25 July 2017
1QFY18 Results Update | Sector:
Financials
Mahindra Financial Services
BSE SENSEX
32,228
S&P CNX
9,370
CMP: INR399
n
TP: INR459 (+15%)
Buy
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Operating performance strong; Strengthening the balance sheet
Mahindra & Mahindra Financial Services (MMFS) had a strong quarter on the
operating front.
Value of assets financed increased 16% YoY in 1QFY18 – the
fourth consecutive quarter of 15%+ YoY growth.
This comes after a span of over
12 quarters of sluggish growth, caused by a variety of external factors.
Management expects strong growth to sustain or even improve.
GNPL ratio increased 150bp QoQ, but declined 20bp YoY to 10.5%.
The
sequential increase, which is seasonal, is much lower than that witnessed in the
past three years.
Asset quality data from the past 10 years suggest that in a good
economic cycle, 4Q-to-1Q GNPL increase is ~50-100bp, while in a bad cycle, it
goes to as high as 250+bp.
The company incurred provisioning cost of INR834m, based on its assessment of
underlying collateral for NPLs, on which 100% provisioning has been made.
As a
result, PCR was largely stable at 60-62%. The sequential PCR decline of a mere
130bp is the lowest in the past 11 years (average decline of 600bp). We view
this shoring-up of provisions as a positive sign as it strengthens the balance
sheet, despite the negative impact on near-term profitability.
Valuation and view:
The business environment for MMFS seems to be getting
better. After several quarters of sluggish disbursement growth, MMFS has finally
delivered four consecutive quarters of 15%+ growth. Asset quality data too signal
early signs of revival. We like the fact that the company chooses to improve
balance sheet quality over near-term profitability. The company’s long-term
prospects remain strong. As MMFS is highly levered to growth and asset quality,
this would have a multiplier effect on the return ratios. We upgrade FY18/19 EPS
estimates by 9%/18% and our TP to INR459 (SOTP FY19 based).
Buy.
n
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
MMFS
565.0
225.5 /3.5
405 / 244
17/23/10
-
-
n
Financials & Valuations (INR b)
Y/E March
2017 2018E 2019E
NII
33.2 40.0 45.1
PPP
19.3 23.9 26.8
PAT
4.0
7.8 10.0
EPS (INR)
7.1 13.9 17.8
BV/Sh.(INR)
111.8 120.1 130.6
ABV/Sh (INR)
92.0 95.4 104.4
RoA on AUM (%)
1.0
1.7
1.9
RoE (%)
6.5 12.0 14.2
Payout (%)
39.2 41.0 41.0
Valuations
P/E (x)
56.3 28.8 22.5
P/BV (x)
3.6
3.3
3.1
P/ABV (x)
4.3
4.2
3.8
Div. Yield (%)
0.7
1.2
1.6
n
Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 3980 4393
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Mahindra Financial Services
Exhibit 1: Quarterly performance v/s expectations and deviations for the same
Y/E March
Net Income
% Change (Y-o-Y)
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Other Provisions
Profit before Tax
Tax Provisions
Net Profit
% Change (Y-o-Y)
1QFY18A
8,704
27
3,810
4,894
36
4,258
636
162
474
-46
1QFY18E
8,628
26
3,755
4,873
36
2,500
2,373
835
1,538
77
Var (%)
1
1
0
70
-73
-81
-69
Comments
In-line
In-line
In-line
Higher credit costs to shore up PCR
PAT Miss due to higher credit costs
Source: MOSL, Company
Robust farm sentiment
bodes well for rural demand
AUM growth remains stable at 14% YoY
n
n
n
Reported AUM increased 14% YoY (+1% QoQ) to INR476b, driven by 16% YoY
rise in value of assets financed. While management refrained from giving
guidance, it is bullish on growth prospects for the remainder of the year.
Growth was broad based across all segment and AUM mix remained largely
stable.
According to management, MMFS has gained share in car financing across all
OEMs in the geographies and segments it operates in.
Asset quality performance
has been much better than
in the past. Provisions on
the balance sheet have
been shored up
Asset quality trend encouraging
n
n
n
n
n
The collection efficiency of 95% achieved in 1QFY18 is 400-500bp higher than
that generally witnessed in the first quarter of any fiscal.
