20 July 2020
1QFY21 Results Update | Sector: Financials
Mahindra & Mahindra Financial
Estimate change
TP change
Rating change
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CMP: INR230
TP: INR320 (+39%)
Buy
Controlled opex leads to PPoP beat; Credit costs elevated
Mahindra Finance (MMFS) reported 1QFY21 PAT of INR1.6b (up 128% YoY;
down 29% QoQ), a 3% miss. While PPoP beat our estimates by 25%,
higher-than-expected provisions at INR8.4b led to the modest PAT miss.
The board approved a 1:1 rights issue at INR50 per share, amounting to
INR30.89b as of 23
rd
July 2020 (record date). As per our calculations,
while FY21 networth increases ~25%, BVPS declines ~35% to INR125.
While the value of assets financed declined sharply, we note the decline in
Tractors was much lower (35% YoY).
Operating expenses declined 38% YoY to INR3.5b largely driven by 47%
YoY decline in other expenses to INR0.9b.
Around half of the opex cut is
sustainable, as per management.
Gross Stage 3 assets increased 75bp QoQ to 9.2% due to slippages from
tractor owners who had not availed moratorium.
The company took INR4.8b COVID-19 provisions during the quarter, vis-à-
vis INR5.7b COVID-19 provisions in 4QFY20.
The company increased
provision coverage to 40% QoQ from 31%. ECL% increased to 5.5% v/s
4.4% in 4QFY20 and 3.6% in 1QFY20.
~40% of customers who availed moratorium are paying full installments.
Around 48% of customers are currently in moratorium.
MMFS is comfortable on the ALM front, with liability repayments of
INR54.7b in 2QFY21, against a cash balance of INR85b.
Mahindra Rural Housing Finance:
There were nil disbursements during the
quarter. PBT/PAT increased 38%/66% YoY to INR567m/INR477m. GS3%
increased by ~37bp to 15.5%, while NS3% declined 85bp to 9.9%.
Collection efficiency in June was 75% of the total demand. This has
improved in July.
48% of total customers and 30% of Tractor customers
are under moratorium currently.
30–40% taxi aggregators are returning to activity, but recovery is slow.
Month-on-month improvement in disbursements and collections is
encouraging; however, its sustenance is the key monitorable. Within its
product mix, Tractors, Entry-level Cars, and LCVs are likely to do well, while
M&HCV and Taxi Aggregator are likely to witness slow recovery.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
MMFS IN
615
141.8 / 1.7
403 / 125
24/-25/-34
1316
Tractor disbursements better v/s other segments; Opex under control
Financials & valuations (INR b)
Y/E March
2020 2021E
NII
PPP
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
Ratios
NIM (%)
C/I ratio (%)
RoA (%)
RoE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
51.1
34.0
9.1
14.7
-41.8
185
8.3
37.3
1.3
8.3
0.0
15.6
1.2
0.0
57.5
42.8
9.1
7.4
-49.9
125
9.2
29.1
1.2
6.8
23.4
31.2
1.8
0.0
INR4.8b COVID-19 provisions in the quarter;
comfortable
on liquidity
2022E
55.7
39.2
11.0
8.9
21.3
132
9.2
33.4
1.5
7.0
23.4
Other highlights
25.7
1.7
0.8
Highlights from management commentary
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
51.2
51.2
DII
15.6
15.4
FII
24.3
25.3
Others
8.9
8.2
FII Includes depository receipts
Mar-19
51.2
13.6
27.2
7.9
Valuation and view
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020
1
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
On the asset quality front, the true picture would be known only after the
moratorium. However, the fact that the company is buffering up with an INR31b
capital raise is comforting. We increase our FY21 EPS estimate by 34% (off a low
base) given: a) a healthy performance on NII and b) lower opex, offset by higher
credit costs. Our FY22 EPS estimate is largely unchanged. We also factor the
rights issue in our estimates. At the CMP of INR230, the stock trades at 1.1x
post-rights FY22E BVPS (average cost = INR(230+50)/2 = INR140). Maintain Buy,
with TP of INR320. This works out to INR160/share post rights issue (upside of
15%), translating to 1.2x FY22E post rights BVPS.
