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Analyst Meet / AGM
28-Oct-20
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Conference Call
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Mahindra & Mahindra Financial Services
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Expects AUM growth at 8-10%, to reduce NNPA below 4% by March 2021
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Mahindra and Mahindra Financial Services conducted a conference call on 27 October 2020 to discuss its financial results for the quarter ended September 2020. Ramesh Iyer, Vice Chairman and MD of the company addressed the call:
Highlights:
- The rural segment was insulated from the impact of coronavirus than the urban sector. The kharif crop has been good after strong monsoon rainfall, while the good water reservoir level and higher MSP is expected to boost rabi crop output too. The demand for vehicles remains healthy, while the infrastructure sector opening up would benefit.
- As per the company, 70% of the customers taking Moratorium have paid at least one installment.
- The company has not extended any restructuring, while it expects about 1-1.5% customers may require restructuring out of 20 lakh customers. However, there would not be any impact on collateral, as a period extension in restructuring is not expected to be longer.
- The footballs at dealerships and demand have been healthy, but OEMs are not able to fulfill the demand because of supply constraints.
- The company is witnessing growth in disbursements on qoq basis, while its cautious in terms of lending. The disbursements are likely to reach pre covid level by March 2021. The company is targeting AUM growth of 8-10% for FY2021.
- The used vehicle demand is good but there is constraint on the supply side as there is not much of repossession as well as exchange happening.
- The company is focused on the cost rationalization, while cost to asset ratio may increase as the business volume picks up. However, the in the medium run the company is focused on reducing the ratio to 2%.
- The cost of fund is not expected to decline any further, but it would remain stable for next 6 to 12 months.
- The stressed sectors like taxi aggregator, school bus operators, commercial vehicle fleet operators etc account for 7- 8% of AUM.
- The company is keeping aggressive stance on provisioning and expects to reduce net NPA below 4% by March 2021.
- The company would gradually reduce excess liquidity, which is expected to impact margins by 50-60 bps. The company carries excess liquidity of more than 8500 crore, which is having impact on NIM.
- As per the company, the reduction in the number of branches is on account of the rationalizing of the regional offices. The company has consolidated some of the regional offices and redeployed the employees.
- The collection efficiency in the month of September 2020 stands at 82%. Out of 16 lakh customers around 2.75 lakh customers have not paid single installment.
- The second half of the year is always good for the company and the company does not expect any spike in NPAs in H2FY2021.
- The rural housing finance subsidiary is expecting good collection and reduction in NPA by March 2021. The company is cautious on growth front.
- The capital position of the company is comfortable and do not require capital infusion.
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