Mahindra & Mahindra Financial Services- Looks for Presence Abroad

While many of the financial services companies are looking for opportunities in banking in the domestic Indian markets, Mahindra & Mahindra Financial Services (MMFSL), has sent teams to scout for opportunities in South Korea and South Africa. In a recent interview to a leading financial news channel its managing director Ramesh Iyer was quoted as saying “the move is in line with its strategy of growing businesses adjacent to its core automotive business and capitalising on growth opportunities in the financial services arena”. He further added that, “a team is in place, which is gathering information from our associates located in the two countries. In six months we will be fairly clear, whether we will have a joint venture or set it up ourselves”. We are of the opinion that a presence in emerging markets like South Africa will surely boost the company’s performance big time, though the impact of the same will not be visible in FY13, and be partial seen only in FY14.

MMFSL has also recently announced the successful completion of its qualified institutional placement (QIP) via which it raised Rs 867 crore. The QIP was oversubscribed five times and was priced at Rs 889 a share, which is very much in line with its market price. We are of the opinion that the high level of interest shown by leading institutional investors across the globe, even in the current uncertain economic environment, reflects their confidence in the company.

Being a subsidiary of Mahindra & Mahindra, the company has a strong backing of a robust management. Further, it is mainly into the financing of the M&M vehicles and this is the reason why in the past six months while other Auto companies have been struggling, M&M has been performing quite strongly. New launches like XUV500 and Quanto have been very successful. 

The scrip has been continuously going up and on a YTD basis has provided good returns of more than 60 per cent. The financial performance of the company has also been quite good. In a difficult scenario where the automobile sales were sluggish, MMFSL has been a rock solid performer.

While the topline on a Y-o-Y basis has increased by 41 per cent the bottomline has increased by 38 per cent. The performance on a sequential quarter basis too has been good with the topline having increased by 9.65 per cent and the bottomline having increased by 16.50 per cent.