(INR m)
1QFY21E v/s est
25,575
400
25,975
7.7
13,153
12,823
-0.2
4,480
8,343
15.2
6,200
2,143
536
1,607
134.9
3
2
-4
8
-23
25
36
-6
-2
-7
Quarterly Performance
Y/E March
1Q
23,940
185
24,125
24.4
11,282
12,843
17.7
5,600
7,243
2.6
6,196
1,047
363
684
-74.6
Operating Income
Other Income
Total income
YoY Growth (%)
Interest Expenses
Net Income
YoY Growth (%)
Operating Expenses
Operating Profit
YoY Growth (%)
Provisions
Profit before Tax
Tax Provisions
Net Profit*
YoY Growth (%)
Key Operating Parameters (%)
Yield on loans (Cal)
15.3
15.5
15.7
15.9
16.2
16.6
16.9
16.9
15.8
Cost of funds (Cal)
8.4
8.6
8.4
8.7
8.2
8.4
8.6
8.5
8.6
Spreads (Cal)
6.9
6.8
7.3
7.2
8.0
8.2
8.4
8.4
7.2
Credit Cost (Cal)
4.0
2.3
2.5
4.1
7.3
7.7
8.5
8.8
3.3
Cost to Income Ratio
43.6
38.8
36.9
30.3
24.9
27.8
30.0
32.9
37.3
Tax Rate
34.6
45.1
25.2
24.5
25.9
26.0
26.0
26.1
32.5
Balance Sheet Parameters
Loans (INR B)
624
638
655
650
638
650
Change YoY (%)
20.9
15.0
12.4
6.1
2.3
6.1
Value of Asset Fin (INR B)
106
97
128
93
35
424
Change YoY (%)
2.5 -10.2
-3.8 -21.0 -67.1
-8.3
Borrowings (INR B)
548
565
587
595
634
595
Change YoY (%)
28.4
18.0
17.9
12.5
15.7
12.5
Loans/Borrowings (%)
113.9 112.9 111.5 109.3 100.8
109.3
Debt/Equity (x)
5.0
5.3
5.3
5.2
5.5
5.2
Asset Quality Parameters (%)
GS 3 (INR B)
53.0
52.0
57.7
57.5
62.2
Gross Stage 3 (% on Assets)
8.2
7.9
8.5
8.4
9.2
NS 3 (INR B)
39.8
41.9
44.5
39.7
37.3
Net Stage 3 (% on Assets)
6.3
6.4
6.7
6.0
5.7
PCR (%)
24.9
19.5
22.9
31.0
40.1
ECL (%)
3.6
3.4
3.6
4.4
5.5
Return Ratios (%)
ROAA
0.4
1.4
2.0
1.2
0.8
1.3
ROAE
2.5
9.3
13.4
7.9
5.4
8.3
* Note: 1QFY21 PAT excludes INR61m profit on stake sale in AMC subsidiary to Manulife Asset Management
FY20
2Q
3Q
24,864 25,806
545
354
25,409 26,160
18.4
16.5
12,022 12,089
13,387 14,072
10.2
14.8
5,196 5,189
8,190 8,883
4.1
19.3
3,606 4,001
4,584 4,882
2,066 1,229
2,518 3,653
-34.0
14.6
4Q
26,369
389
26,758
7.9
12,895
13,863
3.8
4,197
9,666
23.9
6,741
2,925
716
2,209
-62.4
1Q
26,405
144
26,549
10.0
12,646
13,903
8.3
3,457
10,447
44.2
8,427
2,020
523
1,497
118.7
FY21
2QE
3QE
26,647 26,803
250
300
26,897 27,103
5.9
3.6
12,267 11,408
14,630 15,695
9.3
11.5
4,071 4,706
10,559 10,989
28.9
23.7
8,000 7,500
2,559 3,489
665
907
1,894 2,582
-24.8 -29.3
FY20
FY21E
4QE
27,062 1,00,979 1,06,917
410
1,473
1,105
27,473 1,02,451 1,08,022
2.7
16.3
5.4
11,376 48,287 47,697
16,097 54,164 60,325
16.1
11.3
11.4
5,298 20,182 17,531
10,798 33,982 42,794
11.7
12.6
25.9
6,576 20,545 30,503
4,222 13,438 12,291
1,100
4,374
3,196
3,122
9,064
9,095
41.3
-41.8
0.3
16.4
8.4
8.0
4.8
29.1
26.0
20 July 2020
2
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Highlights from management commentary
Business updates
The company foresees rural turnaround to certainly be much faster v/s the
urban markets.
