M&M FINANCIAL SERVICES 2022-23 Annual Report Analysis

Tue, 4 Jul

M&M FINANCIAL SERVICES has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during the year 2022-23.

M&M FINANCIAL SERVICES Income Statement Analysis

• Interest income during the year rose 12.2% on a year-on-year (YoY) basis.
• Interest expenses were up by 15.3% YoY during the same period.
• Operating expenses increased by 12.6% YoY during the year.
• The company's net interest income (NII) increased by 10.2% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 50.1% in FY23 as against 67.8% in FY22.
• Other income increased by 823.1% YoY during the year.
• Net profit for the year increased by 82.3% YoY.
• Net profit margins during the year increased to 16.3% in FY23 from 10.0% in FY22.

M&M FINANCIAL SERVICES Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	113,176	126,995	12.2%
Other Income	Rs m	1,687	15,570	823.1%
Interest Expense	Rs m	44,174	50,943	15.3%
Net Interest Income	Rs m	69,002	76,052	10.2%
Operating Expense	Rs m	54,331	61,198	12.6%
Pre-provision Operating Profit	Rs m	16,358	30,425	86.0%
Provisions & Contingencies	Rs m	159	248	56.7%
Profit before tax	Rs m	15,494	28,038	81.0%
Tax	Rs m	3,991	7,326	83.6%
Profit after tax	Rs m	11,369	20,724	82.3%
Minority Interest	Rs m	-135	12	108.9%
Net Interest Margin	%	67.8	50.1
Net profit margin	%	10.0	16.3

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M&M FINANCIAL SERVICES Balance Sheet Analysis

• The company's deposits during FY23 stood at Rs 54.6 bn as compared to Rs 82.9 bn in FY22, thereby witnessing a decrease of 34.1%.
• Advances for the year stood at Rs 34.8 bn as compared to Rs 12.0 bn during FY22, a rise of 191.0%.
• Cost of deposits for M&M FINANCIAL SERVICES rose 6.4% and stood at 9.8%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 117.0 bn during the year from Rs 89.8 bn in FY22.
• Borrowing stood at Rs 50.4 bn, a growth of 436.5% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 1,043.4 bn as against Rs 828.6 bn during FY22, thereby witnessing a rise of 25.9%.

M&M FINANCIAL SERVICES Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	168,533	185,199	9.9%
Advances	Rs m	11,962	34,811	191.0%
Deposits	Rs m	82,863	54,587	-34.1%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	9.2	9.8
Investments	Rs m	89,845	116,974	30.2%
Borrowings	Rs m	9,391	50,384	436.5%
Total Assets	Rs m	828,574	1,043,390	25.9%

Current Valuations for M&M FINANCIAL SERVICES

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 16.8, an improvement from the EPS of Rs 9.2 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 343.6, stands at 12.8 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 2.3 times, while the price to income ratio stands at 2.1 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	91.8	102.9
Earnings per share (Unadj.)	Rs	9.2	16.8
Diluted earnings per share	Rs	9.2	16.8
Avg P/E ratio	Rs	18.1	12.8
Avg P/ABV ratio	Rs	1.3	2.3
Avg Market Cap	Rs	206,119	265,378
Dividends per share (Unadj.)	Rs	3.60	6.00

Ratio Analysis for M&M FINANCIAL SERVICES

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio improved and stood at 63.8x during FY23, from 14.4x during FY22. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio increased and stood at 0.57x during FY23, from 0.55x during FY22. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): M&M FINANCIAL SERVICES's capital adequacy ratio (CAR) was at 22.5% as on 31 March 2023 as compared to 27.8% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company improved and stood at 11.2% during FY23, from 6.7% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company improved and stood at 1.99% during FY23, from 1.37% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 8.82% during FY23, from 7.46% during FY22. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. M&M FINANCIAL SERVICES's gross NPA ratio stood at 0.0% as of 31 March 2023 compared to 0.0% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of M&M FINANCIAL SERVICES was 1.9% in financial year 2023. This compared with 3.4% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	14.4	63.8
Debt to Equity Ratio	x	0.5	0.6
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	27.8	22.5
Return on Equity	%	6.7	11.2
Return on Assets	%	1.4	2.0
Return on Capital Employed	%	7.5	8.8
% of Gross NPAs	%	0.0	0.0
% of Net NPAs	%	3.4	1.9
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how M&M FINANCIAL SERVICES has performed over the last 5 years, please visit here.

M&M FINANCIAL SERVICES Share Price Performance

Over the last one year, M&M FINANCIAL SERVICES share price has moved up from Rs 178.9 to Rs 343.6, registering a gain of Rs 164.7 or around 92.1%.

Overall, the S&P BSE SENSEX is up 23.0% over the year.

(To know more, you can check out historical annual results for M&M FINANCIAL SERVICES here and quarterly results for M&M FINANCIAL SERVICES here)