Mahindra and Mahindra Financial Services (Mahindra Finance) has posted a decline of 66 per cent in its consolidated net profit to Rs 108.50 crore in the first quarter ended June 30, the company said on July 23. It had registered a net profit of Rs 322.30 crore in the corresponding quarter of the previous financial year.
Total income (consolidated) was, however, up by 23 per cent at Rs 2,838.40 crore during June quarter of 2019-20 as against Rs 2,302 crore in year-ago same period, Mahindra Finance said in a regulatory filing.
On a standalone basis, the net profit was down by 75 per cent to Rs 68.40 crore as against Rs 269.10 crore. Income rose 24 per cent to Rs 2,412.50 crore from Rs 1,939.70 crore a year ago.
The company, India's largest tractor financier that mainly focuses on rural and semi-urban sector, is primarily finances purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, construction equipment and SME financing.
Giving an overview of the passenger vehicles industry, Mahindra Finance said small cars and utility vehicles expected to continue growth. However, muted growth in 2019-20 and 2020-21 shall significantly reduce the 5-year growth projection.
"Growth to remain muted in 2020, marginally improve in 2021 – on account of increase in price and reduction in mileage. Higher Inventory shall continue to exert pressure on OEM sales till inventory levels normalise," it said.
On commercial vehicles, there is a reduction in sale price of second-hand vehicles resulting in slower buying of new vehicles while lower finance availability is hurting sales.
In the tractors industry, government support towards road construction and rural housing likely to boost commercial demand for tractors, it said.
However, the growth momentum in the sector expected to slow, especially for housing finance companies (HFCs).
"However, demand side fundamentals remain strong. Affordable housing a new growth engine. Deeper mortgage penetration and increased demand from tier II/ smaller towns to fuel loan growth over the period. The government's aggressive push towards affordable housing leading to threefold increase in the number of houses," it said.
Shares of the company Tuesday closed at Rs 340.15 apiece on the BSE, down 5.04 per cent from the previous close.
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