Mahindra and Mahindra Financial Services Ltd shares slumped by 15% in intraday trade on 24 July after the non-banking finance company (NBFC) posted a 66% drop in its consolidated net profit to Rs 108.50 crore in the first quarter (Q1) ended June.
At 11:04 am, shares of Mahindra and Mahindra Financial Services were trading at Rs 305 apiece, down 10.5% on BSE after hitting an intra-day low of Rs 289.15, their lowest level in more than two years. The stock has corrected nearly 30% in the last one year.
Mahindra Finance’s consolidated total income rose 23% year-on-year to Rs 2,838.40 crore during the June quarter against Rs 2,302 crore in the same period a year ago.
On a standalone basis, net profit was down 75% to Rs 68.40 crore in the June quarter as against Rs 269.10 crore a year ago. Income rose 24% to Rs 2,412.50 crore from Rs 1,939.70 crore a year ago.
Mahindra Finance noted that small cars and utility vehicles segments are expected to grow in future. However, muted growth in 2019-20 and 2020-21 shall significantly reduce the five-year growth projection. “Growth to remain muted in 2020, marginally improve in 2021 – on account of increase in price and reduction in mileage. Higher Inventory shall continue to exert pressure on OEM sales till inventory levels normalise,” the company said.
In the tractors industry, government support towards road construction and rural housing is likely to boost commercial demand, said Mahindra Finance.
After the earnings, Nomura cut its target price for the Mahindra Finance stock to Rs 420 from Rs 500 earlier, while maintaining its “buy” call, citing a weakening growth outlook. The brokerage house has also cut its growth forecast for assets under management during FY20-21 given the weakness in demand.
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