Mahindra & Mahindra Financial Services Net Profit Drops 15.7% In Q3FY14

Mahindra & Mahindra Financial Services (MMFSL) announced its December quarter FY14 result, yesterday (January 22, 2014) just few minutes before the closing of bourses. In the wake of decline in company's financial performance, the stock was down about 4% before the result announcement. The stock closed 5% down at Rs 253.95.

During the third quarter of FY14, the consolidated net sales grew by 28.5% came in at Rs 1358.6 crore. Operating expenses increased heavily, primarily because of the increase in loan provisioning & write off during the quarter on yearly basis. The EBITDA registered a growth of 16.5% to Rs 896 crore in Q3FY14.

The higher provisioning and finance expenses impacted the profitability of the company, declined by 16% in this quarter on YoY basis. Net profit stood at Rs 182 crore against Rs 216 crore in Q3FY13.

About the December quarter FY14 financial performance, the company's management said, the major decline in profitability front was due to the delay in collection from the regions Madhya Pradesh and Maharashtra on almost various ranges of heavy vehicle. Also the MMFSL's southern market, which is one of its major markets, had showed a down turn in last few quarters. However, they expect an improvement in Tamilnadu, Andhra and Karnataka market in the next 10 to 12 month period.

On demand front, MMFSL is still not optimistic on urban market demand. Whereas, they expect growth in demand in the rural markets from the quarter going ahead, backed by the good monsoon and the harvest season which will led to an improvement in rural sentiment.

The lower customer sentiment and down turn in the automotive segment, which has led to decline in demand for heavy vehicle along with the delayed collection from major markets will let the company's performance down in the coming one year period. So we recommend investors not to enter this counter at present level.