16 May 2020
4QFY20 Results Update | Sector: Financials
Mahindra & Mahindra Financial
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
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
11.4
0.9
0.0
46.1
31.3
4.9
8.0
-46.0
193
7.4
36.6
0.7
4.2
23.4
21.1
0.9
0.0
MMFS IN
615
104 / 1.4
439 / 128
6/-25/-39
898
CMP: INR168
TP: INR 200 (+19%)
Provisioning cost partly offset by controlled opex
Buy
2022E
49.3
33.1
8.8
14.3
80.0
204
8.2
37.5
1.2
7.2
23.4
11.7
0.8
1.7
MMFS 4QFY20 PAT of INR2.2b (down 62% YoY), a 40% miss. The miss in
PAT was led by a contingency provision of INR5.7b (we factored in
~INR2.2b) related to COVID-19. Of INR5.7b, INR4.7b was used to increase
PCR (800bps QoQ to 31%) for GNPA. Pre-provisioning profits grew 24% YoY
(beat of 14%) to INR9.7b as opex (27% beat) declined 24% YoY to INR4.2b.
Net income missed our estimate by 3% as loans stood largely flat QoQ
(+6% YoY) at INR650b v/s the expectation of ~2% QoQ growth (on March-
end COVID-19 restrictions). NIMs/GS3% came in flat QoQ at 7.7%/8.4%.
Restrictions imposed on the movement of goods and people due to
COVID-19 would have a significant impact on growth and asset quality. We
have cut estimates by 22%/4% for FY21/FY22. ROEs are likely to be less
than 10% over FY20–22. While a valuation at 0.8x FY22 BV is comfortable,
considerable relaxation in lockdown restriction remains a key catalyst.
The value of assets financed declined 28% YoY to INR93b. While decline
was witnessed across products, the CV and CE segments (40%+ sequential
declines) led the laggards. The AUM mix was largely stable (Exhibit 3).
Gross Stage 3 asset were flat QoQ at ~INR57b. Weighed by challenging
macros, MMFS increased PCR levels to 31% (+800bp QoQ) on GNPA.
ECL% has increased to 4.4% v/s 3.6%in 3QFY20 and 2.9% in 4QFY19.
MMFS has already commenced operations at 500 of its 1320+ branches;
200+ branches would resume shop shortly. However, operations in North
(29% of AUM)/West (15%) have resumed only in 28%/34% locations.
MMFS is comfortable on the ALM front, with liability repayments of
INR21b/INR34b in May/June 2020 and 2QFY20, against a cash balance of
INR45b, in addition to undrawn sanctions.
75%+ customers availed moratorium. Those who chose not to avail it
belong largely to the farming community. Collection efficiency stood at
15–16% in April.
8–9 areas were identified where opex could be reduced by ~50bp in FY21.
Customers are not expected to surrender their assets. A delay, but not a
default, is likely.
We have baked in a 40% drop in disbursements in FY21 as 1H is likely to
see a plunge (60–70%); we expect healthy, but gradual recovery from
2HFY21. With a higher share (75%) of moratorium availed and collections
issues, repayment rates are likely to be lower and thus support AUM.
Forecasting asset quality and credit cost is challenging as they are likely to
be guided by the easing of restrictions on COVID-19. The Red zone
contributes ~30% to AUM. We have baked in ~3.9% credit cost v/s 2.35%
in FY20 (ex-contingency provisions).
We have baked in a sharp drop of ~100bp in NIMs in FY21 due to
challenging asset quality. A valuation of 0.8x PBV largely factors in near-
term issues. Recovery/upgrades are likely to be the quickest as restrictions
ease, as the underlying customer base’s cashflows, especially in the
Farming segment, are healthy.
Buy.
