Mahindra Finance falls 10% despite 55% profit jump

(M&MFIN) fell as much as 9.81% to an intraday low of ₹268.25 on the NSE on October 22, despite reporting a 55% year-on-year jump in Q2 FY27 standalone net profit to ₹882 crore. The results came out after market hours on October 21, when the stock closed at ₹297.45. Disbursements grew 22% to ₹16,499 crore, while assets under management rose 15%. Net interest income increased 17.3% to ₹2,822 crore, with net interest margin stable at 7%. Credit cost fell to 1.6% from 2.2% a year ago. Consolidated net profit rose 61% to ₹911 crore. The asset quality trend is genuinely better. CLSA noted that net slippages declined 15 basis points year-on-year, and the ratio of stage 2 and stage 3 loans fell to a multi-year low. Disbursement growth of 22% also shows healthy demand across vehicle and non-vehicle loans. The profit jump is mostly a provisioning story. Provisions and write-offs fell 16% to ₹630 crore, while pre-provision operating profit grew only 20%. So the 55% headline growth comes largely from setting aside less money for bad loans, not from faster core earnings. Nomura flagged concerns about asset quality and rising funding costs despite keeping its Buy rating. AUM growth of 15% is also well behind disbursement growth of 22%. Investors should watch credit costs over the next few quarters, cost of funds, AUM growth, and collection efficiency in the rural loan book. The key question is whether Mahindra Finance can keep growing profit once the benefit of lower provisions fades. Disclosure: I do not hold any position in Mahindra & Mahindra Financial Services Limited. This post is for informational purposes only and is not investment advice.