Mumbai: Mahindra and Mahindra Financial Services Ltd, which raised over Rs1,000 crore by selling shares to financial institutions earlier this month, is considering strategic acquisitions across its various verticals, a top company official said.
The company, a subsidiary of Mahindra and Mahindra Ltd, is open to evaluating acquisition opportunities if it finds a right fit, vice-chairman and managing director Ramesh Iyer said. “It has to have a good cultural fit and be relevant to what we do, as a strategy. Either it should bring a new geography or a new product. Or, it should bring a technology differentiator. We are also open to looking at acquiring select portfolios in situations where a seller may be looking to exit a particular sector or business. We will look at all options of organic and inorganic growth," Iyer said in an interview.
Mint reported in September that Mahindra Finance was exploring various routes for the proposed fund-raising, including a qualified institutional placement (QIP) and a private placement of shares with private equity investors or other institutional investors.
QIP is a capital-raising tool through which listed companies can sell equity shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into stocks, to a qualified institutional buyer.
“Our recent QIP will increase our capital adequacy (ratio) by another 3% and we will be at 16% level overall which is a very healthy ratio. For the next two years, we are looking at a growth of 15% and after that, we will explore the possibility of raising additional capital. All our subsidiaries are growing at a rapid pace and we will need to infuse more capital going forward. We are seeing a re-emergence of opportunities. Monsoon has been good this year and the issues on the regulatory front have subsided. Putting all of these together, we are seeing immense opportunities for growth," Iyer said.
Iyer ruled out any additional fund-raising plans for the next two years, maintaining that the company will look at listing some of its subsidiaries going forward.
“The subsidiaries will follow the same path of its parent Mahindra Finance. The asset management business and housing finance business need a lot of capital. We will keep financing them to the extent they become mature and stable. We will look at opportunities to take these businesses public at an appropriate time," he said.
The company’s subsidiaries include Mahindra Mutual Fund, Mahindra Insurance Brokers Ltd and Mahindra Rural Housing Finance Ltd.
In the second quarter of 2017-18, Mahindra Finance posted a 11.7% decline in consolidated net profit to Rs100.68 crore compared to a Rs114.04 crore profit it posted the year before.
The company’s total income for the quarter under review rose to Rs1,985.59 crore from Rs1,741.26 crore a year ago. The company had a network of 1,183 offices and total assets under management (AUM) of Rs47,576 crore as on 30 June.
According to a recent report by rating agency CARE Ratings, Mahindra Finance’s asset quality parameters have traditionally been inferior to peers as its business is closely linked to the rural economy with uncertain cash flows. However, the loan pricing takes care of higher delinquencies with above industry average profitability, the report said.
“We will continue to remain a rural focused NBFC and will add another 100 branches in the next phase of expansion. Among the growth areas, financing pre-owned vehicles is a big opportunity and also the commercial vehicles segment," Iyer said, adding: “We will grow the SME segment which is about 8% of our book to 15%. In the SME segment, we are focussing on agri and auto industries, where we will provide working capital as well as for capacity expansion. Within rural, we see a large opportunity in the segments we operate in and we will not spread ourselves thin. At this stage, our plans are focussed on growing the retail business, housing business, insurance and asset management business."
On Friday, shares of Mahindra Finance rose 3.36%, or Rs15.00, to Rs461.35 while the benchmark Sensex gained 0.65%, or 216.27 points, to end the day at 33,462.97.