Target: ₹285
CMP: ₹237.55
Mahindra & Mahindra Financial Services (MMFS) has over the last 18 months embarked on multiple strategic initiatives, which we believe will lead to lower operating cost ratios through improved productivity aided by higher efficiencies, sustainable improvement in asset quality resulting in lower credit costs, much better risk management by leveraging analytics/business intelligence, and improvement in business volumes by targeting the affluent rural and semi-urban (RUSU) customer segment with relevant lifecycle products.
MMFS has significantly beefed up the processes around repossessions and additional safeguards have been built. The regulator has seen through all the measures undertaken by the company and has revoked the ban on deploying third-party collection agencies. This will now aid improvement in repossessions activity and prevent any volatility in asset quality (which could have otherwise been there).
MMFS has appointed Raul Rebello (current COO) as the MD & CEO designate and he will assume charge after Ramesh Iyer (the current MD & CEO) superannuates in Apr’24. We expect this to be a smooth and seamless transition given that Rebello (ex-Axis Bank) has been with MMFS for the last 18 months and he has been at the forefront in strengthening the operational framework.
Key risk to our call: external disruptions like COVID waves leading to volatility in asset quality and credit costs.
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