Concall Summary: M&M Financials Q1FY21

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Business update

  • The management is very excited by witnessing what is happening in the rural market and it has been happening for some time now
  • All branches are functioning currently and all dealerships are operating which are witnessing high footfalls
  • Collections doubled in May but the best performance was witnessed in June
  • In this quarter to correctly analyze the performance one should understand that it is the result of action from only one month i.e. June
  • In April 75% of customers had taken moratorium but 40% of those customers have paid their installments in the current month
  • The yields were phenomenal, harvests were good and support prices have been good as well with money being put in the hand of the farmer
  • From a product perspective traction in HCV’s is still taking some time and also in taxi aggregation segment recovery will take longer. On the other hand tractors, LCV’s and Pick up vehicles are doing well
  • Supply was a problem in new and also pre-owned vehicles otherwise numbers in Q1 could be even better
  • From a liquidity perspective company seems to be in a good space as getting a good response for bonds and also ALM bucket is perfectly matched
  • As business starts improving costs could also start catching up over the next few quarters
  • The rural market depends on two cash flows:
    • Farm cash flow: Improvement visible
    • Infrastructure cash flow: Seeing government impetus visible on both state and central level
  • The rights issue has come at a discount because it is the 25th year and thus the company wants all shareholders to participate and thus is rewarding by pricing it attractively for all shareholders
  • The capital is being raised from a growth perspective
Also Read on FinMedium:  Concall Summary: JM Financial Ltd Q4FY20

Participants

  • ELARA Capital
  • SBI Life
  • Motilal Oswal
  • Nomura
  • B&K Securities
  • HSBC Asset Management
  • Credit Suisse
  • Morgan Stanley
  • IIFL
  • Kotak Securities

Q&A

  • The company has enough buffer liquidity for the next 4 months and until March the company can easily pay off all liabilities
  • From June have started seeing customers, even those who are in moratorium have started repaying monthly installments
  • In the transportation segment, the majority of the customers of the company are in the rural segment
  • The management feels that delay of payment is a possibility but non-payment is not an issue and post moratorium ending in August don’t see a big surge of NPA’s coming in
  • Amongst the cost reduction seeing 50% of the reduction to be sustainable going forward
  • The farm cash flow is expected to be much better and thus numbers should start improving as the months move towards March
  • The Southern states have performed slightly poorly, MP & Chhattisgarh have been phenomenally good while other states have been around average
  • The endeavor of the management is to take down Net NPA levels to 4%
  • Almost 60% of the moratorium pool of customers have not paid a single installment till June
  • The collection efficiency has improved to around 75% in June and the first 15 days of July have been better than June
  • The collections have progressed over Apr-June in the following fashion – Rs 500 crores in April, Rs 1000 crores in May and Rs 2000 crores + in June
  • The management is in talks with OEMs about supply situation and production schedule for vehicles and growth also depends upon the speed at which companies can supply vehicles
  • The OEM for four-wheeler and dealerships are talking of very high inquiries so if supply can sustain then growth should be good
  • Currently, it is not sure of how the supply will pan out but in October with festival season incoming, there is much more confident of higher growth and better supply from the manufacturer side
Also Read on FinMedium:  Concall Summary: Emami Q4FY20

Image Source : Company’s LinkedIn profile

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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