Mahindra & Mahindra Financial Services, which nearly acts as the captive lending arm of the automobile-focused Mahindra Group, on Friday reported a robust 58 per cent growth in consolidated net profit at Rs 362 crore for the June quarter, driven by higher loan sales that cushioned a marginal dip in margin.

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The city-headquartered shadow bank, which is only into automobile financing, has as much as 45 per cent of its assets in the Mahindra group's passenger vehicles, commercial vehicles and tractors. And 10 per cent in pre-owned vehicle financing.

A 28 per cent spike in new loan disbursals worth Rs 12,165 crore, boosted consolidated revenue by 25 per cent to Rs 3,637 crore in the June quarter during the quarter ended June 30, 2023, as against Rs. 2,914 crore during the corresponding quarter last year.

This had the loan book touching Rs 86,732 crore which also clipped at 28 per cent, Ramesh lyer, the vice-chairman & managing director of the company told PTI here. As much as Rs 82,000 crore of this total book is retail, he said.

He said the revenue increased in spite of the company seeing a 7 basis points decline in net interest margin to 6.8 per cent as it did not pass on the entire repo rate hike to existing borrowers, which it will do in the oncoming quarters.

As a result, its cost of funds rose by 70 bps to 7.5-7.7 per cent. Accordingly, the key net interest income rose marginally only at 7 per cent to Rs 1,675 crore as it was also impacted by change in portfolio mix and increased interest costs.

Asset quality improved with gross NPAs printing at 4.3 per cent in the reporting quarter from 8 per cent a year ago and net NPAs almost halved to 1.8 per cent from 3.5 per cent. In absolute terms, GNPA at Rs 1,144 crore as against Rs 1,184 crore in March 2022.

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As a result, the restructured portfolio has come down to Rs 1,860 crore from Rs 2,174 crore in March 2023.

The capital adequacy stood at 21.2 per cent and the provision coverage ratio on NPAs stood at 60.1 per cent, which was at the same level in the trailing 12 months period, Iyer said, adding its liquidity buffer stood at Rs 9,350 crore, which covers three months obligations.

During the quarter, the company maintained its leadership position in tractor and Mahindra auto vehicle segments. The disbursement growth was broad-based across vehicle segments, he said, adding going forward, he expects to maintain the market leadership in core segments, while accelerating growth in pre-owned vehicle segment, SMEs, leasing and personal loans.

Collection efficiency remained strong at 94 per cent, similar to the level observed in Q1 FY23. Focus on collections including use of digital payment channels and effective use of legal machinery are helping maintain healthy asset quality.

The consolidated numbers also include that of Mahindra Rural Housing Finance, which registered an income of Rs 342 crore as against Rs 329 crore during the corresponding quarter last year.

The company booked a net loss of Rs 22.5 crore as against net income of Rs 2.4 crore during the corresponding quarter last year. This is in spite of it improving its asset quality to 8.5 per cent from 10 per cent.

Another arm is Mahindra Insurance Brokers, which chipped in with 85 per cent more income of Rs 164 crore from which it earned a net profit of Rs 17.3 crore as against Rs 2.2 crore.

Mahindra Manulife Investment Management booked an income of Rs 14 crore as against Rs 7.9 crore but incurred a loss of Rs 5.8 crore as against a loss of Rs 10.8 crore a year ago.

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