Consequently, GNPL ratio increased only 150bp sequentially to 10.5%. This is
much lower than that witnessed in the past three years. Asset quality data from
the past 10 years suggests that in the good economic cycle, the 4Q-to-1Q GNPL
increase is ~50-100bp, while in the bad cycle, it goes to as high as 250+ bp.
The company incurred a provisioning cost of INR834m, based on its assessment
of underlying collateral for NPLs on which 100% provisioning has been made.
The sequential PCR decline of a mere 130bp is the lowest 4Q-to-1Q decline in
the past 11 years (average decline – 600bp). We view this strengthening of
provisions as a positive sign as it strengthens the balance sheet despite the
negative impact on near-term profitability.
The total number of NPL contracts increased only 3% YoY to 171K.
Margins up 80bp YoY; C/I ratio improves significantly
n
n
While the company enjoyed the benefit of 90bp lower cost of funds YoY, yields
have been unchanged. The company has not had to pass on the benefits to
borrowers. As a result, NIM on AUM increased 80bp YoY to 7.94%.
Due to strong NIM expansion, C/I ratio declined 380bp YoY to 43.8% in 1QFY18.
25 July 2017
2

Mahindra Financial Services
Subsidiaries’ performance
n
n
Mahindra Rural Housing Finance (MRHFL):
While loan book growth remained
robust (47% YoY), GNPL ratio inched up 310bp to 12.8%, resulting in subdued
profitability in the quarter. Management attributes this to cash flow timing
issues for the borrowers. The outstanding loan book is INR52b.
Mahindra Insurance Broker (MIBL):
MIBL’s total income grew 22% YoY to
INR445m, driven by 39% YoY growth in number of policies. Net premium grew
45% YoY to INR3.9b and PAT was at INR134m, up 33% YoY.
Valuations and view
n
n
n
n
MMFS has underperformed peers over the last 2 years due to asset quality
pressures. While it’s reported NPLs are likely to remain at remain high, due to
weak rural economy, prolonged economic recovery, and subsequent migration
to 90dpd NPL recognition norms, we view this as a cyclical adjustment and not
a structural breakdown.
There are clear signs of a turnaround in the economic cycle. In this business,
growth and asset quality improvement move in tandem. With the rural
economy improving, growth is expected to pick up and at the same time, credit
costs shall decline sharply.
We upgrade FY18/19 EPS estimates by 9%/18% to factor in better topline. We
use SOTP to arrive at a TP of INR459.
Our estimates do not factor in any capital raise. However, if INR20b capital
were raised at current market prices at the end of the fiscal, FY19 BVPS would
increase from INR131 to INR154, in our view.
Exhibit 2: Upgrade FY18/19 EPS estimates to factor stronger NII
INR B
NII (incl. Sec. Inc)
Other Income
Total Income
Operating Expenses
Operating Profits
Provisions
PBT
Tax
PAT
AUM
Margins
Credit Cost
RoA on AUM
RoE
FY18
38.0
0.8
38.8
16.7
22.1
10.3
11.8
4.2
7.7
538
8.1
2.20
1.7
11.4
Old Est
FY19
43.4
1.1
44.4
19.2
25.3
11.0
14.3
5.0
9.2
630
7.9
2.00
1.7
12.8
FY20
50.8
1.4
52.2
22.0
30.2
13.1
17.1
6.0
11.1
744
7.8
2.00
1.8
14.2
New Est
FY18
FY19
FY20
40.0
45.1
53.2
0.8
1.1
1.4
40.8
46.2
54.6
16.9
19.4
22.2
23.9
26.8
32.4
11.8
11.4
12.3
12.1
15.4
20.1
4.3
5.4
7.0
7.8
10.0
13.1
533
622
733
8.6
8.3
8.3
2.55
2.10
1.90
1.7
1.9
2.1
12.0
14.2
16.8
% Change
FY18
FY19
FY20
5.2
4.1
4.7
5.1
1.1
8.1
14.8
2.4
2.4
2.4
-0.8
0.5
0.4
0.0
0.6
4.0
1.1
6.2
3.6
8.1
7.5
8.5
-1.2
0.4
0.1
0.2
1.3
4.6
1.0
7.2
-6.2
17.4
16.7
17.8
-1.5
0.5
-0.1
0.3
2.6
25 July 2017
3

Mahindra Financial Services
Exhibit 3: SOTP analysis
SOTP FY19E Based (INR)
Core business
Key Ventures
Mahindra Rural Housing Finance
Mahindra Insurance Brokers
Total Value of Ventures
Less: 20% holding discount
Value of Key Ventures
Target Value Post 20% Holding Co Disc
CMP
Upside - %
Value
(INR b)
220
24
25
49
10
39
259
225
15.0
Value (USD Value/ Sh.
