Mahindra Finance Q1 loss at Rs 1,573 crore

In the year-ago period, the company clocked a net profit of Rs 156 crore.

Total income declined to Rs 2,187 crore, as against Rs 2,655 crore during the same quarter last year.

Losses were on account of ECL (expected credit loss) provision of Rs 2,124 crore in the quarter under review, it said.

"The total number of contracts in stage 2 (non-impaired loans) and stage 3 (non-performing assets) increased on account of COVID-related liquidity issues for consumers and limited restructuring,” Mahindra Finance said.

The non-banking financial company said it has made an additional overlay provision of Rs 393 crore taking the total overlay to Rs 2,709 crore (up from Rs 2,316 crore in March 2021).

In many cases, either the customers have made a part-payment or have so far repaid over 50 percent of the original loan.

In many cases, either the customers have made a part-payment or have so far repaid over 50 percent of the original loan.

"We, therefore, expect a similar improvement over the next few quarters, resulting in provision reversals for 80-90 percent of loan contracts over Q3/Q4 F22.”

"Profit before tax for the quarter included an exceptional item in the nature of capital gain of Rs 229 crore…on the basis of fair valuation of retained interest of 51 percent post stake dilution of 49 percent in subsidiaries, Mahindra Asset Management Company and Mahindra Trustee Company vide Joint Venture agreement with Manulife Asset Management (Singapore) Pte Ltd (Manulife),” it said.

Mahindra Finance said the second wave of COVID has had a severe impact on its semi urban and rural market where it has 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.”

Also, the company executives could not undertake collections due to restricted movements, it added.

The gross NPAs were higher at 15.5 percent compared to 9 percent as at March-end, it said.

The company believes that the elevated NPAs are not a reflection of any credit risk increase but are purely delays caused by liquidity situation, it said.

"Our experience in the past has always shown return to normalcy by these segments of customers once their earnings stabilize,” it said.

Mahindra Finance stock settled at Rs 146.15 on BSE, down 5.25 percent from previous close.