Mahindra Finance predicts big improvement in asset quality by March end

Target Date - March 31, 2022

Mahindra and Mahindra Financial Services (MMFS) continues to sound very positive on the asset quality and has predicted big improvements.

Key points to note –

  • As at December 31, 2021, its Gross NPA (GNPA) as per IND-AS was 11.30% and as per IRACP at 14-15%. (IND-AS are the accounting norms and IRACP is RBI’s Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances released in November 2021).
  • On the same date, Net NPA (NNPA) stood at 5.63% and 11% respectively.
  • The Company targets to reduce these NNPAs to below 4% and 6% by March 2022 end.
  • Company expects these improvements on the back of better collections as it mentions 4th quarter in general to be it’s best quarter for the collections.
  • MMFSL also mentions that during 1st quarter (June 2021), it had made excess provisions due to pandemic and uncertain market conditions. These were to the tune of Rs 2,517 crore during that quarter. It expects almost 80% of these to be reversed (60% have already been reversed till December 31, 2021).

It’s encouraging to see improvement in MMFSL’s asset quality. However, in general the company had a very volatile performance track record. Given that, I would be personally very cautious of getting excited with the short term improvements.

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