Brokerages see steady momentum for M&M Fin; festive demand support outlook

Brokerages maintained a broadly stable outlook on Mahindra & Mahindra Financial Services (M&M Fin) following its September quarter performance, pointing to improving margins and resilient asset quality even as loan disbursements showed uneven traction across segments.

CLSA kept an ‘Outperform’ rating and raised its target price to ₹350, highlighting that calculated NIM improved by around 20 bps sequentially (adjusted for higher trade advances) due to a 30-bps decline in cost of funds.

The brokerage noted that GS2+3% remained stable sequentially, unlike the deterioration seen last year, and said the lender continues to benefit from strong tractor financing demand.

Morgan Stanley remained more reserved with an ‘Equal-Weight’ stance and a ₹300 target. It flagged a 4% beat in core operating profit, but a PAT miss of 8% as credit costs inched up in tandem with coverage build-up.

The brokerage raised EPS estimates by 3% for FY26 and 1% for FY27, factoring in better margins and fee income, but said upside appears capped at current valuations despite downside support from franchise strength.

Solid earnings underpin outlook

M&M Fin reported a 45% surge in net profit to ₹564 crore for Q2 FY26 (Q2 FY25: ₹389 crore), supported by margin gains and higher yields. Net interest income (NII) increased 14.6% YoY to ₹2,279 crore.

The lender’s loan book expanded 13% YoY, while disbursements grew 3% to ₹13,514 crore. Growth skew remained visible — tractor disbursements jumped 41% YoY, and SME lending was up 12%, while other vehicle categories were flat to lower year-on-year. Management expects festive-season traction to broaden recovery in the second half.

Asset quality stayed within guided ranges, with Stage 3 loans at 3.9% and GS2+GS3 at 9.7%. Credit cost stood at 2.2%, and collection efficiency remained steady at 96%. Provision coverage was robust at 53%, supporting portfolio protection.

On liquidity and capital, capital adequacy stood at 19.5% (Tier-1 at 16.9%), while a liquidity buffer of ₹8,572 crore offered flexibility for growth and risk management.

The company said it continues to diversify beyond vehicle financing, with the non-vehicle loan book rising 33% YoY through expansion in SME credit, leasing via Quiklyz, and fee-based income streams backed by tech and analytics investments.