M&M Financial Services: Q1FY13 In Line With Street Estimates

M&M Financial Services announced its June 2013 quarter results and the numbers have been in line with street estimates. On a consolidated basis, the company posted a topline of Rs 1164.68 crore and a bottomline of Rs 203.05 crore as against Rs 882.57 crore and Rs 171 .95 crore in June 2012.

The growth shown by the company has been very good considering the fact that the automobile sector as a whole is not performing well. Despite so many odds, the company has put in better growth. One major factor behind this has been a consistent improvement on the branch network front and mainly into Tier II and Tier III cities. The branch network of M& M Financial Services has increased to 675 from 657 in March 2013.Besides, a diversified portfolio (like vehicle financing, pre-owned vehicles, SME financing, personal loans and MF distribution) is also an advantage for the company.

On the operational performance front, the total asset under management stands at 29539.4 crore on a consolidated basis as in June 2013 against Rs 21744.10 crore in June 2012. The growth has been good on the sequential front too.

On the spread front, the net spread for the June 2013 quarter stood at 4.5% showing a decline as compared to 4.9% witnessed in June 2012. Though the spread has declined, we are of the opinion that in a scenario where most of the financing companies are facing pressure on the margins front, MMFSL has been able to sustain its NIM.

MMFSL is witnessing some issues on the asset quality front like most others. As on June 30, 2013, the net NPAs stood at 1.9% as against 1.2% in June 2012 and 1% in March 2013. The company is well capitalised with the CAR standing at 19.60% (Tier I 16.40% And Tier II 3.2%).

Holding the scrip at the current levels would be a good strategy to adopt at the moment.