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Cover Story

Following The Parent to International Markets
Increased Penetration into Financing of CVs, Construction Equipments and Pre-Owned Vehicles has Rounded off a great year for M&M Financial, even as The Recent RBI ruling played Spoilsport. Now, The Company wants to take its Portfolio very Aggressively into The Global Market.
Issue Date - 26/05/2011
Setting up an NBFC that caters to rural and semi-urban financing was a perfect foil to the tractor business of the Mahindra & Mahindra group. But as Vice Chairman & MD Anand Mahindra would be realising, achieving synergy with government objectives may be a tougher task call at times.

Reserve Bank of India’s (RBI’s) recent credit policy announcement in India that any bank lending to NBFC will not be classified as priority sector lending, does have a material impact on the operations of Mahindra & Mahindra Financial Services Ltd (MMFSL), affecting their cost of picking loans by upto 70-80 basis points. This is despite the fact that MMFSL gets bank loans, which are classified as priority and lends for tractors and commercial vehicles. Currently, around 22% of MMFSL’s lending comes under the purview of the priority sector.

On the strategic front, though, the company is doing extremely well. The company has managed assets worth $3 billion by the end of FY 2010-11. During the fiscal 2010-11, it reported net profit of Rs.4.63 billion, a growth of 35% yoy. The results were buoyed by an increaase in the bank’s loan book by 62% yoy to Rs.144.2 billion for the fiscal. With mcap growth of 123.65% for the fiscal, M&M Financial ranks 9th in B&E’s list of India’s greatest wealth creators in terms of market share growth in terms of percentage. Ramesh Iyer, MD, M&M Financial Services, comments, “In the financial year FY 2010-11, we have enhanced our focus towards financing of commercial vehicles, construction equipments, as well as, pre-owned vehicles.”

Meanwhile, the company is already looking to go global even as it endeavours to seek clarification on RBI’s ruling. After commencing operations in US, the company is now planning to take its portfolio to South Korea, South Africa and China. As expected, these are countries where the group already has established businesses. South Korea is expected to provide new opportunities in auto finance whereas China would be a hub for tractor financing. In South Africa, M&M is targetting finance opportunities for both commercial vehicles and tractors. As of now, the company is studying the business as well as policy environment of these markets. Earlier in the year, the company entered into a joint-venture with De Lage Landen Financial Services (subsidiary of Rabo Bank) to provide finance to US-based tractor dealers. In South Korea too, MMFSL would be looking to leverage the network of Ssangyong Motors, Iyer said. In China, M&M is present through two joint ventures to manufacture tractors suited to Chinese farming conditions and practices. In South Africa, the automobile company sells all its major products.

While the previous fiscal was about greater penetration into the Indian market, the current one could see some advancement towards a global play. And of course, the company would love to achieve greater policy synergy as well.


Mona Mehta           

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