Mahindra and Mahindra Financial Services disappointed the Street with its FY17 first quarter numbers. Profits fell 2 percent to Rs 87 crore in April-June quarter compared with Rs 89 crore in year-ago period, impacted by lower net interest income.
Mahindra and Mahindra Financial Services disappointed the Street with its FY17 first quarter numbers. Profits fell 2 percent to Rs 87 crore in April-June quarter compared with Rs 89 crore in the year-ago period, impacted by lower net interest income.
Asset quality worsened further with the gross non-performing assets (NPA) rising 270 basis points to 10.7 percent and net NPA climbing 220 basis points to 5.4 percent compared to preceding period.
Digant Haria, Antique Stock Broking and SP Tulsian of sptulsian.com shared their views on the numbers and the way forward.
Below is the verbatim transcript of Digant Haria and SP Tulsian’s interview to Sonia Shenoy on CNBC-TV18.
Sonia: What was your expectation as far as profits are concerned and would this come as a disappointment?
Haria: Not really a disappointment although we are expecting close to Rs 120 crore. However, this quarter there were two things, one it is a seasonally weak quarter because you have Q4, that is the March quarter where there is a sharp recovery and then there is a sharp fall again in the June quarter. This is very seasonal; it has been going on since years; that is number one.
Number two; the company had initially stated that they will migrate from 135 days NPA recognition to 120 day NPA recognition. So, that is something which could have increased the NPA numbers and if the NPA increase and the provision increase is because of that, I don’t think it is a bad set of numbers.
Sonia: How would you react to the net interest income (NII) growth?
Haria: I just need to wait and see if they have migrated from 135 days to 120 days. All these NBFCs had to migrate to 120 days by the end of this financial year. However, these guys, they generally do it a little before the Reserve Bank of India (RBI) deadline ends. So, if they have done it this quarter, some of the miss in NII would be explained by interest reversals which happen when your NPAs go up.
Sonia: How would you read into the numbers, the stock has come off from the highs, it is still up but it is up just about 1.5 percent now?
Tulsian: Numbers are really quite disappointing because if you see, the provisions have gone to Rs 247 crore and if you recall, this is what I have been saying for last one week; we had a discussion two or three times. What is happening with the company that whenever they come into the concall, they say that all our customers, we have very good relations and we recover the amount.
However, the swing of providing and then recovering in the next quarter is seen happening every time or maybe at an interval of alternate quarters and that is the reason if you see the provisions which were at Rs 116 crore, just Rs 116 crore in March quarter, maybe because of the efforts to align with the financial year ending but the provision of Rs 247 crore and the operating profit of Rs 924 crore against Rs 1,362 crore of March quarter I would say that is hugely disappointing.
I don’t think that market is going take this nicely - the kind of run up which we have seen, maybe the strong hands those who have been holding the position, they can keep this momentum to continue for some time but this has to be seen to get reflected into the share price. I won’t be surprised to see the share correcting to a level of about Rs 300 which may happen maybe after expiry of this series which will happen after four days or so but very disappointing numbers.
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