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Mahindra and Mahindra Financial Services
(MMFSL), on a consolidated basis, has reported sharp net the net profit to Rs 1573.72
crore in the quarter ended June 2021 (Q1FY2022), The sharp deterioration in
asset quality and surge in credit cost led to sharp net losses for the company
in Q1FY2022. The credit cost for the company zoomed to 1891 bps (annualized) in
Q1FY2022 compared with 563 bps in preceding quarter and 561 bps in the
corresponding quarter last year.
The company has
created ECL provision of Rs 124 crore in Q1FY22. The total number of contracts
in Stage 2 and Stage 3 increased on account of Covid-related liquidity issues
for consumers (refer chart below) and limited restructuring. It also made
additional overlay provision of Rs 393 crore taking the total overlay to Rs
2709 crore up from Rs 2316 crore in March 2021.
The net interest margin (NIM), on calculated
basis, of the company eased to 8.27% in Q1FY2022 compared with 8.44% in the
corresponding quarter last year.
Income from Operations dipped 18% to Rs 2465.22
crore during the quarter ended June 2021, compared to the corresponding
previous year quarter. Other Income jumped 33% to Rs 101.62 crore. The total
Income declined 16% to Rs 2566.84 crore, while interest expenses also fell 18%
to Rs 1151.08 crore in the quarter ended June 2021.
The staff cost moved up 22% to Rs 365.06 crore, while
other operating expenses increased 42% to Rs 170.81 crore. The ensuing
operating profit declined 30% to Rs 879.89 crore in the quarter ended June
2021.
Depreciation fell 13% to Rs 32.76 crore during
the quarter under review. Provisions & write-off zoomed 217% to Rs 3005.37 crore.
The pre tax loss came in at Rs 2158.24 crore. The company has reversed tax
provisions of Rs 567.95 crore, helping to reduce net loss to Rs 1573.72 crore
in the quarter ended June 2021.
MMFSL currently has a network of 1391 offices. The
company’s customer base has crossed 7.39 million customers at end June 2021.
The
disbursements were at Rs 3872 crore, up
42% but a sequential drop of 35%. The company has maintained market share in
its lead products. The standalone Assets Under Management (AUM) stood at Rs
78955
crore end June 2021, as against Rs 81436
crore end June 2020, registering a marginal decline of 3% approx.
Book
value of the company on standalone basis
stood at Rs 107.2 per share and adjusted
book value (net of NNPA and 10% of restructured loans) stood at Rs 68.6 per
share end March 2021. Book value of
the company on consolidated basis stood at Rs 115.6 per share and adjusted book value (net of NNPA and 10% of
restructured loans) stood at Rs 67.8 per share end March 2021.
Asset Quality
GNPA surged to 15.46% of total asset at end June
2021 from 8.96% a quarter ago. NNPA ratio also zoomed to 7.81% on sequential
basis from 3.97% a quarter ago. NPA coverage ratio eased to 53.70% at end June
2021 from 57.90% at end June 2019.
The company
has experienced similar trends in prior periods of economic stress. During
demonetization, GNPA peaked at 14.5%. However, after 3 quarters the GNPA
dropped to 9%. And post recovery, by FY19, the GNPA’s had stabilized at 6%,
thereby company believes once the customer cashflow improves, the recovery is
swift.
Based on
analysis of the Stage 2 and Stage 3 contracts as of June 30, 2021, the company
finds either the customers have made a part-payment or have so far repaid more
than 50% of the original loan. Therefore, the company expects provision
reversals for 80-90% of loan contracts over Q3/Q4FY22.
The Company
continues to be well-capitalized with a capital adequacy ratio of 23.8%. It has
sufficient provision coverage on Stage 3 loans at 53.7% and continues to hold
sufficient liquidity chest.
The second
wave of Covid has had a severe impact on the Semi Urban & Rural Market
where company has its major operations. The Company works largely with the earn
and pay segment. With substantially lower people movement and impact on
economic activity, the customers’ ability to use their assets and earn from
them was severely impacted. This resulted in lower cash flows at their end. The
impacted segments largely were Tourism, Taxi operations, School bus operations,
Contracting segment and Heavy goods movement. Further, because of restricted
movement due to lock downs, neither company executives could travel for
collections nor could the customers reach branches to pay installments.
Operations gradually resumed from mid-May 2021 and as of date, the company has
resumed operations in most offices PAN India.
Restructuring
During the
quarter ended June 2021, the Company has implemented resolution plans to
relieve COVID19 Pandemic related stress of eligible borrowers in 59,455 loan
accounts with a total outstanding of Rs 2172 crore end June 2021. Of these, total loan accounts which were
restructured during the quarter, for 56090 cases, having an outstanding amount
of Rs 2069 crore, basis their credit
assessment and the terms of restructuring, the Company has classified such loan
accounts as non-impaired. An incremental provision of Rs 157
crore has been made during the quarter ended 30 June, 2021 towards
these restructured loan contracts.
Subsidiaries
Mahindra Insurance Brokers (MIBL)
During
Q1FY2022, MIBL registered income at Rs 60.1 crore as against Rs 41.2 crore during the corresponding quarter last year, a growth of 46%
over the same period previous year. The Profit After Tax (PAT) registered was
Rs 3.5
crore during Q1FY2022, as against Rs 2.0
crore during the corresponding quarter last year, a growth of 75%
over the same period previous year.