% of total Rationale
b)
(INR)
3.4
390
84.9
3x June 2019 BV
0.4
0.4
0.8
0.2
0.6
4.1
3.5
15.0
43
44
86
17
69
459
399
15.0
9.3
9.5
18.8
3.8
15.1
100.0
4x FY19 BV; 20x PE
30x FY19 PAT
Source: Company, MOSL
Key conference call highlights
Business Updates
n
n
n
In 4Q, demand for repossessed vehicles returned to normalcy.
Management believes that it could get significant benefits from operating
leverage if volumes pick up in FY18. Would not need to add further resources to
achieve 25% growth, going forward.
Growth has come from cars and tractors (some market share gains too). Focus
on pre-owned vehicles has also resulted in strong growth.
Slippages have clearly declined, according to management.
Around 138,000 accounts are NPLs (50% Mahindra / 50% non-Mahindra
vehicles). Of these, ~40,000 accounts are paying dues.
Of the 138,000 accounts, 40,000 are carry-forward from FY16, while the rest
were added during the year.
Barring TN and Karnataka, all states that had asset quality issues have shown
improvement in terms of asset quality due to better infra cash flows and farm
cash flows.
Accounts under RBI dispensation last quarter – out of 32,000 contracts, 24,000
are completely resolved and 4,000 are partially resolved.
103% collection efficiency in 4Q, 117% in March (significantly higher YoY).
Including the value of repossessed vehicles, GNPL ratio would be 8.1% and NNPL
ratio would be 3.2%.
Targeting RoE of 15-16% for FY18.
Pre-owned vehicles – 16-21% interest rate. LTV capped at 60-70%. Loan tenure
will not be more than the expected residual life of the vehicle.
Their customer segment does not get impacted by farm loan waivers.
Asset Quality
n
n
n
n
n
n
n
Others
n
n
n
25 July 2017
4

Mahindra Financial Services
Exhibit 4: Quarterly Snapshot
1Q
Profit and Loss (INR m)
Net Income
Operating Expenses
Employee
Others
Operating Profits
Provisions
PBT
Taxes
PAT (before EO)
Asset Quality
GNPA (INR m)
NNPA (INR m)
%GNPAs to total assets (%)
%NNPAs to total assets (%)
PCR (Calc., %)
Ratios (%)
Cost to Income
Tax Rate
CAR
Tier I
RoA - calculated
RoE - calculated
Key Details (INR b)
AUM (Reported)
AUM (Adjusted)
On book Loans
Off book Loans
Borrowings
On book Borrowings
Off book (Securitization)
AUM Mix (%)
Auto/Utility vehicles
Tractors
Cars
Commercial Vehicles
Refinance & others
Value of assets fin mix. (%)
Auto/Utility vehicles
Tractors
Cars
Commercial Vehicles
Refinance & others
Total Borrowing Mix (%)
Bank Term loans
Bonds/NCDs
Securitization
Fixed deposits
Commercial Papers
Other Details
Branches (Nos.)
Employees (Nos.)