Loan growth moderates and asset quality stands stable QoQ
Comfortable on liquidity; Gradual resumption of operations
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
Highlights from management commentary
Valuation and view
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526 |
Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com); +91 22 6129 1540
14
Oswal
2020
1
Motilal
January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Quarterly Performance
Y/E March
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)
Cost of funds (Cal)
Spreads (Cal)
Rep Spreads (Cum)
Credit Cost (Cal)
Cost to Income Ratio
Tax Rate
Balance Sheet Parameters
Loans (INR B)
Change YoY (%)
Value of Asset Fin (INR B)
Change YoY (%)
Borrowings (INR B)
Change YoY (%)
Loans/Borrowings (%)
Debt/Equity (x)
Asset Quality Parameters (%)
GS 3 (INR B)
Gross Stage 3 (% on Assets)
NS 3 (INR B)
Net Stage 3 (% on Assets)
PCR (%)
ECL (%)
Return Ratios (%)
ROAA
ROAE
1Q
19,285
111
19,397
28.6
8,488
10,909
44.8
3,849
7,060
65.8
2,938
4,122
1,432
2,691
33.6
15.3
8.2
7.1
7.6
2.3
35.3
34.7
516
17.8
103
35.3
427
21.0
120.9
4.3
55.3
9.4
35.9
6.3
35.1
5.3
2.0
11.0
FY19
2Q
3Q
21,097 22,304
357
157
21,455 22,461
39.4
22.7
9,310 10,205
12,145 12,256
50.8
20.7
4,276 4,812
7,869 7,444
65.9
12.4
2,311 2,247
5,558 5,197
1,744 2,010
3,814 3,187
132.5
-3.8
15.6
8.2
7.4
8.2
1.7
35.2
31.4
555
20.6
109
43.5
479
28.2
115.9
4.8
56.4
9.0
36.7
6.0
34.9
5.1
2.7
15.4
15.5
8.4
7.2
8.1
1.6
39.3
38.7
583
21.9
133
24.1
498
37.0
117.0
4.8
50.6
8.3
37.0
6.2
26.9
3.9
2.1
12.6
4Q
24,552
243
24,795
37.2
11,443
13,352
29.7
5,549
7,803
28.4
-1,145
8,947
3,068
5,880
87.0
16.1
8.9
7.2
8.1
-0.8
41.6
34.3
612
26.2
117
-1.1
528
31.8
115.9
4.8
40.7
6.5
7.8
5.3
80.8
2.9
3.6
22.2
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
15.3
8.4
6.9
7.6
4.0
43.6
34.6
624
20.9
106
2.5
548
28.4
113.9
5.0
53.0
8.2
39.8
6.3
24.9
3.6
0.4
2.5
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
15.5
8.6
6.8
7.6
2.3
38.8
45.1
638
15.0
97
-10.2
565
18.0
112.9
5.3
52.0
7.9
41.9
6.4
19.5
3.4
1.4
9.3
15.7
8.4
7.3
7.7
2.5
36.9
25.2
655
12.4
128
-3.8
587
17.9
111.5
5.3
57.7
8.5
44.5
6.7
22.9
3.6
2.0
13.4
FY19
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
15.9
8.7
7.2
7.7
4.1
30.3
24.5
650
6.1
93
-21.0
595
12.5
109.3
5.2
57.5
8.4
39.7
6.0
31.0
4.4
1.2
7.9
2.6
15.8
1.3
8.3
(INR M)
FY20 4QFY20E v/s est
26,526
350
26,876
8.4
12,612
14,264
6.8
5,774
8,490
8.8
3,946
4,544
859
3,685
-37.3
-1
0
2
-3
-27
14
71
-36
-17
-40
87,229 100,979
869
1,473
88,098 102,451
31.8
16.3
39,446 48,287
48,653 54,164
35.0
11.3
18,476 20,182
30,177 33,982
39.1
12.6
6,352 20,545
23,824 13,438
8,254
4,374
15,571
9,064
54.0
-41.8
38.0
34.6
612
26.2
462
22.3
528
31.8
115.9
5.1
37.3
32.5
650
6.1
424
-8.3
595
12.5
109.3
5.2
16 May 2020
2
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Highlights from management commentary
Business updates
500 branches are now operational; the company is seeing some walk-ins.
8–9 areas have been identified where opex could be reduced by 40–50bp over
the year. For example, the company is attempting to reduce branch rent by 20–
25%.
It would be another quarter or so before normalcy has returned. Many people
are staying back in their hometowns.
Customers are not expected to surrender their assets. A delay, but not a
default, is likely.
MMFS is considering changing the mix of employee remuneration between fixed
and variable payouts.
28–30% of customers/branches are in the Red zone.
Collection efficiency in April was 15–16%.
Of INR5.74b, INR4.74 worth of the COVID-19 provision is for Stage 3 assets.
Tractor demand is already picking up.
According to the management, moratorium of 90 days is insufficient for several
products, such as CVs. Reschedulement is a better option for longer duration
products.
Mahindra HFC would focus on recoveries and make disbursements gradually.
Moratorium
75%+ customers availed moratorium. Those who chose not to avail it belong
largely to the farming community. Decent collections were witnessed in April.
Collections in the 15 days of May were equal to April collections.