Mahindra Rural Housing Finance Limited (MRHFL)
During
Q1FY2022, MRHFL registered income at Rs 334.1 crore as against Rs 385.2 crore during the corresponding quarter last year, a decline of 13%
over the same period previous year. The Net Loss is Rs 65.4
crore during Q1FY2022, as against Profit After Tax (PAT) of Rs
47.7
crore during the corresponding quarter last year.
During
Q1FY2022, MRHFL has implemented resolution plans to relieve COVID19 pandemic
related stress of eligible borrowers in 1,92,961 loan accounts with a total
outstanding of Rs 1976.4 crore end June
2021. Of these, total loan accounts which were restructured during the quarter,
for 1,66,181 cases, having an outstanding amount of Rs 1756.9
crore, basis their credit assessment and the terms of
restructuring, the Company has classified such loan accounts as non-impaired.
An incremental provision of Rs 74.9 crore has been made during Q1FY2022 towards these restructured
loan contracts.
The Company
has cumulative management overlay of Rs 99.4 crore end June 2021 for covering the contingencies that may arise
due to COVID19 pandemic.
Mahindra Manulife Investment Management (MMIMPL)
During
Q1FY2022, MMIMPL earned total income of Rs.8.7 crore as compared to Rs.6.4 crore in the same period previous year. The company incurred a
loss of Rs 5.1 crore compared to a loss of
Rs.5.4
crore during the same period of the previous year.
Mahindra Manulife Trustee (MMTPL)
During
Q1FY2022, MMTPL earned total income of Rs 0.2 crore compared to Rs 0.1 crore during the same period previous year. The company reached a
break even with no profit or loss compared to a loss of Rs.0.1
crore during the same period of the previous year.
Mahindra Finance USA (MFUSA)
During
Q1FY2022, MFUSA registered income at USD 14.7 Million as against USD 16.4
Million during the corresponding quarter last year, registering a decline of
10% over the same period previous year. The Profit after Tax (PAT) during
Q1FY2022, was USD 5.2 Million as against USD 4.0 Million during the
corresponding quarter last year, a growth of 30% over the same period previous
year.
Ideal Finance (IFL)
During
Q1FY2022, IFL registered income at LKR 265.3 Million as against LKR 216.0
Million during the corresponding quarter last year, registering a growth of 23%
over the same period previous year. The Profit after Tax (PAT) during Q1FY2022,
was LKR 58.9 Million as against LKR 25.2 Million during the corresponding
quarter last year, a growth of 134% over the same period previous year.
The
Company has completed acquisition of addition 20% equity share capital of IFL
on 8 July 2021, resulting in an increase in the Company’s equity stake in IFL
from 38.2% to 58.2%. Consequent to this investment, IFL has become a subsidiary
of the Company.
Financial Performance FY2021
For the year ended March 2021 (FY2021), MMFSL
reported 2% rise in the Income from Operations to Rs 11703.79 crore, against
the corresponding previous year period. Other Income declined 13% to Rs 466.71 crore.
As a result, the total Income grew 1% to Rs 12170.50 crore. Interest expenses fell
2% to Rs 5307.57 crore, while the operating expenses dipped 21% to Rs 2047.62 crore
leading the operating profits to jump 20% to Rs 4815.31 crore. Depreciation
increased 2% to Rs 150.51 crore, while Provisions & write-off zoomed 72% to
Rs 3998.74 crore. PBT dipped 57% to Rs 666.06 crore. The effective tax rates
stood at 23.1% in FY2021 compared with 33.2% in FY2020. Net Profit declined 28%
to Rs 773.21 crore in FY2021 over FY2020.
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Mahindra &
Mahindra Financial Services: Consolidated Results
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Particulars
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2106 (3)
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2006 (3)
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Var %
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2103 (12)
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2003 (12)
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Var %
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Income from
operations
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2465.22
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2992.39
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-18
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11703.79
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11457.61
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2
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Other Income
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101.62
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76.29
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33
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466.71
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538.85
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-13
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Total Income
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2566.84
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3068.68
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-16
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12170.50
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11996.46
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1
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Interest Expenses
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1151.08
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1401.15
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-18
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5307.57
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5390.56
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-2
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Operating Expense
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535.87
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419.00
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28
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2047.62
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2583.92
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-21
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Gross Profits
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879.89
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1248.53
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-30
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4815.31
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4021.98
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20
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Depreciation /
Amortization
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32.76
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37.87
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-13
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150.51
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146.87
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2
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Provisions and
write off
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3005.37
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948.84
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217
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3998.74
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2318.98
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72
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PBT before EO
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-2158.24
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261.82
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PL
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666.06
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1556.13
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-57
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Extra ordinary
item (EO)
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0.00
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228.54
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-
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228.54
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0.00
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-
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PBT after EO
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-2158.24
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490.36
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PL
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894.60
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1556.13
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-43
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Tax Expense
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-567.95
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71.66
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LP
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153.86
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516.21
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-70
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Net Profit
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-1590.29
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418.70
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PL
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740.74
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1039.92
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-29
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Minority Interest
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0.32
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0.40
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-20
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7.07
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10.67
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-34
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P&L of Associate
Co.
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16.89
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13.42
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26
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39.54
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45.90
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-14
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PAT
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-1573.72
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431.72
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PL
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773.21
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1075.15
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-28
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EPS
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-51.1
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7.7
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4.7
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8.7
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*Annualized on
current equity of Rs 246.4 core excluding EO and relevant tax. Face Value: Rs
2, Figures in Rs crore
PL: Profit to
Loss, LP: Loss to Profit
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Source: Capitaline
Corporate Database
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