7,239
2,635
1,294
1,341
4,604
3,228
1,376
486
890
2Q
FY16
3Q
4Q
10,186
3,391
1,556
1,836
6,795
1,089
5,706
2,003
3,703
1Q
6,847
3,260
1,675
1,585
3,587
2,245
1,341
472
870
2Q
FY17
3Q
4Q
11,290
4,037
1,797
2,241
7,252
3,614
3,638
1,298
2,341
FY18
1Q
8,704
3,810
1,980
1,830
4,894
4,258
636
162
474
Variation (%)
QoQ
YoY
(23)
(6)
10
(18)
(33)
18
(83)
(88)
(80)
27
17
18
15
36
90
(53)
(66)
(46)
7,841
2,808
1,384
1,425
5,033
2,772
2,261
799
1,462
7,391
2,946
1,354
1,592
4,445
3,406
1,039
367
672
8,071
3,567
1,710
1,856
4,504
3,042
1,462
514
948
7,593
3,645
1,627
2,018
3,949
4,190
-241
-85
-156
29,411
12,767
8.0
3.6
56.6
36.4
35.3
18.1
15.3
1.0
6.2
376
354
341
13
284
269
14
31
18
23
13
15
31
16
24
10
19
40
28
5
17
11
1,124
14,250
35,283
16,453
9.4
4.6
53.4
35.8
35.3
18.2
15.5
1.6
10.0
384
361
347
14
291
276
15
31
18
23
12
16
31
15
23
11
20
35
32
5
17
10
1,158
14,889
39,851
17,016
10.1
4.6
57.3
39.9
35.3
17.8
15.0
0.7
4.5
403
379
366
14
303
288
15
31
17
24
12
16
31
16
23
10
20
33
34
5
16
12
1,179
15,580
32,242
12,351
8.0
3.2
61.7
33.3
35.1
17.3
14.6
3.8
24.5
409
380
367
14
308
294
14
31
17
24
12
10
30
15
22
11
16
35
35
5
16
10
1,167
15,821
44,147
21,060
10.7
5.4
52.3
47.6
35.2
19.5
14.3
0.9
5.7
417
390
378
12
312
299
13
31
17
24
13
9
29
17
22
13
14
33
39
4
15
8
1,172
15,610
47,481
22,862
11.0
5.6
51.9
44.2
35.2
18.1
13.2
0.9
6.1
439
411
399
12
334
322
12
30
17
23
13
10
28
17
22
12
15
30
43
4
14
9
1,180
16,549
50,589
22,074
11.1
5.2
56.4
48.0
35.2
17.9
13.3
-0.1
-1.0
457
428
419
10
345
334
10
31
18
24
13
9
28
20
23
11
12
26
45
3
13
13
1,181
17,433
41,827
15,997
9.0
3.6
61.8
35.8
35.7
17.6
13.2
2.1
14.7
468
433
425
8
355
347
8
30
17
23
13
9
28
19
22
11
13
27
43
2
12
12
1,182
17,856
50,142
19,810
10.5
4.4
60.5
43.8
25.5
17.4
12.9
0.4
2.9
476
444
438
6
359
353
6
30
17
23
13
9
28
21
21
11
14
24
47
2
11
13
1,183
17,659
20
24
14
(6)
2
3
3
(26)
1
2
(21)
14
14
16
(50)
15
18
(49)
25 July 2017
5

Mahindra Financial Services
Story in charts
Exhibit 5: AUM growth
stable
35 35
Adj. AUM (INR b)
YoY Gr. (%)
Exhibit 6: AUM mix remains largely stable (%)
Auto/Uvs
CVs
14
14
23
19
30
16
14
23
18
29
15
13
23
19
30
15
13
23
18
31
15
13
23
18
31
Tractors
Used CV & others
16
12
23
18
31
16
12
24
17
31
6
10
12
24
17
31
6
9
13
24
17
31
Cars
SME & others
5
7
8
8
10 9
9
9
13 13 13 13
23
17
30
24
18
31
23
17
30
23
17
30
30 27
21
15 14
14 13 14 14
10 8 9
10 9 10
7
Source: Company, MOSL
Source: Company, MOSL
Exhibit 7:
Borrowing
mix largely stable (%)
Bank Term Loans
Bonds / NCDs
Securitiz.
