Mahindra & Mahindra Financial Services (M&M Financial Services) shares tumbled nearly 10% on Thursday, 22 October, even as the non-banking financial company (NBFC) posted strong earnings growth for the September quarter of FY27, driven by higher business volumes and a decline in credit costs.
The company’s consolidated net profit rose 55% year-on-year to ₹882 crore in Q2 FY27, compared with ₹569 crore in the year-ago period.
Revenue from operations grew 15% to ₹5,164 crore, while net interest income (NII) increased 17% year-on-year to ₹2,822 crore. Consolidated net profit stood at ₹911 crore, up 61%, while total assets expanded 21% to ₹1.80 lakh crore.
Asset quality-related costs showed improvement during the quarter, with credit costs declining to 1.6% of average total assets from 2.2% in the corresponding period last year. Net interest margin (NIM), however, remained steady at 7%, the company said in its regulatory filing.
For the longer term, Mahindra & Mahindra Financial Services aims to achieve a return on assets (RoA) of 2.2%–2.5% by FY31. Its RoA stood at 2.2% in the September quarter.
Should you buy, sell or hold?
Brokerages have offered mixed views on Mahindra & Mahindra Financial Services following its Q2 FY27 results, with concerns over rising funding costs and potential pressure on margins and asset quality in the tractor-financing segment tempering the outlook. While ICICI Securities retained its ‘Buy’ rating and target price of ₹415, Nomura lowered its target to ₹400, and Nuvama Institutional Equities maintained its ‘Hold’ rating with a reduced target of ₹340.
Nomura on M&M Financial Services
According to media reports, Nomura cut its target price on Mahindra & Mahindra Financial Services to ₹400 from ₹415 while retaining its ‘Buy’ rating, implying an upside potential of around 35%.
The brokerage flagged concerns over asset quality in the tractor financing segment and expects credit costs to rise to an annualised 1.8% in Q3 and Q4 FY27, compared with 1.7% in the first half of the financial year. Management believes the quality of tractor loans is best assessed at the end of the sowing season, when repayments fall due.
Nomura also highlighted rising funding costs as a key concern and cut its FY27–FY29 net profit estimates by 1–9%. While excess liquidity, the floating-rate non-wheel portfolio and securitisation could help mitigate the impact of higher interest rates, management expects the cost of funds to continue rising. The brokerage has factored in a 70-basis-point increase in funding costs over the next five quarters, according to media reports.
ICICI Securities maintains ‘Buy’
ICICI Securities said Mahindra & Mahindra Financial Services continued to improve across key business parameters, including growth, margins and asset quality, in Q2 FY27. According to the brokerage, the performance validates the company’s revamped, technology-led business model.
Assets under management (AUM) growth accelerated for the fourth consecutive quarter to 15% year-on-year in Q2 FY27, compared with 12%, 12.1% and 12.7% in Q3 FY26, Q4 FY26 and Q1 FY27, respectively.
Despite macroeconomic headwinds, core profitability remained robust, with profit after tax (PAT) rising 55% year-on-year and return on assets (RoA) standing at 2.2%.
Citing the company’s steady progress towards its medium-term RoA target of 2.5% and an improving earnings trajectory, ICICI Securities retained its ‘Buy’ rating and target price of ₹415. Based on the cited market price of ₹297, the target implies an upside potential of around 40%.
Nuvama Institutional Equities retains ‘Hold’
Nuvama Institutional Equities described Mahindra & Mahindra Financial Services’ Q2 FY27 performance as mixed. AUM growth improved to around 15% year-on-year, largely driven by lower-yielding trade finance, which contributed to a 30-basis-point quarter-on-quarter decline in net interest margin (NIM) and fees to 7%.
However, lower operating expenses and provisions helped the company report an in-line PAT of ₹880 crore, with RoA at 2.2%.
Looking ahead, Nuvama expects potential interest rate hikes to intensify margin pressure, while caps on insurance commissions could weigh on FY28 earnings. It also cautioned that drought conditions in some states could delay the improvement in credit costs.
Following the stock’s recent correction, Nuvama noted that it was trading at 1.2 times its estimated adjusted book value (ABV) for September 2028. The brokerage cut its FY28–FY29 earnings estimates by 6–7% to account for margin and fee pressures.
Nuvama also lowered its target price to ₹340 from ₹365, valuing the stock at 1.4 times its estimated September 2028 ABV and assigning ₹16 per share to subsidiaries and investments. It maintained its ‘Hold’ rating.
M&M Financial Services share price today
M&M Financial Services share price today opened at ₹291 apiece on the BSE, the stock touched an intraday high of ₹291.05 apiece and an intraday low of ₹268.50 apiece.
Gaurav Arora, Head of Research at SAHI, said Mahindra & Mahindra Financial Services is trading at a crucial juncture, with ₹272 emerging as a key support level. A potential double-top formation is visible on the chart, although the pattern is yet to be confirmed.
Arora noted that if the stock sustains above ₹272, buying interest could return, potentially pushing the share price towards ₹325. However, a breach of this support level could trigger further downside, making ₹272 a crucial level to watch in the near term.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