Dealerships are open and operational. Even MMFS’ 300 ‘smart branches’ are
operational.
June was a great month in terms of disbursements and collections. The
company disbursed loans for 30k vehicles and collected INR22b in June (i.e.,
INR29b demand; ~75% collection efficiency). Disbursements could have been
higher in the month if dealers had more inventory.
Tractors, small cars, and small LCVs and pre-owned vehicles saw good traction.
30–40% taxi aggregators are returning to activity, but recovery is likely to be
prolonged. The company has 80k taxi aggregators of 2m customers.
Due to production constraints at OEMs, disbursements may be below demand.
Thus, expect 2Q to be muted, but 2HFY21 to be a strong period.
50% of the opex reduction in 1Q is sustainable going forward. Expect a 15–20%
drop in overall opex in FY21. This would be driven by rent renegotiations,
branch rationalization, advertising expense reduction, no/low increments, etc.
The expense ratio would rise to 2% (from 2.85%) over the medium term.
A rights issue that was priced attractively was only to reward shareholders.
It is confident of maintaining market share in various OEMs in FY21.
INR5b collections were reported in April and INR10b in May.
50–52% of the Tractors portfolio opted for Morat. 1.0.
Collections in July thus far are better v/s June.
Moratorium rate by value and volume is 48% currently (30% in Tractors).
Expect decline.
40% of customers paid full installments in June.
The company is confident of maintaining asset quality, barring slight delays in
repayment, even post the lifting of the moratorium.
60% moratorium customers of the 75% have not paid a single full installment
since April.
The increase in the GNPL ratio QoQ is attributable to the Tractors segment
(many of these customers did not opt for morat as they expected cash
inflows). However, this is likely to reverse given good crop output.
It aims to take NPL to 4% levels.
Provisions made this quarter comprise – Stage 1, 2: INR1.8b and Stage 3:
INR4.7b.
The company has INR85b of liquidity on the balance sheet.
Asset quality trends are more on geography than product segment.
Madhya Pradesh is doing better than other states.
Recovery in M&HCV would be prolonged.
Digital repayments have increased to 50% currently from 35–40% earlier.
Asset quality / Moratorium
Liquidity/Funding
Others
20 July 2020
3
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
It has not changed loan-to-value (LTVs).
RWA/Total assets % declined YoY in FY20 due to a higher share of liquid assets.
According to management, June demand is not pent up.
Southern India has been facing challenges since before the COVID-19 outbreak.
Expect some pick-up in mining activities in Karnataka post-October.
