significantly boosted the volume of its artificial intelligence integration. Geographically, AI-attributed operations grew from 20% to 45% in the twelve quarters between the previous and current measurement periods. 

AI-enhanced collections workflows reduce their operational footprint by 50%. It also launched 12 local AI bots that simplify interaction and engagement with customers in various regional markets.

Conclusion

The performance of Mahindra Finance in the first quarter demonstrates the company’s well-rounded approach that emphasizes swift asset expansion and optimisation during operations. The increase in disbursements by 22% and the total AUM of ₹1,374.5 billion, with a consolidated net profit increment of 75%, position the company well on track to grow in the future. The company’s strategy to increase its asset footprint through non-wheels financing and building on group synergies, combined with the introduction of digital and AI infrastructure throughout its operations, will ensure it succeeds in its long-term ambitions.