Mahindra and Mahindra Financial Services Ltd Q1FY22 consolidated net loss at Rs. 1573.72 crores

MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD. has reported financial results for the period ended June 30, 2021.

Financial Results (Q1 FY 2021-22) - QoQ Comparison

The company has reported total income of Rs.2566.84 crores during the period ended June 30, 2021 as compared to Rs.3038.37 crores during the period ended March 31, 2021.

The company has posted net profit / (loss) of Rs.(1573.72) crores for the period ended June 30, 2021 as against net profit / (loss) of Rs.216.34 crores for the period ended March 31, 2021.

The company has reported EPS of Rs.(12.77) for the period ended June 30, 2021 as compared to Rs.1.76 for the period ended March 31, 2021.

Financials	Q1 FY2021-22	Q4 FY20-21	% Change
Total Income	₹ 2566.84 crs	₹ 3038.37 crs	-15.52%
Net Profit	₹ (1573.72) crs	₹ 216.34 crs	-827.43%
EPS	₹ (12.77)	₹ 1.76	-825.57%

Financial Results (Q1 FY 2021-22) - YoY Comparison

The company has reported total income of Rs.2566.84 crores during the period ended June 30, 2021 as compared to Rs.3068.68 crores during the period ended June 30, 2020.

The company has posted net profit / (loss) of Rs.(1573.72) crores for the period ended June 30, 2021 as against net profit / (loss) of Rs.431.72 crores for the period ended June 30, 2020.

The company has reported EPS of Rs.(12.77) for the period ended June 30, 2021 as compared to Rs.4.80 for the period ended June 30, 2020.

Financials	Q1 FY2021-22	Q1 FY2020-21	% Change
Total Income	₹ 2566.84 crs	₹ 3068.68 crs	-16.35%
Net Profit	₹ (1573.72) crs	₹ 431.72 crs	-464.52%
EPS	₹ (12.77)	₹ 4.80	-366.04%

FY 2022 Q1 Standalone Results

The Total Income declined by 18% at Rs. 2,187 Crores during the quarter ended June 30, 2021, as against Rs. 2,655 Crores during the corresponding quarter last year. The Loss (after tax) stood at Rs. 1,529 Crores during the quarter ended June 30, 2021, as against Profit After Tax of Rs.156 Crores during the corresponding quarter last year.

The primary reasons for the losses were on account of:

- ECL provision of Rs. 2,124 Crores in Q1 F22. The total number of contracts in Stage 2 and Stage 3 increased on account of Covid-related liquidity issues for consumers (refer chart below) and limited restructuring

- Made additional overlay provision of Rs. 393 Crores taking the total overlay to Rs, 2,709 Crores (up from Rs. 2,316 Crores in Mar'21)

We have experienced similar trends in prior periods of economic stress. For example, during demonetization, GNPA peaked at 14.5%. However, after 3 quarters the GNPA dropped to 9%. And post recovery, by FY19, the GNPA's had stabilised at 6%, thereby validating our belief that once the customer cashflow improves, the recovery is swift.

Based on our analysis of the Stage 2 and Stage 3 contracts as of June 30, 2021, it is evident that in many cases (refer chart below), either the customers have made a part-payment or have so far repaid > 50% of the original loan. We, therefore, expect a similar improvement over the next few quarters, resulting in provision reversals for 80-90% of loan contracts over Q3/Q4 F22.

The Company continues to be well-capitalised with a capital adequacy ratio of 23.8%. It has sufficient provision coverage on Stage 3 loans at 53.7% and continues to hold sufficient liquidity chest.

Shares of MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD. was last trading in BSE at Rs. 146.15 as compared to the previous close of Rs. 154.25. The total number of shares traded during the day was 1774066 in over 19101 trades.

The stock hit an intraday high of Rs. 156.8 and intraday low of 142.75. The net turnover during the day was Rs. 265035373.

Source : Equity Bulls

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