Non-banking finance company Mahindra & Mahindra Financial Services is expected to continue reporting degrowth in net profit for July-September quarter. Profit is seen falling 21 percent year-on-year to Rs 164 crore during the quarter, according to average of estimates of analysts polled by CNBC-TV18. The Mahindra Group company will announce its earnings on October 21.
Net interest income - the difference between interest earned and interest expended, may increase 4 percent to Rs 766 crore in quarter ended September 2015 compared to Rs 737 crore in same quarter last fiscal.
Key factor to watch out for would be gross non-performing loans (GNPL). Significant worsening in GNPL could lead to spike in provisions and interest reversals, feel analysts, saying rural slowdown, unseasonal rains and poor monsoon may continue to weigh on GNPL.
About 30 percent of company's branch network is in four states — Maharashtra, Gujarat, MP, and Rajasthan, where unseasonal rains and hailstorms in March and April destroyed most of the standing crop. While some of its impact on asset quality already seen in Q1, some may come in Q2 as well, say analysts.
In Q1, GNPL increased 200 basis points sequentially to 8 percent (the highest in 22 quarters) with interest reversals of Rs 100 crore and provisions of over Rs 300 crore. Profit in same quarter declined by 42.6 percent year-on-year to Rs 88.9 crore. GNPL has increased 3-fold in past three years.
Net interest margin pressure could continue in Q2 due to change in loan mix, feel analysts. Loan mix is now towards lower yielding products like cars against tractors earlier.
Asset under management is likely to continue being subdued. AUM growth moderated at 9.6 percent in Q2 led by 13 percent growth in auto, 17 percent refinance and 10 percent cars segment. Tractors and commercial vehicle segments reported only 2 percent and 4 percent growth in June quarter, respectively.
Analysts feel disbursements could pick up on the back of low base and some uptick in demand may be seen in commercial and utility vehicles.
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