M&M Financial shares jump 4% after Q1 update; Morgan Stanley shares "equal-weight" rating

M&M Finance up 4 percent after steady Q1 numbers

Shares of M&M Financial Services rose by 4 percent to Rs 273 per share on July 3 after the company shared a stable business update for the first quarter of the financial year 2025–26.

So far this year, the company’s stock has climbed 4 percent, while the Nifty 50 benchmark index has gone up by 7 percent during the same period.

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In the April–June quarter, the company reported disbursements worth Rs 12,800 crore, which is a small increase of 1 percent compared to the same period last year. Its total business assets grew by 15 percent year-on-year to Rs 1.22 lakh crore. The company also said its loan recovery rate (collection efficiency) stood at 95 percent, slightly higher than 94 percent a year ago.

As of June 30, 2025, the company’s Stage-3 assets—which refer to loans that are at a higher risk of turning bad—were between 3.8 percent and 3.9 percent. This is up from 3.7 percent in the previous quarter and 3.6 percent a year ago.

Stage-2 assets, which include loans that might become risky soon, stood between 5.8 percent and 5.9 percent, compared to 5.4 percent last quarter and 6.1 percent last year.

The company also said it has a cash buffer of over Rs 9,600 crore, meaning it has enough liquidity to manage operations comfortably.

Analysts at Morgan Stanley described the performance as “muted.” The brokerage firm raised concerns about the quality of the company’s assets and its overall growth. It kept an “equal-weight” rating.

Morgan Stanley noted that the collection efficiency dropped from 97 percent in the previous quarter to 95 percent in Q1, which they believe is a negative sign. The brokerage sees potential risks to the company’s future profits and returns.

They also mentioned that as Mahindra Finance shifts its focus to safer loans, it could affect returns. Morgan Stanley expects the company’s return on assets (ROA) to be around 2 percent in both FY26 and FY27, and return on equity (ROE) to be 12.5 percent in FY26 and 12.6 percent in FY27.

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