Multinational investment bank UBS said it was ‘Neutral’ on Mahindra & Mahindra Financial Services Ltd. (M&M Finance) as the risk-reward ratio appears balanced for the stock.
UBS gave a target price of Rs 270 on M&M Finance shares, just a tad higher than their previous close of Rs 259.55 on the BSE.
The investment management firm said that the neutral rating on M&M Finance factored in moderate monsoon risks and in-line valuations. It added that higher interest rates could also drive a slowdown in credit demand and weigh on the company’s margins.
UBS noted that rural demand trends looked mixed, impacted by lower MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) allocations while aided by higher capex.
This could put pressure on M&M Finance’s earnings, fears UBS. “As seen in previous cycles, M&M Finance’s business has historically had volatile asset quality trends in-line with macro factors, posing downside risks to our numbers,” it said, adding that the company is likely to miss on management’s 2025 guidance.
M&M Finance announced earlier this month that the meeting of its board of directors is scheduled to be held on April 28 to approve the financial results of the company for the March quarter and the conclusion of the financial year 2023.
In its monthly business update, M&M Finance also announced that the company estimated the overall March quarter disbursements at around Rs 13,750 crore, registering a growth of 50 percent compared to the year-ago quarter. The fiscal year 2023 disbursement was approximately Rs 49,500 crore, marking a growth rate of 80 percent.
Shares of M&M Finance are trading 0.66 percent higher at Rs 261.10.
