This company looks promising. Pls look at recommendations from HDFC Securities

http://www.valuenotes.com/hdfc/hdfc_mmfs_03Jul09.asp?ArtCd=147100&Cat=C&Id=1334

I will post my comments later.

The company is a promising play on financial sector at proper valuations at current market price and could be the financial powerhouse in the making from Mahindra stable.

Anand Mahindra has a lot of vision in all his endeavours and I feel this company can be a good portfolio holding which could weather ups and downs of the market.

New initiatives like MF business and the wide geographical reach of the company could be very important. It happens to be a preferred financier for maruti vehicles.

Only overhang over the stock remains the poor monsoon where the bread and butter business of the company of tractor financing may not show big growth.

Here is my perspective:
Positive
1. Valuation is not demanding at 1.3 BV.
2. Core biz is growing at 25%.
3. Focus on Fee based Biz. Insurance distribution.
4. Home Loan biz has started growing pretty well and is profitable in 2nd yea itself. It has immense potential.
5. Largest pan-India rural and semi-urban biz.
6. MF can be actually positve. If they can be creative and build a brand which sells in rural India. Brand Loyality in pretty strong in rural India.
7. They have managed NPAs pretty well so far.
8. Mahindra's corporate governance is pretty good.
9. Company can be umbrella for all Fin Biz of Mahindra group.
10. They will act as vehicle for banks to achieve their priority sector lending targets.
11. Tractors becoming economically viable replaement for oxes.

But biggest driver will be rural focus of government. We have reached a point where food security for growing population is becoming a big concern for policy maker. This wil force govt to provide incentive for farmers. It will come in form of higher support prices for food grains, loan incentives and so on. Whatever may be the policy decision we need food. First time since 60s food security threat is being seriously felt.

Negatives:
1. Impact of monsoon and cyclic fluctuations. (This warrants only long term investment. Q-2-Q investors need to keep away from this.
2. Rise in NPAs. (This should be manageable in longer term. Crop faillures can lead to NPAs in specific seasons)
3. Rising disel prices (Very unlikely that fuel prices will not be controlled)





Edited by nav_1996 - 30/Aug/2009 at 12:35pm

We must also remember that the NIM for them are in the range of 7-8% and more which should hopefully compensate for relatively higher NPA's. Also they are getting into many allied services also which can become a more sustainable distribution led income stream.. One worrying factor is the reduction in their credit rating by one of the agencies to a level of AA- which is not what I would prefer.. But the opportunity is quite big and Mahindra is a good brand in rural areas.. Also it is currently not at very high valuations so even if it does not work out very well, it will not lead to big losses (their low last year was around 160+)
So risk reward may suggest some small exposure and therefore I invested in this