Analyst Meet / AGM - Analyst Meet
Growth did not pick up as anticipated in H2 FY'14
Mahindra & Mahindra Financial Services (MMFS) held its analyst meet on 23rd April'14 and was addressed by Mr Ramesh Iyer MD
Key highlights
MMFS vision is to be a leading provider of financial service in rural and semi urban areas of India. The company has presence in 25 states in India with over 3.1 million customer base as on Mar'14.
Of the total assets that are financed in FY'14, about 32% is towards auto/utility vehicles, 20% towards tractors, 22% to passenger cars, 11% to commercial vehicles and construction equipments, 15% to pre-owned vehicles and others.
As highlighted earlier, Southern market continued to remain under pressure. Rainfall particularly in Andhra Pradesh region was affected and some of the customers of the company got hit. The company cautiously made provisions on some of the loans given to these customers. As per the management, adequate provisions now has been made for all possible foreseeable bad debts happening in any of these Southern region.
Cost to income ratio was higher in FY'14 and stood at around 33%. There were additional marketing and sales promotions expenditure incurred to increase the reach of the company. Going forward management expects the ratio to remain around this level.
GNPA stood at 4.4% as on Mar'14. Management expects the GNPA ratio to improve as the company behaved cautiously and conservatively and higher provisions have been made in FY'14. Provision coverage ratio stood at 59% as on Mar'14.
As per the management growth did not pick up in H2 FY'14, as earlier planned by the management. Auto sector continued its de growth and even after the reduction of excise duty, things did not improve. Further uncertain rain led to destruction of crops in some geographies of the country. Since the company was expanding aggressively, there was an immediate impact of higher costs and provisions on the profitability of FY'14.
Capital Adequacy ratio stood at 18% with Tier 1 at 15.5%. Book Value stood at Rs 89.6 per share as on Mar'14.
Management expects the key growth driver going forward will be increase in penetration levels in cars, utility vehicles, increase in dealership and access to finance etc.
Small cars are expected to recover in FY'15 on the back of economic recovery. Management expects the MHCV and HCV industry to take some more time before recovery pips in.
Overall, FY'15 should be better in terms of cost control, lower provisions and NPAs compared to FY'14. The company will continue to grow aggressively in terms of branches and dealer network.
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