Shares in M&M Financial Services (MMFS) fell as much as 8.5 per cent on Thursday after the company's profitability was hit because of sharp rise in bad loans during the December quarter.
MMFS Q3 profit fell 18 per cent year-on-year to Rs. 164 crore as the company set aside Rs. 180 crore (up 120 per cent y-o-y) as provisions in the third quarter.
The sharp slowdown in the auto sector reflected in loan disbursals, which rose just 8 per cent in Q3 even as the loan book grew 28 per cent y-o-y.
Passenger car sales in the country fell for the first time in 11 years in 2013 as customers continued to defer purchases amid a slowdown. Demand was no better for commercial vehicle segments, which fell around 16 per cent during the previous year.
"Only tractors and pre-owned segment showed y-o-y growth... MMFS has indicated that it has almost exited medium and heavy commercial vehicles business while increasing focus on the pre-owned segment," Nomura analysts Abhishek Bhattacharya and Amit Nanavati said.
As of 10.20 a.m., MMFS shares traded off the day's low at Rs. 247.15. The stock had earlier fallen to a low of Rs. 232.35.
Analysts' take on Q3:
"Gross and net non-performing assets (NPAs) rose sharply (up 70 basis points and 30 basis points sequentially respectively), and credit costs spiked (240 basis points in Q3)," Barclays said, which has a "neutral" rating on the stock.
The management remains cautious on the near-term outlook for credit quality in the current environment, the brokerage added.
Barclays price target of Rs. 201 on the stock indicates a 21 per cent downside from Wednesday's close of Rs. 254.
Dr.Tirthankar Patnaik of Religare Capital Markets told NDTV asset quality issues have started to hurt the stock. Investors should exit the stock after the central bank signalled a hawkish policy couple of days back, he added.
An RBI panel on Tuesday suggested targeting consumer price inflation, which if accepted, may result in interest rates staying higher for long.
MMFS Q3 profit fell 18 per cent year-on-year to Rs. 164 crore as the company set aside Rs. 180 crore (up 120 per cent y-o-y) as provisions in the third quarter.
The sharp slowdown in the auto sector reflected in loan disbursals, which rose just 8 per cent in Q3 even as the loan book grew 28 per cent y-o-y.
Passenger car sales in the country fell for the first time in 11 years in 2013 as customers continued to defer purchases amid a slowdown. Demand was no better for commercial vehicle segments, which fell around 16 per cent during the previous year.
"Only tractors and pre-owned segment showed y-o-y growth... MMFS has indicated that it has almost exited medium and heavy commercial vehicles business while increasing focus on the pre-owned segment," Nomura analysts Abhishek Bhattacharya and Amit Nanavati said.
As of 10.20 a.m., MMFS shares traded off the day's low at Rs. 247.15. The stock had earlier fallen to a low of Rs. 232.35.
Analysts' take on Q3:
"Gross and net non-performing assets (NPAs) rose sharply (up 70 basis points and 30 basis points sequentially respectively), and credit costs spiked (240 basis points in Q3)," Barclays said, which has a "neutral" rating on the stock.
The management remains cautious on the near-term outlook for credit quality in the current environment, the brokerage added.
Barclays price target of Rs. 201 on the stock indicates a 21 per cent downside from Wednesday's close of Rs. 254.
Dr.Tirthankar Patnaik of Religare Capital Markets told NDTV asset quality issues have started to hurt the stock. Investors should exit the stock after the central bank signalled a hawkish policy couple of days back, he added.
An RBI panel on Tuesday suggested targeting consumer price inflation, which if accepted, may result in interest rates staying higher for long.
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