M&M Financial Shares Drop 10 Percent Despite Higher Profit

Mahindra & Mahindra Financial Services shares tumbled nearly 10% on Thursday, 22 October, even as the non-banking financial company posted strong earnings growth for the September quarter of FY27, driven by higher business volumes and a decline in credit costs. The company's consolidated net profit rose 55% year-on-year to ₹ 882 crore in Q2 FY27, compared with ₹ 569 crore in the year-ago period. Revenue from operations grew 15% to ₹ 5,164 crore, while net interest income increased 17% year-on-year to ₹ 2,822 crore. Consolidated net profit stood at ₹ 911 crore, up 61%, while total assets expanded 21% to ₹ 1.80 lakh crore. Asset quality-related costs showed improvement during the quarter, with credit costs declining to 1.6% of average total assets from 2.2% in the corresponding period last year.

Brokerage Reactions

Brokerages offered mixed views following the Q2 results, with concerns over rising funding costs and potential pressure on margins and asset quality in the tractor-financing segment. ICICI Securities retained its 'Buy' rating and target price of ₹ 415, while Nomura lowered its target to ₹ 400 and Nuvama Institutional Equities maintained its 'Hold' rating with a reduced target of ₹ 340. Nomura flagged concerns over asset quality in the tractor financing segment and expects credit costs to rise. Gaurav Arora, Head of Research at SAHI, noted that Mahindra & Mahindra Financial Services is trading at a crucial juncture, with ₹ 272 emerging as a key support level.

Context

Stock prices often react to future outlooks and risks highlighted by analysts rather than past profit growth alone. Financial companies closely monitor asset quality, funding costs, and sector-specific loan repayments to gauge their long-term stability.