M&M Financial soars to nearly three-year high — what's driving the stock

Mahindra & Mahindra Financial Services shares soared to their highest intraday level recorded snce March 2020 on Monday, after the NBFC reported improvement in its asset quality. M&M Financial shares climbed up 11 per cent to touch Rs 268.8 apiece at the strongest level of the day. 

M&M Financial shares came within Rs 40 of their all-time high of Rs 308 apiece, touched in May 2018.  

M&M Financial asset quality

Mahindra & Mahindra Financial reported a strong impovement in its asset quality during the October-December period. Its gross stage-three loans as a percentage of total loans came in at 5.93 per cent for the quarter ended December 2022, down 77 basis points on a quarter-and-quarter basis and 537 basis points on a year-on-year basis.

What brokerages recommend on M&M Financial Services

Analysts at Kotak Institutional Equities find comfort in the company’s smooth compliance with the RBI’s non-performing loans (NPL) norms and consistent mom improvement in collections, which will be augmented by the lifting of the ban on repossession, and moderation in the pace of growth.

“We expect the momentum across business lines to continue, augmented by parent M&M’s new product and MMFS’s plans to diversify into the rural affluent and MSME segments,” Kotak Institutional Equities analyst Nischint Chawathe said.

CLSA, JPMorgan, Jefferies and Citi have targets of Rs 225-310 for M&M Financial.   

M&M Financial Services share price history

The stock has rewarded investors with a return of 72 per cent in the last one year, sharply outperforming a five per cent rise in Sensex.

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