Mahindra & Mahindra Financial Services Limited (MMFSL) here today announced public issue of Secured and Unsecured Subordinated Redeemable Non-Convertible Debentures (NCDs) with face value of Rs 1,000 each for Rs 500 crores (Base Issue Size), and option to retain oversubscription upto Rs 3,000 crores, aggregating upto Rs 3,500 crores (Tranche I Issue). The issue opens on January 04, 2019 and closes on January 25, 2019.
These NCDs, bearing a fixed rate of interest, are being offered under four different series: Series I (39 months), Series II (60 months) and Series III (96 months) are offered as Secured NCDs, while Series IV (120 months) is offered as Unsecured Subordinated NCDs. The NCDs offered through this Tranche I Prospectus are proposed to be listed on the BSE Limited.
Ramesh Iyer, Vice-Chairman and CMD, Mahindra Finance, said that the funds raised through this Tranche I Issue will be used for: onward lending, financing, refinancing existing indebtedness, long-term working capital and general corporate purposes. “We believe the market remains buoyant, despite the automobile and tractor industry going through rough times between 2016 and 2018. The company is covering 3,60,000 villages in India with products designed for those customers, and with focus on rural areas being top priority for the Government, we are ensuring that cash flow for the rural front is buoyant, despite risings costs” he said.
Replying to questions, Iyer said the commercial vehicles industry registered low sales – despite tractor growth picking up in farms and infrastructure – due to elections recently (where less buying happens) but is expected to pick up from this quarter onwards. Farm loan waivers don’t affect asset back-lending as that money is spent on mostly seeds, fertilisers etc, he said.
Noting that the company had started venturing into financing SMEs and also rural players over the past few years, Dinesh Prajapati, VP – Teasury & Corporate Affairs, MMFSL, said “This is the third issue in the NCD series and our strategy is focus on growth in rural and semi-urban markets for vehicle and automobile financing, effective use of technology to improve productivity, diverse product portfolio and developing complementary business lines.”
With target segment of the company being rural which has high dependence on cash, MMFSL saw impact on profitability on account of demonetization during FY17 (especially second half of the year) resulting in decline of 40% in PAT to Rs 400 crore on total income of Rs 6,238 crore during FY17, as compared to PAT of Rs 673 crore on total income of Rs 5,905 crore during FY16. During FY18, MMFSL witnessed improvement in recovery and collections, resulting in improvement in profitability. It reported PAT of Rs 892 crore on total income of Rs 7,206 crore during FY18 with Return on Total assets (ROTA) improving to 1.81% as against 0.95% for FY17.
Meanwhile, after two consecutive droughts, the country received a normal monsoon in 2016 and 2017 which was positive for customer profile of MMFSL. However, the company faced incremental stress in asset quality parameters for short term on account of lower collections due to demonetization, which has stabilized since then. Further, adequate monsoon during 2018 is expected to improve the asset quality in the current financial year.