FD
CP
Exhibit 8:
Cost-to-income ratio decreases YoY (%)
13
13
3
45
26
12
12
2
43
27
13
11
2
47
24
9
8
19
49
9
16
7
21
46
12
17
6
22
43
11
17
5
28
40
10
17
5
32
35
12
16
5
34
33
10
16
5
35
35
8
15
4
39
33
9
14
4
43
30
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: GNPA increased by 250bp QoQ
Gross NPAs (%)
8.0
5.9
9.4
10.1
Net NPAs (%)
10.7 11.0 11.1
8.0
5.4 5.6 5.2
3.2
9.0
10.5
Exhibit 10:
PCR stable sequentially
Prov as % of Op Profit
PCR (%)
6.2 6.3
7.1
3.0 3.1 3.4 2.4 3.6
4.6 4.6
3.6
4.4
46
49
52
54
61
57
53 57
62
52
52 56
62
60
37
56
23
70
55
77
16
63
68 106 50
87
Source: Company, MOSL
Source: Company, MOSL
25 July 2017
6

Mahindra Financial Services
Exhibit 1: Financial: Valuation Matrix
Rating
66
ICICIBC*
HDFCB
AXSB
KMB*
YES
IIB
IDFC Bk
FB
DCBB
JKBK
SIB
Equitas
RBL
Private Aggregate
SBIN (cons)*
PNB
BOI
BOB
CBK
UNBK
OBC
INBK
Public Aggregate
Banks Aggregate
HDFC*
LICHF
IHFL
GRHF
REPCO
DEWH
Housing Finance
RECL
POWF
Infra Finance
SHTF
MMFS
BAF
CIFC
SCUF
MUTH
SKSM
Asset Finance
FY19E
Buy
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Neutral
Neutral
Buy
Buy
Under
Review
Buy
Buy
Neutral
Buy
Neutral
Neutral
Neutral
Buy
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
RoA (%)
FY19E
1.23
1.84
1.23
1.99
1.80
1.95
0.91
0.85
0.96
0.44
0.74
2.16
1.35
0.50
0.37
0.33
0.66
0.41
0.47
0.26
0.72
RoE (%)
FY18E
9.4
18.8
10.1
15.0
18.0
17.3
7.9
10.2
11.4
3.5
10.8
7.1
13.6
8.7
5.6
6.1
11.9
6.2
8.1
4.6
10.9
FY19E
10.1
19.6
15.4
16.3
19.5
18.5
8.8
10.5
11.8
7.2
12.7
10.1
13.9
10.0
7.5
9.0
13.2
9.1
10.5
5.4
11.2
(INR) (USDb) FY18E FY19E FY18E FY19E FY18E FY19E
304
30.1 15.6 17.9 13.8 11.2 146.6 159.2
1,739
69.0 68.2 82.1 25.5 21.2 388 451
545
19.9 23.8 40.3 22.9 13.5 245 278
987
28.2 32.4 41.0 30.4 24.1 232 272
1,614
11.3 90.7 114.6 17.8 14.1 541 632
1,543
14.4 61.9 76.8 24.9 20.1 383 446
60
3.2
3.5
4.2
17.2 14.5
46
49
119
3.1
5.5
6.8
21.8 17.5
62
68
198
0.9
8.4 10.4 23.6 19.0
83
93
90
0.7
3.8
8.2
23.4 10.9 112 118
30
0.6
2.9
3.7
10.3
8.0
28
30
168
0.9
4.8
7.4
34.8 22.6
70
77
530
296
163
164
165
357
161
157
321
3.1
39.5
5.3
2.6
5.9
3.0
1.7
0.8
2.4
18.0
17.9
10.3
13.7
18.4
30.1
24.6
17.1
34.4
23.7
23.3
14.5
22.0
22.5
47.0
34.5
21.4
38.3
29.4
14.8
15.9
12.0
8.9
11.9
6.6
9.2
9.3
22.4
11.2
11.2
7.5
7.3
7.6
4.7
7.3
8.4
160
230
187
233
162
498
315
382
327
180
249
199
255
179
540
345
404
357
FY18E FY19E FY18E
1.47 1.26 1.23
4.48 3.86 1.84
2.23 1.96 0.87
4.25 3.63 1.84
2.98 2.55 1.75
4.03 3.46 1.90
1.32 1.23 0.93
1.91 1.76 0.83
2.37 2.13 0.95
0.80 0.76 0.23
1.07 0.98 0.65
2.39 2.18 1.66
3.30
1.15
0.87
0.71
1.02
0.72
0.51
0.41
0.98
2.95
1.05
0.82
0.64
0.92
0.66
0.47
0.39
0.90
1.34
0.44
0.29
0.22
0.59
0.29
0.37
0.22
0.73
Under
Review
Neutral
Buy
Neutral
Buy
Buy
Neutral
Neutral
Buy
Buy
Buy
Buy
Buy
Buy
Neutral
1,632
732
1,199
462
784
462
178
125
997
399
1,623
