Strong vehicle demand to help M&M Finance grow AUM to Rs 81,000 cr

Kolkata: Mahindra & Mahindra Financial Services is likely to close FY23 with ₹81,000 crore of assets under management on a standalone basis, registering about 30% growth year-on-year, after facing two consecutive years of Covid-induced muted expansion, managing director and chief executive officer-designate Raul Rebello said.

The tailwind and pent-up demand in the vehicle industry helped the business expansion while the company is also trying to diversify into other areas such as lending to small and medium enterprises and leasing.

In an interview with ET, Rebello said that the company's aim is to focus on profitable growth and stabilise asset quality by investing in the improvement of underwriting standards and recovery. He said that stressed assets (gross stage 3) have come down to 5% and the lender aims to bring down the exposure further by another 150 basis points. One basis point is 0.01%.

Rebello will take charge when the current head Ramesh Iyer retires on April 29, 2024.

"The hero metric is profitable growth. And our commitment is to get to a 2.5% ROA (return on assets) if we kind of use the right leverage," Rebello said. The lender's ROA was 2.1% for the nine months ending December 2022.

The company, with about 90% of its AUM coming from financing new vehicles, plans to be more aggressive in used vertical financing and raise the share to 15% by 2025. The lender is making significant investments in tech and digital abilities.

Under the company's vision FY25 statement, it is also working on business diversification so that 15% of its business comes from SME financing and leasing.

"As part of diversification, both the leasing business and the SME business are gaining good traction," Rebello said. The SME business is now ₹4,500 crore of its AUM, while the leasing business, which is largely vehicle leasing, is close to about ₹800 crore.

"Leasing makes good sense from our standpoint because the regulation does not allow banks to do it and we are one of the NBFCs who have taken a lead in this," he said.