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Mahindra & Mahindra Financial Services reported a strong financial performance in the first quarter of FY27, driven by improved net interest margins, lower impairment provisions and healthy loan disbursement growth. The company also maintained stable asset quality despite some pressure in select segments and continued to diversify its loan portfolio beyond vehicle financing. Management said the company has started its long-term growth plan positively and remains confident of sustaining healthy margins while expanding its assets under management over the coming years.
Mahindra & Mahindra Financial Services reported a 75% year-on-year increase in its consolidated net profit to INR 927 crore during the April-June quarter of FY27. The improvement was supported by higher net interest margins (NIMs), lower impairment provisions and steady business growth.
On a standalone basis, the Mahindra Group's financial services arm posted a net profit of INR 899 crore, marking a 70% increase compared to the corresponding quarter of the previous financial year.
The company's Chief Executive Officer and Managing Director, Raul Rebello, said the lender expanded its net interest margin to 7.3% during the quarter from 6.7% a year earlier. He attributed the improvement mainly to a lower cost of funds following the rights issue undertaken by the company during the previous year.
Rebello said the benefit from the lower funding cost is expected to gradually reduce over time, which may lead to some moderation in net interest margins. However, the company remains confident of maintaining NIMs above 7% over the medium term. In the immediately preceding quarter, Mahindra Finance had reported a net interest margin of 7.5%.
He also said stronger underwriting standards and better account management practices helped the company keep credit costs under control during the quarter.
The amount set aside for loan impairments and credit losses declined to INR 570 crore from INR 660 crore in the corresponding quarter last year, reflecting an improvement in provisioning requirements.
Business growth remained healthy during the quarter, with total loan disbursements increasing 22% year-on-year. Management said the company has made a positive start towards its five-year growth strategy, under which it aims to expand its asset base to INR 3 lakh crore by FY31.
Mahindra Finance also continued to diversify its lending portfolio. The share of its non-wheel financing business, including mortgage loans and lending to small businesses, increased to 17% of the overall loan book as these segments grew faster than its traditional vehicle finance business.
Rebello further said that more than 44% of the company's loan book now comes from what Mahindra Finance classifies as its strategic businesses, which originate through various companies within the Mahindra Group. The company has been focusing on expanding these businesses to reduce dependence on vehicle financing and strengthen portfolio diversification.
On the asset quality front, loans overdue by more than 90 days stood at 3.45% at the end of the quarter, up marginally by 0.04 percentage points compared with March. Management indicated that the company continues to closely monitor risk across sectors and geographies. It has also adopted a cautious lending approach in segments impacted by the ongoing West Asia geopolitical situation whenever it identifies elevated risks.
Mahindra Finance has been steadily expanding its presence beyond its traditional rural and semi-urban vehicle financing business in recent years by strengthening lending across mortgages, SME finance, leasing and other retail lending segments. The company has also focused on improving digital capabilities, strengthening risk management practices and maintaining asset quality while pursuing long-term growth.
Investor sentiment remained positive following the earnings announcement. Shares of Mahindra & Mahindra Financial Services closed 8.69% higher at INR 350.65 on the BSE, outperforming the broader market, while the benchmark index declined 0.31% during the session.
Source PTI
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