1,153
2,322
467
792
40.0
5.8
7.6
2.6
0.8
2.2
5.6
5.2
3.4
3.2
13.6
2.7
2.4
2.9
1.7
39.2
44.2
24.5
19.6
13.6
11.1
38.3
18.4
9.8
4.4
4.1
10.1
24.4
25.8
17.4
13.6
10.8
14.9
228
252
324
33
214
282
196
169
285
295
368
40
253
321
227
191
4.22
3.03
1.79
1.82
1.63
3.24
2.43
2.21
1.33
3.12
2.72
2.91
1.74
3.51
2.78
3.96
4.61
4.26
18.3
20.6
28.2
33.0
18.1
14.1
19.1
17.0
14.7
11.4
24.3
18.5
16.2
23.2
20.9
17.4
19.7
31.3
32.8
18.2
15.6
19.1
16.8
16.3
12.8
25.9
18.9
18.1
21.4
21.6
47.9 53.8 15.3
86.3 108.4 13.9
9.9 12.1 46.4
35.8 42.5 21.9
37.7 47.1 12.3
35.0
27.2
78.5
13.6
47.6
55.0
132.8
41.0
41.3
40.4
30.2
98.5
16.4
62.9
66.4
171.2
43.3
53.0
5.1
4.6
12.7
29.5
34.1
21.0
17.5
11.4
19.2
2.91 2.48 1.64
3.71 3.25 3.28
13.93 11.43 2.43
3.66 3.10 2.25
1.64 1.44 1.25
0.91
0.74
0.78
0.65
1.54
3.02
6.01
3.04
2.28
2.15
2.92
3.10
2.76
2.60
1.68
3.51
2.74
3.63
4.99
4.49
564 646 1.77
123 132 3.26
216 270 7.51
322 380 3.59
874 1,019 2.66
189 217 2.47
219 272 3.62
25 July 2017
7

Mahindra Financial Services
Financials and valuations
Income Statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Income from Securitisation
Other Income
Net Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Provisions and W/Offs
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend (Incl Tax)
2013
36,268
16,188
20,080
31.3
2,145
533
22,759
35.9
7,420
15,339
41.7
2,833
12,506
3,833
30.7
8,673
39.9
2,389
2014
47,079
21,880
25,199
25.5
2,137
314
27,650
21.5
9,134
18,516
20.7
5,058
13,458
4,585
34.1
8,872
2.3
2,522
2015
52,798
24,967
27,831
10.4
2,562
486
30,880
11.7
10,068
20,811
12.4
8,275
12,536
4,219
33.7
8,318
-6.2
2,730
2016
56,468
26,393
30,075
8.1
2,063
519
32,658
5.8
11,781
20,877
0.3
10,495
10,382
3,656
35.2
6,726
-19.1
2,713
2017
60,545
28,574
31,971
6.3
1,194
636
33,801
3.5
14,509
19,292
-7.6
13,091
6,201
2,198
35.5
4,002
-40.5
1,610
2018E
69,421
30,497
38,924
21.7
1,031
827
40,782
20.7
16,893
23,889
23.8
11,792
12,097
4,258
35.2
7,839
95.9
3,196
(INR Million)
2019E
78,102
34,195
43,907
12.8
1,222
1,075
46,205
13.3
19,379
26,826
12.3
11,395
15,430
5,401
35.0
10,030
28.0
4,090
2020E
90,772
39,039
51,733
17.8
1,482
1,398
54,613
18.2
22,235
32,378
20.7
12,258
20,120
7,042
35.0
13,078
30.4
5,333
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Total Liabilities
Investments
Change (%)
Loans and Advances
Change (%)
Net Fixed Assets
Net Current Assets
Total Assets
E: MOSL Estimates
2013
1,126
43,420
44,546
188,723
35.2
233,269
7,315
45.6
236,483
36.3
1,068
-11,597
233,269
2014
1,127
49,815
50,942
239,306
26.8
290,249
10,051
37.4
291,943
23.5
1,195
-12,940
290,248
2015
1,128
55,566
56,694
262,633
9.7
319,327
10,857
8.0
324,314
11.1
1,100
-16,944
319,326
2016
1,129
59,752
60,881
294,523
12.1
355,404
15,351
41.4
362,189
11.7
1,135
-23,270
355,404
2017
1,130
62,069
63,199
346,704
17.7
