Mahindra Finance (MMFS) reported strong earnings on the back of robust recoveries and stable NIM. High volumes in previous quarters led to 27% growth in AUMs even as disbursements were flat yoy. Stable NIM indicates limited impact of the liquidity crises and its pricing power. Incrementally, growth momentum in rural India is monitorable even as a strong traction in recoveries, slowdown by competition will provide near-term tailwinds. ADD; FV of Rs 500 (rolled from Rs 485). Mahindra Finance reported 29% growth in NII on the back of strong (27% yoy and 6% qoq) growth in AUMs and flat NIM (up 5 bps yoy). Operating expenses increased 31% yoy and cost-to-average AUM increased 10 bps yoy to 3.4%. As such, core PBT (PBT before provisions) was up 28% yoy, 2% above estimates. The company achieved a sharp decline in gross stage 3 loans- down 180 bps qoq to 5.9% (9% in 4QFY18). Consequently, it reported large provisioning write-back leading to 87% growth in PAT to Rs 5.9 billion. MMFS reported massive reduction in gross stage 3 (GNPL) loans to 5.9% from 9% yoy; more importantly, even the number of loan contracts under NPLs declined to 93,000 from 134,000. While the reduction tends to be seasonal and we expect some rise in 1HFY20E, the sharp reduction this year likely indicates the underlying cash flows in rural India. As such, we expect collection trends to remain strong over the next few quarters even as we expect credit costs to increase to 1.2% of loans in FY2020E, 1.5% in FY2022E from 1% in FY2019. The liquidity crises seem to have negligible impact on Mahindra Finance.