Shares of M&M Financial Services gained 3 percent on Thursday after the Reserve Bank of India (RBI) lifted restrictions on recovery of loans through third-party agents, which the central bank placed on the company last year.
The lifting of restrictions followed submissions made by the company and its pledge to strengthen recovery practices and outsourcing arrangements while tightening the process of onboarding third-party agents and strengthening its accountability framework, the company said in a regulatory filing.
Following the update, the stock made a strong start to the trade at ₹236.95 apiece, compared to the previous closing price of ₹234.10, and rose further to hit an intra-day high of ₹241.15. At the current market price of ₹240.20, the stock is trading just 2.69 percent away from its 52-week high of ₹247.
On September 22, the RBI ordered the company to stop using third-party loan recovery services. The RBI action came after a 27-year-old pregnant lady was reportedly crushed to death in Jharkhand's Hazaribagh by a tractor being forcedly driven away by the company's recovery agent.
After the RBI announcement, the stock crashed 20 percent in just seven trading sessions. However, the stock has experienced a surge in buying since then and has gained nearly 36 percent to date.
The company had said the halt on vehicle recovery by third-party agencies would not "have any material impact" on its financials.
Over the last one year, the stock has delivered a fabulous return of 56 percent, climbing from ₹155 apiece to its current position of ₹240.
Meanwhile, in mid-October last year, the company announced a strategic partnership with India Post Payments Bank to enhance credit access for a larger customer base.
As a part of this alliance, India Post Payments Bank will provide lead referral services to Mahindra Finance for passenger vehicles, three-wheelers, tractors, and commercial vehicle loan categories and provide cash EMI deposit facility to existing Mahindra Finance customers at post offices.
For the September-ending quarter, the company reported a 55.39 percent drop in its consolidated net profit to ₹492 crore as against ₹1,103.8 crore in the same quarter of the previous fiscal.
However, sequentially, the net profit was up 104.93 percent. Revenue from operations increased by 2.64 percent to Rs. 3,029 crore during the quarter, compared to Rs. 2,950 crore in the corresponding quarter of the previous fiscal.
The net interest income stood at Rs. 1,540 crore, up 2 percent YoY. The net interest margin (NIM) came in healthy at 7.5 percent. In Q2 FY23, the company's loan book increased by 9 percent to ₹73,817 crore compared to Q1 FY23, aided by an increase in disbursements.
31 analysts polled by MintGenie on average have a 'buy' call on the stock.
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