Key exhibits
Exhibit 1: Loan growth continues to decline (%)
Loans (INR b)
26.2
17.8
20.6
21.9
20.9
15.0
12.4
6.1
516
555
583
612
624
638
655
2.3
587
628
656
689
714
727
759
650
638
21.1
YoY Growth (%)
32.9
Exhibit 2: AUM growth up due to higher liquidity (%)
AUM (INR b)
35.7
30.6
21.6
15.9
15.7
YoY Growth (%)
11.9
772
14.0
814
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 3: Cumulative value of assets financed down 67%
YoY
Value of assets financed (INR b)
35.3
39.4
33.1
22.3
2.5
(4.0)
(3.9)
(8.3)
35
(67.1)
103
212
345
462
106
203
331
424
YoY Growth (%)
Exhibit 4: Tractors outshines the mix of value of assets
financed (%)
Auto/Uvs (%)
CV & CE (%)
5
5
7
14
14
14
17
18
18
21
20
20
19
19
18
24
23
24
Tractors (%)
Used vehicles (%)
2
3
4
16
14
18
18
19
17
20
20
19
17
16
18
25
27
27
Cars (%)
SME & Others (%)
3
3
19
18
18
3
6
15
16
15
19
19
34
17
17
27
28
23
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 5: Higher provisions lead to improvement in PCR (%)
GS 3 (%)
81
PCR (%)
Exhibit 6: Credit cost up by ~110bp QoQ
Credit Cost (Bp of AUM)
4.01
2.35
4.13
2.29
-0.77
2.48
5.23
27
8.3
6.5
25
8.2
20
7.9
23
8.5
31
8.4
40
1.73
1.58
9.2
Source: MOFSL, Company, GS 3% on total assets
Source: MOFSL, Company
20 July 2020
4
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Exhibit 7: Comfortable on ALM front
Cumulative mismatch (INR b)
60
50
Cumulative surplus (%)
55
38
35
18
14.3
20.4
33.7
39.3
67.4
78.2
22
Exhibit 8: Spreads improve ~80bp sequentially (%)
Yields on loans (%)
15.3
15.6
15.5
16.1
15.3
15.5
CoF(%)
15.7
15.9
16.2
8.2
8.2
8.4
8.9
8.4
8.6
8.4
8.7
8.2
115.8
Source: MOFSL, Company
Source: MOFSL, Company
Valuation and view
Month-on-month improvement in disbursements and collections is encouraging;
however, its sustenance is the key monitorable.
Within its product mix, Tractors, Entry-level Cars, and LCVs are likely to do well,
while M&HCV and Taxi Aggregator are likely to witness slow recovery. We
estimate a 40% drop in disbursements in FY21.
On the asset quality front, the true picture would be known only after the
moratorium. However, the company has taken over INR11b COVID-19
provisions over the past two quarters, amounting to nearly 2% of the loan book.
In addition, the fact that the company is buffering up with an INR31b capital
raise is comforting. With the capital raise, leverage decreases to 4.2x from 5.7x
currently.
We increase our FY21 EPS estimate by 34% (off a low base) given: a) a healthy
performance on NII and b) lower opex, offset by higher credit cost. Our FY22 EPS
estimate is largely unchanged. We also factor the rights issue in our estimates.
At the CMP of INR230, the stock trades at 1.1x post-rights FY22E BVPS (average
cost = INR(230+50)/2 = INR140). Maintain Buy, with TP of INR320. This works
out to INR160/share post rights issue (upside of 15%), translating to 1.2x FY22E
post rights BVPS.
Exhibit 9: We upgrade our EPS estimate by ~34% for FY21 but leave FY22 estimates largely unchanged
INR B
NII (incl. Sec. Inc)
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Loans
Borrowings
Margins
Credit Cost
RoA on AUM
RoE
FY21
50.3
1.6
51.9
18.1
33.8
24.8
9.1
2.3
6.8
633
541
7.8
3.9
0.9
5.1
Old Est
FY22
54.4
1.8
56.2
19.9
36.4
21.3
15.0
3.8
11.3
616
527
8.7
3.4
1.5
7.0
FY21
59.2
1.1
60.3
17.5
42.8
30.5
12.3
3.2
9.1
633
541
9.2
4.8
1.2
6.8
New Est
FY22
57.6
1.2
58.8
19.6
39.2
24.2
14.9
3.9
11.0
616
527
9.2
3.9
1.5
7.0
FY21
17.7
-31.8
16.2
-3.1
26.4
23.1
35.6
41.1
33.8
0.0
0.0
% Change
FY22
5.7
-31.8
4.5
-1.2
7.7
13.6
-0.7
3.2
-2.0
0.0
0.0
Source: MOFSL, Company
20 July 2020
5
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Exhibit 10: One-year forward P/B
3.6
P/B (x)
Min (x)
Avg (x)
+1SD
2.8
2.6
2.3
1.8
1.0
Max (x)
-1SD
3.3
Exhibit 11: One-year forward P/E
50.0
40.0
30.0
27.6
20.0
12.4
19.7
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
39.0
1.6
20.0
10.0
0.0
0.7
0.6
8.2
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 12: Valuation matrix
66
Rating
FY22E
HFCs
HDFC*
LICHF
PNBHF
Vehicle fin.