Liquidity/Funding
The company has enough liquidity to meet all obligations even if the current
situation lasts another six months.
Liquidity on the balance sheet is INR45b; INR30b+ has been raised in the past
few months.
Broadly, debt maturity stands at INR10b per month.
It has thus far raised INR6.75b via TLTRO at 7.5–7.65%.
Others
15–20 business days were lost in March.
INR5.7b has been put toward COVID-19 provisions; East India has contributed a
bit lesser than other geographies.
The LCV segment is expected to bounce back before M&HCV; taxi operators
would take a while to recover.
The quarter saw some benefit of the restatement of gratuity cost.
Due to COVID-19, MMFS has lost out on a potentially 150bp improvement in the
GNPL ratio from loan settlements and recoveries.
The company has a mix of customer profiles: taxi operators comprise 10%,
farmers 25%, and the self-employed (including traders) 15–18%, among others
(including contractors and fleet operators).
4% of the portfolio is for FTUs (CVs).
170–200k customer loans mature every year.
16 May 2020
3
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Key Exhibits
Exhibit 1: Loan growth continues to decline (%)
Loans (INR b)
20.6 21.9
YoY Growth (%)
26.2
15.9 15.3 14.2 14.2
17.8
20.9
15.0
12.4
6.1
438 460 478 485 516 555 583 612 624 638 655 650
485
16.3
7.7
5.7
528 587 628 656 689 714 727 759 772
32.9
21.1
Exhibit 2: AUM growth down ~400bp sequentially (%)
AUM (INR b)
35.7
30.6
21.6
15.9 15.7
11.9
YoY Growth (%)
12.9
472 483
Source: MOFSL, Company
Source: MOFSL, Company
Share of CVs up 100bp QoQ
to 19% in the total AUM mix
(%)
Exhibit 3: AUM mix largely stable (%)
M&M-Auto/UV (%)
PV, Other UV & Tractors, SV (%)
Used Vehicles (%)
10
12
12
12
8
8
8
9
13
12
14
14
23
22
22
22
17
28
18
28
17
27
17
27
M&M Tractors (%)
CV & CE (%)
SME & Others (%)
8
9
9
9
9
9
19
18
19
21
21
20
17
17
17
26
26
26
8
9
13
23
17
30
14
8
15
21
17
25
10
9
17
21
17
26
7
10
18
21
17
27
6
10
19
21
17
27
Source: MOFSL, Company, UV: Used vehicles, PV: Private Vehicles
Exhibit 4: Cumulative value of assets financed down 800bp
YoY
Value of assets financed (INR b)
35.3 39.4 33.1
16.4
7.8 11.3
YoY Growth (%)
Exhibit 5: Mix of value of assets financed stable (%)
Auto/Uvs (%)
CV & CE (%)
5
6
7
14 15 14
11 11 12
21 21 21
21
19
27
20
27
Tractors (%)
Cars (%)
Used vehicles (%)
SME & Others (%)
2
3
3
3
4
5
5
7
14 14 14 14 16 18 18 18
17 18 18 19 18 17 16 15
21 20 20 20 20 19 19 19
19 18 19 18 17 16 17 17
24
23
24
25
27
27
27
19.3
22.3
2.5 (4.0)
(8.3)
(3.9)
331
424
9
14
13
20
18
26
76
152 259 378 103 212 345 462106 203
28
28
Source: MOFSL, Company
Source: MOFSL, Company
16 May 2020
4
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Exhibit 6: Spreads decline ~17bp sequentially (%)
Yields on loans (%)
13.9 13.5
CoF(%)
Exhibit 7: Share of bank borrowings up 500bp QoQ (%)
Banks (%)
Insurance & Pension (%)
Others (%)
8
8
8
9
9
9
9
8
9
12
15 17 16
15
14
31 28 28 27 23
37
38
39
40
42
MF (%)
FII and Corporates (%)
10
12
15
22
41
15.5 14.9 15.3 15.6 15.5 16.1 15.3 15.5 15.7 15.9
12
10
13
25
13
10
16
14
46
14
10
16
15
45
16
8
19
13
16
8
18
13
46
16
8
18
7
51
8.6 8.1 8.9 8.1 8.2 8.2 8.4 8.9 8.4 8.6 8.4 8.7
40
45
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 8: Higher provisions lead to improvement in PCR (%)
GS 3 (%)
26.9
19.2
24.9
19.5
PCR (%)
31.0
22.9
Exhibit 9: Credit cost up by ~165bp QoQ
Credit Cost (Bp of AUM)
4.01
2.29
1.58
4.13
2.48
8.3
9MFY19
6.5
FY19
8.2
Q1FY20
7.9
1HFY20
8.5
9MFY20
8.4
Q3FY19
FY20
Q4FY19
-0.77
Source: MOFSL, Company
Q1FY20
Q2FY20
Q3FY20
Q4FY20
Source: MOFSL, Company, GS 3% on total assets
Exhibit 10: Comfortable on ALM front
Exhibit 11: Gradual resumption of operations
Source: MOFSL, Company
Source: MOFSL, Company
Valuation and view
Restrictions imposed on the movement of goods and people due to COVID-19
would have a significant impact on growth and asset quality.
