M&M Financial Services stock has experienced a significant decrease in value, losing 5.75 percent over the last six months. In comparison, the benchmark Nifty50 index has provided a return of 4.77 percent during the same period.

This decline in stock value has been fueled by weak Q2 numbers, resulting in a drop of over 9 percent in early trade on October 30 for M&M Financial Services shares. At 9:24 am, the stock was trading 8.91 percent lower at Rs 252.25 on NSE.

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For the quarter ending September FY24, M&M Financial Services reported a profit of Rs 235 crore, marking a significant decline of 47.5 percent YoY. This decline is primarily attributed to an increase in impairment on financial instruments.

Despite the decline in profit, the company witnessed a growth in the asset book, leading to a 24.1 percent YoY increase in revenue from operations, reaching Rs 3,212 crore. The net interest income also experienced a rise of 9 percent YoY, amounting to Rs 1,674 crore.

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Furthermore, the net interest margin for the quarter stood at 6.5 percent, which was impacted by higher borrowing rates and a change in portfolio mix favoring customers with better credit quality. Despite these challenges, disbursements during Q2 rose by 13 percent YoY to Rs 13,315 crore.

According to UBS, M&M Financial’s net interest income and pre-provision operating profit did not meet expectations in Q2. However, they maintained a “neutral” rating on the stock and reduced the target price. The company foresees a partial recovery in its net interest margins due to better yields.

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The management of M&M Financial Services predicted that the quality of their assets would remain stable, and the costs related to lending would decrease. They do, however, anticipate a 100-basis point reduction in net interest margins to 7.27 percent in FY24. Despite the challenging outlook, the management remains committed to their 2025 goals.

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