SHTF
MMFS
CIFC
Diversified
BAF
SCUF
LTFH
MUTH
MAS
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
CMP
(INR)
1,805
268
204
691
230
215
3,441
702
63
1,230
679
Mcap
(USDb)
41.5
1.8
0.4
2.1
1.7
2.3
26.4
0.6
1.6
6.4
0.5
P/E (x)
FY21E
FY22E
17.3
6.3
11.0
10.2
31.1
17.3
45.5
6.4
12.7
13.7
22.0
13.2
5.6
4.2
6.0
16.1
13.4
29.3
6.1
6.6
12.0
18.4
P/BV (x)
FY21E
FY22E
1.9
0.7
0.4
0.8
1.8
2.0
5.7
0.6
0.8
3.4
3.3
1.4
0.6
0.4
0.7
1.7
1.8
4.8
0.5
0.7
2.8
2.9
RoA (%)
FY21E
FY22E
1.8
1.0
0.4
1.5
1.2
1.6
2.6
2.3
0.9
6.7
3.7
1.7
1.1
1.1
2.6
2.4
1.9
3.5
2.3
1.7
6.7
4.0
RoE (%)
FY21E
FY22E
12.4
11.5
3.8
8.7
6.8
12.1
13.2
9.6
6.7
27.7
16.0
12.1
11.8
9.4
13.0
10.9
13.9
17.8
9.2
12.0
25.6
16.9
20 July 2020
6
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Other Operating Income
Other Income
Net Income
Change (%)
Operating Expenses
Operating Profits
Change (%)
Provisions
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend (Incl Tax)
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus (Ex OCI)
Net Worth
Other Comprehensive Income
Net Worth
Change (%)
Borrowings
Change (%)
Other liabilities
Total Liabilities
Investments
Change (%)
Loans and Advances
Change (%)
Other assets
Total Assets
E: MOFSL Estimates
2016
56,163
26,393
29,770
7.8
2,368
519
32,658
5.8
11,781
20,877
0.3
10,495
10,382
3,656
35.2
6,726
-19.1
2,713
2017
60,127
28,574
31,553
6.0
1,612
636
33,801
3.5
14,509
19,292
-7.6
13,091
6,201
2,198
35.5
4,002
-40.5
1,610
2018
65,842
30,816
35,025
11.0
493
517
36,036
6.6
14,336
21,700
12.5
5,681
16,019
5,907
36.9
10,111
152.6
2,938
2019
86,146
39,446
46,700
33.3
1,084
869
48,653
35.0
18,476
30,177
39.1
6,352
23,824
8,254
34.6
15,571
54.0
4,779
2020
99,417
48,287
51,130
9.5
1,561
1,473
54,164
11.3
20,182
33,982
12.6
20,545
13,438
4,374
32.5
9,064
-41.8
0
2021E
1,05,199
47,697
57,503
12.5
1,718
1,105
60,325
11.4
17,531
42,794
25.9
30,503
12,291
3,196
26.0
9,095
0.3
0
2022E
98,387
42,713
55,674
-3.2
1,889
1,215
58,778
-2.6
19,623
39,156
-8.5
24,243
14,912
3,877
26.0
11,035
21.3
2,207
INR m
2023E
98,655
42,348
56,307
1.1
2,078
1,337
59,722
1.6
21,965
37,757
-3.6
19,790
17,967
4,671
26.0
13,296
20.5
2,659
INR m
2023E
2,466
1,70,622
1,73,088
81
1,73,169
6.6
5,66,024
7.4
49,353
7,88,465
1,02,141
20.0
6,56,588
6.5
29,736
7,88,465
2016
1,129
59,752
60,881
60,881
7.4
2,94,523
12.1
40,391
3,95,795
15,351
41.4
3,62,189
11.7
18,255