We have baked in a 40% drop in disbursements in FY21 as 1H is likely to see a
plunge (60–70%); we expect healthy, but gradual recovery from the festive
season. With a higher share (75%) of moratorium availed and issues concerning
collections, repayment rates are likely to be lower and thus support AUM.
Forecasting asset quality and credit cost is challenging as they are likely to be
guided by the easing of restrictions on COVID-19. The Red zone contributes
~30% to AUM. We have baked in ~3.9% credit cost v/s 2.35% in FY20 (ex-
16 May 2020
5
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
contingency provisions). By upfronting credit cost in 4QFY20, MMFS has created
a buffer of 90bp in credit cost for FY21.
We have baked in a sharp drop of ~100bp in NIMs in FY21 due to challenging
asset quality. Overall, we have cut 22%/4% EPS for FY21/FY22. ROEs are likely to
be in the mid-single digits over FY20–22.
A valuation of 0.8x PBV largely factors in near-term issues. Recovery upgrades
are likely to be the quickest as restrictions ease, as the underlying customer
base’s cashflows, especially in the Farming segment, are healthy.
Buy
Exhibit 12: We cut our EPS estimates by ~22% for FY21, factoring lower loan growth
INR b
NII (incl. Sec. Inc)
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
Loans
Borrowings
Margins
Credit Cost
RoE
EPS
BVPS
FY21
53.6
1.6
55.2
19.9
35.2
26.8
8.4
2.1
6.3
657
578
8.1
4.1
5.5
10.3
191
Old Est
FY22
55.1
1.7
56.8
21.0
35.9
23.6
12.3
3.1
9.2
680
592
8.2
3.5
7.6
14.9
203
FY21
47.8
1.6
49.4
18.1
31.3
24.8
6.5
1.6
4.9
633
582
7.4
3.9
4.2
8.0
193
New Est
FY22
51.2
1.8
53.0
19.9
33.1
21.3
11.8
2.9
8.8
616
567
8.2
3.4
7.2
14.3
204
% Change
FY21
FY22
-10.8
-7.1
2.7
2.7
-10.4
-6.8
-9.2
-5.3
-11.1
-7.7
-7.6
-9.6
-22.4
-4.0
-22.4
-4.0
-22.4
-4.0
-3.7
-9.4
0.7
-4.2
-22.4
-4.1
0.7
0.5
Source: MOFSL, Company
Exhibit 13: One-year forward P/B
P/B (x)
Min (x)
3.6
2.7
2.6
1.6
0.8
0.6
2.3
1.8
0.9
Avg (x)
+1SD
Max (x)
-1SD
3.3
Exhibit 14: One-year forward P/E
50.0
40.0
P/E (x)
Min (x)
Avg (x)
+1SD
Max (x)
-1SD
38.1
26.2
19.1
12.1
8.2
15.6
30.0
20.0
10.0
0.0
Source: MOFSL, Company
Source: MOFSL, Company
16 May 2020
6
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
Exhibit 15: Valuation matrix
66
Rating
HFCs
HDFC*
LICHF
PNBHF
REPCO
Vehicle fin.
