Mahindra & Mahindra Financial Services: Recommendation Review

We had recommended Mahindra & Mahindra Financial Services (MMFS), in DSIJ Vol. 27, Issue No. 11, (dated 20th May, 2012), when it was trading at Rs 685.35. We had recommended the scrip as it was available at a fair valuation. Further, the company has a strong management and has seen good business growth as it provides financial services in the rural and semi-urban areas, which are untapped and offer growth potential.

MMFS is a leading non-banking financial company (NBFC), having a wide range of products in its portfolio, which includes vehicle financing, pre-owned vehicle financing, insurance broking, housing finance, personal loans, etc. In the June 2012 quarter, the company’s revenues increased by 52 per cent to Rs 835 crore and the net profit grew by 58 per cent to Rs 161 crore. However, macroeconomic concerns like sticky inflation, rupee depreciation and the widening current and fiscal account deficits would impact the economy. Further, the Society of Indian Automobile Manufacturers (SIAM) has revised its growth estimate for the auto sector downwards to nine to 11 per cent against its previous estimate of 10 to 12 per cent.

After our recommendation, the scrip traded higher, helping investors to create wealth. On 14th August, 2012, through our ‘Book Profit’ SMS service, we had recommended booking profits in the scrip at Rs 785, which provided almost 15 per cent capital appreciation for investors. At present, the stock is trading at Rs 761, which is well above our recommended price. In view of the volatile market conditions, we advise investors to book profits in case they have not done so already.