M&M Finance opts out of the banking license race - Event Update - Asit C. Mehta

M&M Financial Services Ltd. (MMFSL), the non-banking financial company (NBFC) of the Mahindra Group announced yesterday that it would not proceed with the application for a banking license, as the conditions for converting into a bank would have a significant adverse impact on its business. We believe this is a prudent decision on the part of the management.

MMFSL is a leader in rural sector vehicle financing in India and it has been delivering strong revenue growth of 25-30% YoY, which has essentially aided the increase in Assets under Management (AUMs), a trend that is expected to continue. Furthermore, superior net interest margins (NIMs), strong asset quality, and rural India being the key growth area would help the company sustain this momentum. Thus, we believe that not converting into a bank will not hurt MMFSL's strong fundamentals and its credentials to function as an independent NBFC. We continue to find the stock attractive from a medium-to-long-term perspective and recommend investors to use the correction in the stock price to ACCUMULATE the stock.

Source : Equity Bulls

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