Non-banking financial services company Mahindra & Mahindra Financial Services Ltd on Friday (October 27) reported a 47.5% year-on-year (YoY) decline in net profit at ₹235.2 crore for the second quarter that ended September 30, 2023.

In the corresponding quarter last year, Mahindra & Mahindra Financial Services posted a net profit of ₹448.3 crore, the company said in a regulatory filing. M&M Fin's revenue from operations increased 24.2% to ₹3,211.9 crore as against ₹2,585.8 crore in the corresponding period of the preceding fiscal.

Net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors, rose 8.5%, coming at ₹1,645.4 crore against ₹1,517 crore in the corresponding quarter of FY23.

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Net interest margin for the quarter at 6.5% was impacted by higher borrowing rates coupled with a change in portfolio mix in favour of better credit quality customers, the company said.

Disbursements during the second quarter were ₹13,315 crore, up 13% year-on-year. The loan book increased sequentially by 8.1% to ₹93,723 crore. The Gross Stage 3 level was maintained at 4.3%, similar to the June end level. The Gross Stage 2 improved from 6.4% to 5.7% during the same period.

The credit cost during Q2 of FY24 was at ₹627 crore (2.4% of average assets) as compared to ₹198 crore (1.0%) in Q2 of FY23. The net write-offs were lower at ₹351 crore compared to ₹543 crore during Q2 of FY23.

The second quarter of FY23 witnessed a sharp improvement in both Stage 2 and Stage 3 leading to a provision write-back of ₹345 crore. Both Stage 2 and Stage 3 have now stabilised at more normalised levels. The provision charge for Q2 of FY24 was ₹276 crore.

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The company's Capital Adequacy is healthy at 18.7%. Provision coverage on Stage 3 loans remained prudent at 61.2%. As of September end, the company carried a total liquidity buffer of approximately ₹8,300 crore covering a little over 2.5 months’ gross obligation.

Collection efficiency during the quarter remained strong at 96%, an improvement over the level observed in Q1 of FY24 and a marginal reduction over Q2 of FY23.

With improving underwriting standards and a focus on early bucket delinquency, the company maintained its asset quality during the quarter with Stage-3 assets at 4.3% (4.3% as of June 2023), and Stage-2 assets, at 5.7% (an improvement over 6.4% as of June 2023)

The results came after the close of market hours. Shares of Mahindra & Mahindra Financial Services Ltd ended at ₹278.50, up by ₹8.75, or 3.24 percent on the BSE.

First Published:Oct 27, 2023 6:58 PM IST