M&M Financial Services expects healthier AUM growth with stability in asset quality

Mahindra & Mahindra Financial Services expects the assets under management (AUM) growth to be healthier than before with stability in asset quality going forward, said Ramesh Iyer, VC and MD of the company, on Friday.

The financial services company reported a weaker-than-estimated set of earnings for the June quarter. Disbursals, however, saw a good growth.

“You would start seeing the book grow. We had said a couple of quarters back that it would reach a double-digit number over a period and we are confident that it's moving in that direction with the sentiments and demand still holding up,” said Iyer in an interview with CNBC-TV18, after the company's first-quarter results were announced.

The company reported a consolidated net profit of Rs 240 crore with fall in expenses and higher income, however, it was still 62 percent lower when compared to the previous quarter.

The company had posted a net loss of Rs 1,573.40 crore during the same period last year owing to COVID-19 impact.

Total income increased to Rs 2,914 crore from Rs 2,567 crore while total expenses fell 45 percent to Rs 2,607 crore as against Rs 4,725 crore on a year-on-year basis. However, expenses were higher from Rs 2,035 crore in the previous quarter.

Cost of borrowing has increased, said Iyer, adding that the company has also raised rates.

Talking about return on equity (RoE), he said, “We had put out a 3-year strategy where we clearly articulated it going to 12 percent and then to 15 percent. Currently, our capital adequacy is very high. We are at close to 26 percent and it's only now that we have started seeing good growth of disbursement leading to AUM growth. As we start consuming this capital and the return on assets (RoA) coming back, you would see that happen in the next couple.”

The stock closed nearly 5 percent lower at Rs 186.80 per share on BSE. It is down 10.17 percent in the last five days. The stock has gained 25.62 percent in the last one year, outperforming Sensex by 16.28 percent while it is up 25.37 percent year-to-date.