Rural demand is still strong, vehicle availability an issue – M&MFIN

Rural demand is still strong, vehicle availability an issue – M&MFIN

Update on the Indian Equity Market:


On Thursday, Nifty closed 0.2% higher at 14,895. Within NIFTY50, JSWSTEEL (+9.6%), TATASTEEL(+6.6%), and BAJAJFINSV(+6.5%) were top gainers, while HEROMOTOCO (-2.4%),EICHERMOT(-2.3%), and BAJAJ-AUTO(-1.8%) were the top losing stocks. Among the sectoral indices, METAL (+4.5%), PHARMA (+0.3%), and FINANCIAL SERVICES 25/50 (+0.2%) were the highest gainers, while PSU BANK (-1.1%), AUTO (-1.0%), and FMCG (-0.4%) were the top losers.


Rural demand is still strong, vehicle availability an issue – M&MFIN


Excerpts of an interview with Mr. Ramesh Iyer, MD&Vice Chairman, M&M Financial (M&MFIN), aired on CNBC-TV18 on 26th April 2021:

  • M&MFIN represents the rural and semi-urban vehicle markets. Non-availability of vehicles has led to a lower growth in disbursements for M&MFIN.
  • MHCVswere a growth story for M&MFIN earlier and this segment has also been under pressure leading to lower growth.
  • Collections are good while disbursements are slower, again contributing to a slower growth on the balance sheet.
  • Iyer expects 2HFY22E to be strong once the availability of vehicles is smoothened. The demand in rural India is still strong.
  • Iyer thinks that they have sufficient provisioning for current book. As the 2nd Covid-19 wave is spreading to the rural areas unlike the 1st wave, M&MFIN will take a very cautious approach in 1HFY22E.
  • M&MFIN had GNPA of about 9% in 4QFY21. The seasonality of agriculture means that there is a tendency for GNPAs to go up in the 1st half of the financial year, even without Covid disruption. So 1HFY22E will be the correct period to watch out for in terms of asset quality trends.
  • Iyer is positive on the agri cash flow on back of good monsoon forecast. Infra projects were ready to start which have again faced disruption due to the second wave of covid-19. But as those projects also start post monsoon, the asset growth should be back in 2HFY22E.
  • Industry players are seeing customers wanting smaller EMIs and extended period- i.e. restructuring, which again seems necessary from customer perspective. Regulators’ decision on the same remains to be seen.

Asset Multiplier Comments

  • Several states have imposed lockdowns or restrictions to curb the rising Covid-19 cases. Vehicle demand could see further slowdown due to restricted public mobility, leading to slower disbursements for vehicle financiers.
  • Several banks as well as NBFCs that have reported 4QFY21 results have commented that current provisioning seems adequate. But the situation is still developing and any stress in the loan book will only be visible by the end of 1QFY22E.

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of M&MFIN was ₹ 165 as of 29-April-2021. It traded at 1.3x/ 1.1x the consensus BVPS estimate of ₹ 131/145 for FY22E/ FY23E respectively.
  • The consensus target price of ₹ 186/- implies a PE multiple of 1.3x on FY23E BVPS of ₹145/-.


Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


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