Mahindra Finance shares down as Jefferies, Nomura remain cautious despite improved Q4 disbursements

M&M Fin's gross stage 3 assets (GS3) fell 70 basis point from the previous quarter to 3.3 percent, while GS2 fell 90 bps to 5.1 percent. GS2 assets in non-banking finance companies (NBFC) are loans which are overdue by 31-89 days and Stage-3 more than 90 days.

On basis point is one-hundredth of a percentage point.

According to Jefferies, the fall in GS3 and GS2 is encouraging for M&M Financial Services. The brokerage has a "hold" rating on the stock with a target price of Rs 300.

Nomura has a "reduce" call with a target price of Rs 250 a share.

Morgan Stanley sees M&M Finance's Q4 profit estimates 20-25 percent above consensus due to credit cost factors.

(Credit cost = Provision for reserve for possible loan losses + Write-off of loans + Losses on sales of delinquent loans – Gains on reversal of reserve for possible loan losses – Recoveries of written-off claims).

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M&M Finance's credit costs for F24 are at 1.9 percent, compared to an estimated 1.6 percent earlier, and the guidance range is 1.5-1.7 percent. "Credit costs and guidance implies near-term upside risk for stock into results, " said Morgan Stanely as it maintained an "equal weight" rating on the stock with a target of Rs 310.

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