We hosted the senior management of Mahindra & Mahindra Financial Services (MMFS) at the Mahindra Finance Day on November 21, 2018, at Mumbai. The company was represented by Ramesh Iyer (VC & MD), V Ravi (ED & CFO), Anuj Mehra, MD, Mahindra Rural Housing Finance, Jaideep Devare, MD, Mahindra Insurance Brokers and Ashutosh Bishnoi – MD, Mahindra Asset Management Company.
With MMFS’ core vehicle finance offering complemented with housing finance, insurance broking and asset management services of its subsidiaries; it offers a complete bouquet of products to its rural customers. The panel discussion on “India’s rural economy” witnessed an engaging and insightful discussion between the panelists and the investor community.
Read also| CPSE ETF fourth tranche opens tomorrow for retail investors: Should you invest?
Based on these interactions, our belief has only got stronger that the green shoots of rural recovery are fructifying into a meaningful tailwind. On the back of this rural recovery, the GNPA cycle could continue to improve further and our thesis of very little incremental provisioning requirement over the next two years should stand in good stead. We maintain ‘Buy’ rating on MMFS with a target price of Rs 645.
Rural fortunes are broadly a function of the farm cash-flows and the infrastructure cash-flows which in turn is intricately linked to localised small scale construction spending. Monsoons have been above average this year. This coupled with good yields and an increase in the MSP for farm output should help raise farm income. The quantum of local spending that is currently happening on rural infra is unprecedented. Need-based vehicles like tractors, construction equipment, pick-up vehicles and LCVs have been seeing good growth. Rural asset quality outlook should materially improve. However, this rural recovery has to be looked upon on a state-by-state basis rather than on a pan-India basis.