The rise in Mahindra & Mahindra Finance’s (M&M Finance) gross non-performing asset ratio (GNPA) to 8 percent as on June end from 7. 7 percent as on March 31 is in line with the seasonal trend, Managing Director (MD) and Vice-Chairman Ramesh Iyer told Moneycontrol on August 2. Particularly, rural areas report higher NPAs during Q1 and Q2 of a financial year, he said.
“In the past, we have always seen increase is much steeper. This year, because tourism continued in April and May, a lot of people movement was happening and contracting segment was performing, therefore, we have seen very marginal increase from 7.7 percent to 8 percent, which is hardly any percentage in increase, and it is much different from the trends seen in the past,” Iyer said.s on June end, M&M Finance’s gross stage-3 ratio (GNPAs) increased to 8.03 percent from 7.66 percent as of March 31, while stage-2 ratio declined to 11.72 percent as on June end from 14.25 percent as on March 31. Net NPA ratio stood at 3.53 percent as on June 30 versus 3.36 percent a quarter ago.
Write-offs rose to Rs 570 crore in April-June from Rs 302 crore during the corresponding period of the previous fiscal. As per Iyer, write-offs rose during Q1FY23 as the NBFC had repossessed more vehicles during the previous quarter.
“So, when you sell off those vehicles, you do get some losses because these are all vehicles where the loan outstanding was high,” the MD said.
“Clearly, that is not the trend now that the NPA has settled down at this level of 8 percent and net is only 3.3-3.4 percent. We may not resort to any aggressive repossessions, going forward,” he added.
Collection efficiency would stay in the range of 94 percent to 95 percent, going ahead, Iyer said, adding that an improvement in collections will likely occur between October-March. “Maintaining 94 percent to 95 percent collection efficiency is a possibility,” Iyer said.
M&M Finance’s recently-launched loans against property (LAP), digital small-ticket personal loans, leasing and institutional leasing products have registered small growth and will gather momentum during the course of this fiscal, the MD said.
During Q1, M&M Finance’s total disbursements stood at Rs 9,472 crore, higher than Rs 3,872 crore a year ago. As on June end, auto and utility vehicle loans accounted for 33 percent of disbursements, while small and medium enterprises (SME) and other loans accounted for 8 percent of total loans.
Over the next three years, non-vehicle products will be pushed by the NBFC for growth and will cumulatively account for at least 15 percent-20 percent of total loans, Iyer said.
“On the SME front, we are looking at auto, agriculture and engineering industries as the three industries for base from where we will be looking for growth. The other thing is working capital support for SMEs through bill discounting of various supplies to OEMs (original equipment makers),” the MD said.
Further, Mahindra Finance is looking to provide funds to other well-rated NBFCs. “We are looking at the possibility where, good well-rated NBFCs, if they are looking at some kind of a term loan support, that will be a small portion; that is one possibility,” Iyer said.
M&M Finance’s subsidiary Mahindra Rural Finance reported Q1FY23 net profit at Rs 2 crore, against a net loss in the earlier year.
Its loan book rose gradually to Rs 6,974 crore as on June end, from Rs 6,932 crore last year.
GNPAs, however, rose to 14.49 percent as on June 30, from 11.33 percent as on March end. NNPAs were at 9.95 percent as of June 30 versus 8.47 percent a quarter ago.
Iyer said the rural business is a very unique one where “you will see these kind of spikes and drops happening”. The housing finance subsidiary will now launch an affordable housing product in the rural space through which NPAs will be stabilised, Iyer said.“It is a huge potential business and they will start to grow at least 25 percent plus (on a yearly basis). As far as asset quality is concerned, we are looking at GNPA to come down to below 10 percent from the current level and net NPA should be 6 percent to 7 percent. In the next three years, this business should not have more than 5 percent GNPA,” Iyer said.