3,95,795
2017
1,130
64,994
66,124
0
66,124
8.6
3,52,656
19.7
24,404
4,43,185
19,843
29.3
4,06,000
12.1
17,342
4,43,185
2018
1,229
92,052
93,281
0
93,281
41.1
4,00,932
13.7
33,715
5,27,927
27,341
37.8
4,85,470
19.6
15,116
5,27,927
2019
1,230
1,03,072
1,04,221
81
1,04,302
11.8
5,28,469
31.8
38,009
6,70,780
37,917
38.7
6,12,496
26.2
20,367
6,70,780
2020
1,231
1,12,408
1,13,558
81
1,13,639
9.0
5,94,623
12.5
32,451
7,40,712
59,110
55.9
6,49,935
6.1
31,668
7,40,712
2021E
2,466
1,51,157
1,53,543
81
1,53,624
35.2
5,41,013
-9.0
37,318
7,31,954
70,932
20.0
6,32,985
-2.6
28,038
7,31,954
2022E
2,466
1,59,985
1,62,371
81
1,62,452
5.7
5,26,815
-2.6
42,916
7,32,183
85,118
20.0
6,16,374
-2.6
30,691
7,32,183
20 July 2020
7
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Yield on Portfolio
Cost of Borrowings
Interest Spread
Net Interest Margin
Profitability Ratios (%)
Cost/Income
Empl. Cost/Op. Exps.
RoE
RoA
Asset Quality (%)
GNPA
NNPA
GNPA %
NNPA %
PCR %
Capitalization (%)
CAR
Tier I
Tier II
Average Leverage on Assets (x)
Valuation
Book Value (INR)
BV Growth (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend
Dividend Yield (%)
E: MOFSL Estimates
2016
16.4
9.5
6.9
9.4
2017
15.7
8.8
6.8
8.6
2018
14.8
8.2
6.6
8.0
2019
15.7
8.5
7.2
8.7
2020
15.8
8.6
7.2
8.3
2021E
16.4
8.4
8.0
9.2
2022E
15.8
8.0
7.8
9.2
(%)
2023E
15.5
7.8
7.8
9.2
36.1
47.4
11.4
1.8
42.9
46.9
6.3
1.0
39.8
58.1
12.7
2.1
38.0
59.0
15.8
2.6
37.3
56.9
8.3
1.3
29.1
59.0
6.8
1.2
33.4
59.0
7.0
1.5
36.8
59.0
7.9
1.7
32,242
12,351
8.9
3.6
61.7
68,311
40,938
15.5
10.1
40.1
50,270
33,109
9.8
6.8
34.1
40,706
32,907
6.4
5.4
19.2
57,467
39,665
8.8
6.4
31.0
88,368
57,439
14.0
9.5
35.0
86,205
56,033
14.0
9.6
35.0
79,709
55,797
12.1
8.8
30.0
17.3
14.6
2.7
6.3
2016
107.8
7.3
92.5
11.9
-19.2
4.0
18.1
13.6
4.5
6.6
2017
117.0
8.5
66.3
7.1
-40.5
2.4
22.7
17.0
5.7
6.1
2018
151.8
29.7
114.1
16.5
132.3
4.0
20.3
15.5
4.8
6.1
2019
169.5
11.7
132.0
25.3
53.9
6.5
20.1
16.0
4.1
6.5
2020
184.5
8.9
1.2
136.2
1.7
14.7
-41.8
15.6
0.0
0.0
21.6
17.8
3.8
5.5
2021E
124.5
-32.5
1.8
89.6
2.6
7.4
-49.9
31.2
0.0
0.0
23.1
19.7
3.5
4.6
2022E
131.7
5.7
1.7
97.6
2.4
8.9
21.3
25.7
1.8
0.9
22.9
20.0
2.9
4.5
2023E
140.4
6.6
1.6
106.4
2.2
10.8
20.5
21.3
2.2
1.0
20 July 2020
8
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
20 July 2020
9
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
20 July 2020
10