M&M Financial Services hit a two-year low today at Rs.289.15; though it has jumped back to Rs.310 levels, it is currently the top loser on BSE.
The company’s financial performance for Q1FY20 was disappointing to say the least. Its consolidated net profit was down 66% (YoY) at Rs.108.50 crore though total income showed a 23% rise at Rs.2838 crore.
Total expenses rose 64% mainly on account of a 96% rise in provisions and write-offs and a 1.5 times rise in depreciation. Tax expenses were down 67% and that to some extent, stemmed the fall in net profit or else it would have been a much steeper fall. Provisions as at 30th June 2019 was at Rs.2649 crore v/s Rs.1731 crore (YoY).
Gross NPA rose from 5.9% to 7.4% and Net NPA too showed a sharp rise from 4.8% to 5.7% (QoQ).
The company mainly finances purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, construction equipment and SME financing. Given the low offtake on account of the delayed monsoon this year, the demand has obviously been low and this has impacted the earnings. The company has said that growth is expected to remain muted in 2020, marginally improve in 2021 – on account of increase in price and reduction in mileage. Prices are expected to rise with compliance of emission norms and mandatory safety features with sharper price rise on account of BS-VI migration. Pre-buying is expected before the norm triggers. The company said that the higher Inventory shall continue to exert pressure on OEM sales till inventory levels normalize.