1. Mahindra and Mahindra opex higher than forecast: Nomura

Mahindra and Mahindra opex higher than forecast: Nomura

AUM growth led by healthy demand in tractors and cars: AUM growth was up to 14% y/y, led by the uptick in tractors and used vehicles segment.

By: | Published: October 27, 2016 6:15 AM

AUM growth led by healthy demand in tractors and cars: AUM growth was up to 14% y/y, led by the uptick in tractors and used vehicles segment. Disbursement growth saw a sharp increase (up 29% y/y), which was led by tractors, cars and used vehicles segment. Management indicated that demand is improving and was led by improving farming sector sentiments but it is yet to see a more broad-based recovery, especially in the infra segment.

Management highlighted that the good monsoon had a positive impact on demand and while monsoon was weak in the South, it is still seeing some improvement in states like Tamil. Other states that saw improvement include Maharashtra (due to good cotton crop) and Madhya Pradesh (due to good soya and pulses).

NIMs expanded 80bps q/q, led by some improvement in cost of funds and a higher share of tractors and used vehicles. Slippages were also lower q/q, which led to lower pressure on NIMs due to interest reversals. During the 2Q, bond mix improved 600bps q/q, which led to improvement in cost of funds.

Improvement in NIMs and higher AUM growth led to better-thanexpected PPOP. Opex was higher than our forecast on account of higher employee cost due to increment and increase in headcount. Net slippages came in at `4.8bn, which was better than our forecast. While GNPA % at 11.7% remains high, management indicated that agri cash flows will improve materially in Nov/Dec-16 and this should translate into improving asset quality performance in 4Q17F.

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