M&M Financial Services Q2 profit tanks 47.5% YoY to Rs 235 crore; stock drops 9%

The management predicted that the quality of their assets would remain stable, and the costs related to lending would decrease.

Shares of M&M Financial Services dropped more than 9 percent in early trade on October 30 post registering weak Q2 numbers.

At 9:24 am the M&M Financial Services stock was trading 8.91 percent lower at Rs 252.25 on NSE.

The financial services company has reported a profit of Rs 235 crore for the quarter ending September FY24. This marks a significant decline of 47.5 percent YoY due to an increase in impairment on financial instruments.

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However, the revenue from operations for the same period increased by 24.1 percent YoY to Rs 3,212 crore, aided by growth in the asset book. The net interest income at Rs 1,674 crore also saw a rise of 9 percent YoY.

The net interest margin for the quarter stood at 6.5 percent, which was impacted by higher borrowing rates and a change in portfolio mix in favour of customers with better credit quality. Despite this, disbursements during Q2 rose by 13 percent YoY to Rs 13,315 crore.

Brokerage Views

UBS maintains a "neutral" rating on M&M Financial, but they've reduced the target price to Rs 290 per share from Rs 315 per share in a report released post results. In Q2, the company didn't perform as expected in terms of its net interest income and pre-provision operating profit, mainly due to higher costs related to lending. The company foresees a partial recovery in its net interest margins due to better yields.

The management predicted that the quality of their assets would remain stable, and the costs related to lending would decrease. However, they expect a 100-basis point reduction in net interest margins to 7.27 percent in FY24. Despite a challenging outlook, the management remains committed to their 2025 goals the report added further.