Mahindra and Mahindra Financial Services Ltd’s (Mahindra Finance) January-March quarter performance reflects the slowing economic activity in rural and semi-urban areas. add_main_imageOn a stand-alone level, total income grew by 33% in the fourth quarter. That looks heady when compared with other companies in the listed space. But income, on an average, grew by around 42% in the previous three quarters.The slowdown in income growth can be explained by the shift in Mahindra Finance’s focus to light commercial vehicles, a move that was prompted by the declining sales of medium and heavy commercial vehicles. NextMAdsWith light commercial vehicles having a lower loan ticket size, that weighed on the overall growth of the company.Sure, net profit jumped 46% to ₹ 334 crore. But that too was boosted by an exceptional gain of ₹ 28 crore from the sale of stake in a subsidiary company. Excluding the one-time gains, the profit would have grown by around 34%.The focus on light commercial vehicles and utility vehicles helped the company finance 24% more assets in the fourth quarter than a year ago, according to the management. While that is an improvement from the 15.5% growth registered in the December quarter, on a sequential basis, the value of assets financed by Mahindra Finance is little changed.The easing interest costs improved gross spread from 10.2% in the third quarter to around 10.4% in the January-March this year. With rural cash flows improving towards the end of the fiscal year, gross non-performing assets decreased from 4% in the December quarter to 3% in the three months ended March, the management said.While the improvement in rural cash flows and easing finance costs helped Mahindra Finance report a decent financial performance in March, things are getting tough in a weak macroeconomic environment. Low ticket-size loans and a prolonged slowdown in the agrarian economy can weigh over the company’s growth in the short term.The buzz about the new banking licences helped the Mahindra Finance stock outperform the broader markets for the past one year, but now investors will look for earnings growth.sixthMAdsMahindra Finance says it wants to increase its reach and mine existing customers for more business opportunities. To increase penetration in rural areas it is aiming to open 50-60 new branches in the current fiscal, according to Ramesh Iyer, managing director of the company. It’s yet to be seen whether that strategy will help maintain the pace of growth.