Reduce Mahindra Finance; target of Rs 260: Emkay Global Financial

Emkay Global Financial's research report on Mahindra Finance

On 22-Apr-2024, MMFS informed the exchanges that it has detected a fraud in one of its branches in the Northeast that involved forged KYC documents for retail vehicle loan disbursements, thus leading to embezzlement of Company’s funds. The company estimates that the impact of this fraud is unlikely to exceed Rs1.5bn, which is relatively manageable at ~6% of FY24 PBT; however, this incident, yet again, brings the sanctity of Company’s processes under a cloud. The event will affect investor confidence in MMFS at least for now.

Outlook

The company has hence postponed reporting its Q4FY24 results to 30-May; we expect it to provide a comprehensive review of its branch operations then and the exact quantum of impact from this fraud. To reflect this development, we adjust our FY24 estimates and reiterate REDUCE on the stock, with revised Mar-25E TP of Rs260 (from Rs280 earlier), implying FY26E P/B of 1.5x.