Mahindra & Mahindra Financial Services Ltd. (Mahindra Finance), one of India’s leading non-banking financial companies (NBFCs), reported its financial results for the fourth quarter and the full financial year ended March 31, 2025. While the company showed resilience in several areas including disbursement and asset growth, the fourth quarter (Q4FY25) saw a dip in standalone net profit by 9% year-on-year (YoY) to ₹563 crore.
The market responded negatively to the announcement. Mahindra Finance shares slumped over 4% during intra-day trading on April 23, reflecting investor concern over rising credit costs and narrowing margins despite overall growth.
Q4 FY25 Highlights
Here are the key highlights from Mahindra Finance’s Q4FY25 performance:
| Metric | Q4FY25 | Q4FY24 | YoY Change |
|---|---|---|---|
| Net Profit | ₹563 crore | ₹619 crore | ▼ 9% |
| Net Interest Income (NII) | ₹2,156 crore | ₹1,978 crore | ▲ 9% |
| Loan Book Growth | ₹1,19,673 crore | ₹1,02,262 crore | ▲ 17% |
| Disbursements | ₹15,530 crore | ₹15,230 crore | ▲ 2% |
| Gross Stage 3 Ratio | 3.7% | NA | NA |
| GS2+GS3 Ratio | 9.1% | NA | NA |
| Credit Cost | ₹457 crore | ₹341 crore | ▲ 34% |
| Capital Adequacy Ratio | 18.3% | NA | NA |
Financial Performance Analysis
Mahindra Finance’s Q4FY25 earnings highlight a mixed performance. While revenue through net interest income grew by 9% YoY to ₹2,156 crore, the company’s profitability was impacted by higher provisioning for bad loans and narrowing interest margins.
The standalone net profit dropped to ₹563 crore, down from ₹619 crore a year ago. This marked the first quarterly decline in net profit in several quarters, despite a strong underlying loan book expansion.
The contraction in net profit appears to be largely driven by:
- Higher provisions: ₹457 crore, up 34% YoY.
- Reduced net interest margin (NIM): From 7.1% to 6.5%, due to rising funding costs.
These headwinds overshadowed the growth in lending and disbursements, causing the market to react negatively.
Yearly Performance Overview
Despite the dip in Q4, the company reported an impressive full-year (FY25) performance. Standalone net profit surged 33% to ₹2,345 crore compared to ₹1,760 crore in FY24. This marks a strong comeback year for Mahindra Finance, as the company recovered from post-pandemic challenges and leveraged demand in rural and semi-urban lending segments.
Here’s a summary of FY25 financials:
| Financial Metric | FY25 | FY24 | Change |
|---|---|---|---|
| Standalone PAT | ₹2,345 crore | ₹1,760 crore | ▲ 33% |
| Total Disbursements | ₹57,900 crore | ₹56,200 crore | ▲ 3% |
| AUM | ₹1,19,673 crore | ₹1,02,262 crore | ▲ 17% |
Disbursement & Loan Book Growth
In Q4FY25, the company reported disbursements of ₹15,530 crore, reflecting a marginal 2% increase from the same quarter last year. While overall disbursement growth was subdued, segment-wise performance showed encouraging trends:
- SME disbursements jumped 48% YoY, reflecting Mahindra Finance’s focused push into small business lending.
- Retail and vehicle finance segments remained stable but faced some pressure due to rising competition and high interest rates.
The gross assets under management (AUM) rose 17% YoY to ₹1,19,673 crore, a healthy sign that the company’s lending engine is still growing at a double-digit rate despite margin compression.
Asset Quality Metrics
Asset quality remained within control, though not without concerns. Key ratios:
- GS2+GS3 ratio stood at 9.1%, reflecting a moderate level of stressed assets.
- Gross Stage 3 (GS3) assets remained at 3.7%, indicating potential NPAs.
The rise in credit costs implies that while the book is growing, stress in certain pockets—especially in the rural and semi-urban customer base—is starting to emerge again. Higher interest rates and erratic monsoons could also play spoilsport in FY26 if not managed properly.
Profitability & Net Interest Margins
Despite a 9% increase in NII, the Net Interest Margin (NIM) declined from 7.1% to 6.5% YoY. This 60 basis point drop can be attributed to:
- Increased cost of funds due to rising repo rates and market borrowing costs.
- Competitive pressure from other NBFCs and private lenders.
NIM is a key profitability metric for NBFCs. A narrowing margin, even amidst AUM growth, suggests pressure on earnings sustainability going forward.
Credit Costs and Provisions
Mahindra Finance’s provisions or credit costs for Q4FY25 spiked 34% YoY to ₹457 crore, compared to ₹341 crore in Q4FY24. Rising credit costs indicate:
- Increased delinquencies or early signs of loan stress.
- Conservative provisioning approach to counter future uncertainties.
This spike in provisioning was the primary reason for the 9% YoY decline in net profit for Q4.
Capital Adequacy and Liquidity
The company’s capital position remains solid:
- Capital Adequacy Ratio (CAR) at 18.3% — well above the regulatory minimum.
- Liquidity Buffer of ₹10,400 crore — adequate to meet short-term obligations and future growth.
This positions Mahindra Finance well to weather external shocks and pursue calibrated lending growth in FY26.
Mahindra Finance Share Price Performance
The stock performance has been muted over the last few weeks:
| Period | Performance |
|---|---|
| Last 3 Days | ▼ 2.31% |
| April MTD | ▼ 4.59% |
| YTD 2025 | ▲ 1.91% |
The stock hit a 52-week low of ₹237.95 on April 7, 2025, while the high was ₹343 on September 27, 2024.
On April 23, following the earnings release, the stock slipped 4.31% intraday to ₹265.20 and closed slightly higher at ₹269.20, down 0.17% for the day. Market sentiment has been cautious due to concerns around rising provisions and weakening margins.
Expert Commentary and Market Sentiment
Market analysts and brokerage firms have mixed views:
- Bullish: Some see Mahindra Finance’s FY25 growth and robust capital position as a strong foundation for future performance, especially if interest rates stabilize.
- Bearish: Others highlight margin pressure and asset quality stress as risk factors.
The 33% YoY growth in full-year PAT is commendable, but the recent Q4 miss and higher provisioning have cast a short-term shadow on the stock.
Outlook for FY26
The outlook for Mahindra Finance in FY26 will depend on multiple factors:
- Interest Rate Trend – If the RBI starts easing rates, cost of funds could drop and help restore margins.
- Monsoon and Rural Sentiment – As a rural-focused lender, crop yields and rural incomes will directly impact repayment behavior.
- SME Lending Push – If the company continues growing its SME portfolio responsibly, it could become a new growth driver.
- Digital Transformation – Ongoing investments in digital onboarding and risk analytics are expected to improve underwriting quality and reduce NPAs.
However, elevated provisions and narrowing margins may continue to pose near-term headwinds.
Conclusion
Mahindra Finance’s Q4FY25 results reflect a complex picture: robust full-year growth and healthy disbursement trends, but short-term margin pressure and rising credit costs. The company’s strategy to diversify into SME lending and its strong capital position remain long-term positives.
While the market has reacted negatively to the Q4 results, investors may want to keep a close eye on Q1FY26 performance, asset quality trends, and the evolving interest rate environment before making major investment decisions.
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