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Mahindra Finance- Rural And Semi Urban Market Growing

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We recently met the management of Mahindra Finance. These are some of the key highlights.

Rural and semi urban markets are growing at 20% plus rates versus urban and metros where growth rates have dropped considerably.

Multi product multi application and multi customer is the way forward. These benefits lower concentration to particular states which reduces state specific risks. This is one of the reasons the company is reasonably sure of not breaching the gross npa levels of FY08 and FY09.

The process of securitization which was dead post the draft guidelines have once again begun and the company has securitized Rs300 crs in November 2011. However the difference is in the process of accounting for securitization revenue which has moved from the upfront accounting to amortization

Public sector banks which were aggressive in the market have lowered their enthusiasm as they are battling issues of credit loss and customer defaults. Hence competition has intensity has come down

The company is not strapped for asset growth. Even on its internal benchmark of financing 40% M&M vehicles it is at the 30% mark leaving ample room for growth within the parent portfolio. Outside M&M portfolio, it has tied up with Hyundai, Tata Motors, Ashok Leyland.  It has built relationships with dealers and OEMs and hence a certain process of growth is an automatic process.

This year the focus will be on liabilities (securitization guidelines, acquiring excess liquidity from banks and diversifying sources) and on policies (the regulator has tightened the screws on consumer lending, Usha Tharot Committee report)

The company will continue to access the variability of the market through – collection efficiencies and the regular nomenclature – underline cash flows of the product – dealer pressure on financing activities. Based on these activities the company takes a call on LTVs and product strategy and growth level targets.

 

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Written by Fundamental Side

December 22, 2011 at 5:46 pm