409,903
20,017
30.4
421,218
16.3
1,120
-32,452
409,903
2018E
1,130
66,712
67,842
401,701
15.9
469,543
22,019
10.0
483,977
14.9
1,332
-37,785
469,543
(INR Million)
2019E
1,130
72,652
73,782
480,749
19.7
554,531
24,221
10.0
568,934
17.6
1,525
-40,148
554,531
2020E
1,130
80,397
81,527
581,528
21.0
663,056
26,643
10.0
676,196
18.9
1,692
-41,475
663,056
25 July 2017
8

Mahindra Financial Services
Financials and valuations
Ratios
Y/E March
Spreads Analysis (%)
Yield on Portfolio
Cost of Borrowings
Interest Spread
Net Interest Margin (on AUMs)
Profitability Ratios (%)
RoE
RoA (on balance sheet)
RoA on AUM
Average Leverage (x)
Average leverage on AUM (x)
Efficiency Ratios (%)
Int. Expended/Int.Earned
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Secur. Inc./Net Income
Asset-Liability Profile (%)
Loans/Borrowings Ratio
Net NPAs to Adv.
2013
17.7
9.9
7.8
9.6
2014
17.8
10.2
7.5
9.3
2015E
17.1
9.9
7.1
9.1
2016
16.4
9.5
6.9
8.8
2017
15.4
8.9
6.4
8.1
2018E
15.3
8.2
7.1
8.6
(INR Million)
2019E
14.8
7.8
7.0
8.3
2020E
14.5
7.4
7.2
8.3
23.4
4.3
3.9
5.4
6.1
18.6
3.4
3.1
5.5
6.1
15.5
2.7
2.5
5.7
6.2
11.4
2.0
1.9
5.7
6.1
6.5
1.0
1.0
6.2
6.4
12.0
1.8
1.7
6.7
6.9
14.2
2.0
1.9
7.2
7.5
16.8
2.1
2.1
7.8
8.1
44.6
32.6
30.1
9.4
46.5
33.0
32.6
7.7
47.3
32.6
45.6
8.3
46.7
36.1
47.4
6.3
47.2
42.9
46.9
3.5
43.9
41.4
47.6
2.5
43.8
41.9
47.7
2.6
43.0
40.7
47.8
2.7
125.3
1.1
122.0
2.0
123.5
2.5
123.0
3.4
121.5
3.8
120.5
4.1
118.3
3.7
116.3
3.1
Valuation
Book Value (INR)
BV Growth (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
OPS (INR)
OPS Growth (%)
Price-OP (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend
Dividend Yield (%)
E: MOSL Estimates
79.1
37.7
5.0
75.9
5.3
27.2
29.3
14.6
15.7
29.8
25.5
3.6
0.9
90.4
14.3
4.4
83.2
4.8
32.9
20.6
12.1
15.7
0.4
25.3
3.8
1.0
100.5
11.2
4.0
90.4
4.4
36.9
12.3
10.8
14.7
-6.3
27.1
4.0
1.0
107.8
7.3
3.7
92.5
4.3
37.0
0.2
10.8
11.9
-19.2
33.5
4.0
1.0
111.8
3.7
3.6
92.0
4.3
34.1
-7.7
11.7
7.1
-40.5
56.3
2.8
0.7
120.1
7.3
3.3
95.4
4.2
42.3
23.8
9.4
13.9
95.9
28.8
4.9
1.2
130.6
8.8
3.1
104.4
3.8
47.5
12.3
8.4
17.8
28.0
22.5
6.2
1.6
144.3
10.5
2.8
118.1
3.4
57.3
20.7
7.0
23.1
30.4
17.2
8.1
2.0
25 July 2017
9

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Securities Ltd. (MOSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed
public company, the details in respect of which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock
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available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Mahindra Financial Services
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§
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Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
Mahindra Financial Services
No
25 July 2017
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