Mahindra and Mahindra Financial Services - Not in the race to be a bank; cost outweighs benefits - Emkay

Reco: HOLD
CMP: Rs 236
Target Price: Rs 216

- MMFS cites operational issues like conversion of NBFC branches into banks and opening of 25% branches in unbanked areas as major constraint in applying for license

- EMI and lower yield business model are better placed with minimal operational challenges than fleet on street and high yielding model like MMFS

- If would have converted into a bank, MMFS on a ~Rs316bn average book would have required ~100bn of SLR/ CRR, which would have 0.36% negative impact on FY14 RoA's

- While we continue to maintain positive outlook, given rich valuation at 2.7x/ 2.3x FY14/FY15 ABV, retain HOLD rating with PT of 216

Source : Equity Bulls

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