SHTF
MMFS
CIFC
Diversified
BAF
SCUF
LTFH
MUTH
MAS
Wholesale
ABCL
Others
IIFL Wealth
CMP
(INR)
1,636
254
179
112
642
168
149
2,086
703
57
820
558
44
861
Mcap
(USD b)
37.2
1.7
0.4
0.1
1.9
1.4
1.6
16.1
0.6
1.5
4.3
0.4
1.3
1.0
P/E (x)
FY21E
FY22E
12.7
5.6
3.5
2.5
8.6
16.4
9.6
28.0
5.2
5.5
10.2
18.1
-4.8
20.1
8.8
4.7
2.7
2.3
5.5
11.3
8.0
19.3
4.6
4.5
9.1
15.0
-5.4
15.8
P/BV (x)
FY21E
FY22E
1.6
0.6
0.3
0.3
0.7
0.9
1.3
3.4
0.6
0.7
2.4
2.8
-0.5
2.4
1.1
0.6
0.3
0.3
0.7
0.8
1.1
2.9
0.5
0.6
2.0
2.4
-0.6
2.3
RoA (%)
FY21E
FY22E
1.7
1.0
1.1
2.3
1.6
0.8
2.0
2.6
3.0
1.9
7.1
4.2
2.0
22.3
1.7
1.1
1.4
2.4
2.4
1.2
2.2
3.5
3.4
2.2
7.2
4.7
2.0
24.8
RoE (%)
FY21E
FY22E
13.1
12.0
9.6
14.4
9.0
5.5
14.1
12.7
11.4
13.1
25.8
16.2
11.6
11.9
13.2
13.0
11.5
13.6
12.7
7.6
14.9
16.2
11.8
14.3
24.4
17.2
12.2
14.8
Buy
Buy
Neutral
Buy
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
Buy
Buy
16 May 2020
7
 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)
2015
52,596
24,967
27,629
10.2
2,764
486
30,880
11.7
10,068
20,811
12.4
8,275
12,536
4,219
33.7
8,318
-6.2
2,730
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
94,615
48,550
46,065
-9.9
1,718
1,620
49,403
-8.8
18,088
31,315
-7.8
24,784
6,531
1,633
25.0
4,898
-46.0
0
2022E
95,264
45,976
49,287
7.0
1,889
1,782
52,959
7.2
19,858
33,100
5.7
21,342
11,758
2,940
25.0
8,819
80.0
1,764
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
2015
1,128
55,566
56,694
56,694
11.3
2,62,633
9.7
31,414
3,50,741
10,857
8.0
3,24,314
11.1
15,571
3,50,741
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
2020E
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
1,231
1,17,306
1,18,456
81
1,18,537
4.3
5,82,346
-2.1
37,318
7,38,201
70,932
20.0
6,32,985
-2.6
34,284
7,38,201
2022E
1,231
1,24,361
1,25,511
81
1,25,591
6.0
5,67,064
-2.6
42,916
7,35,571
85,118
20.0
6,16,374
-2.6
34,079
7,35,571
16 May 2020
8
 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)
2015
17.1
9.9
7.1
9.9
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
14.8
8.3
6.5
7.4
2022E
15.3
8.0
7.3
8.2
32.6
45.6
15.5
2.5
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
36.6
57.1
4.2
0.7
37.5
57.3
7.2
1.2
20,997
8,182
6.5
2.6
61.0
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
6.3
31.0
84,032
58,822
13.3
9.7
30.0
80,172
56,121
13.0
9.5
30.0
18.3
15.5
2.8
6.2
2015
100.5
11.2
90.3
36.9
12.3
14.7
-6.4
4.0
17.3
14.6
2.7
6.3
2016
107.8
7.3
92.5
37.0
0.2
11.9
-19.2
4.0
18.1
13.6
4.5
6.6
2017
117.0
8.5
66.3
34.1
-7.7
7.1
-40.5
2.4
22.7
17.0
5.7
6.1
2018
151.8
29.7
114.1
35.3
3.4
16.5
132.3
4.0
2.4
20.3
15.5
4.8
6.1
2019
169.5
11.7
1.0
132.0
1.3
49.1
39.0
3.4
25.3
53.9
6.6
6.5
3.9
20.1
16.0
4.1
6.5
2020E
184.5
8.9
0.9
136.2
1.2
55.2
12.5
3.0
14.7
-41.8
11.4
0.0
0.0
20.9
17.2
3.8
6.4
2021E
192.5
4.3
0.9
120.8
1.4
50.9
-7.8
3.3
8.0
-46.0
21.1
0.0
0.0
22.2
18.7
3.5
6.0
2022E
204.0
6.0
0.8
135.6
1.2
53.8
5.7
3.1
14.3
80.0
11.7
2.9
1.7
Valuation
Book Value (INR)
BV Growth (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
OPS (INR)
OPS Growth (%)
Price-OP (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend
Dividend Yield (%)
E: MOFSL Estimates
16 May 2020
9
 Motilal Oswal Financial Services
Mahindra & Mahindra Financial
NOTES
16 May 2020
10
 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
********************************************************************************************************************************
16 May 2020
11
 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.
16 May 2020
12