Mahindra & Mahindra Financial Services (MMFS IN) – Q2FY27 Result Update – Growth holds up; margin and rural stress warrant caution – Upgrade to ‘BUY’
Published on 22 Oct 2026
Q2 disbursements grew 22% YoY led by broad-based growth across segments, while AUM grew 15% YoY to INR1,465.1bn. We build AUM growth of 14%/15% for FY27E/FY28E, remaining conservative amid potential rural stress and a high base in the festive season. Reported NIM moderated to 7.0% due to excess liquidity buffers and non-yielding trade advances, with rising funding costs and limited pass-through likely to keep margins under pressure. Fee income has improved through cross-selling and diversification, although the proposed insurance commission regulations pose a downside risk. Asset quality remained broadly stable QoQ, with credit costs at 1.6%; we build credit costs in line with guidance while monitoring El Nino-related risks to the rural and tractor portfolios. We marginally tweak our estimates and value the standalone business of MMFS at 1.5x Sep’28E P/ABV. Our SOTP ascribes a valuation of INR335 for the standalone business and INR19 for subsidiaries, with a 25% Holding Co. discount, to arrive at a TP of INR350. Following a 16% correction in stock price over the past month, we upgrade our rating to ‘Buy’ from ‘Accumulate’.
