Mahindra & Mahindra Financial Services (M&MFIN) Q4 01/02 earnings summary

Executive summary

• FY2002 disbursements rose 17% to Rs. 1,166 crore despite weak vehicle and tractor markets; income reached Rs. 191.34 crore and profit after tax Rs. 27.72 crore.

• Network expanded by 23 outlets to 151; 34,000 contracts were added, taking the client base above 100,000 and assets to Rs. 1,114.36 crore.

Financial highlights

• Operating income was Rs. 191.34 crore versus Rs. 138.79 crore in FY2001; profit before tax was Rs. 43.42 crore versus Rs. 20.47 crore, up 112%.

• Profit after tax was Rs. 27.72 crore versus Rs. 9.61 crore, up 188%; FY2002 includes a Rs. 6.998 crore deferred tax credit and Rs. 1.406 crore net excess tax provision from earlier years.

• Hire-purchase income increased to Rs. 164.69 crore from Rs. 110.80 crore; lease income declined to Rs. 14.20 crore from Rs. 22.51 crore.

• Total expenditure rose to Rs. 147.92 crore from Rs. 118.32 crore; finance costs increased to Rs. 74.44 crore from Rs. 65.89 crore, while depreciation fell to Rs. 11.87 crore from Rs. 17.90 crore.

Outlook and guidance

• Proposed IFC funding comprises a Rs. 49 crore long-term loan and Rs. 35 crore subordinated loan, repayable over ~5 years; regulatory approvals were being sought, with drawdown planned in FY2003.

• Planned uses of IFC proceeds include new product lines, stronger capital, and longer-tenor financing; proposed areas include non-parent vehicles, secondary-market vehicles, vendor finance, and agricultural inputs.

• FY2003 policy backdrop included measures to stimulate agriculture and infrastructure, a softer interest-rate environment, adequate liquidity, and proposed stronger creditor enforcement and an Asset Reconstruction Company.