Shares of Mahindra & Mahindra Financial Services Ltd. (M&M Finance) gained over 5% on Friday, July 3, after the NBFC reported a 21% year-on-year increase in disbursements for the June quarter, while maintaining stable collection efficiency and a comfortable liquidity position.

According to the company's provisional business update, overall disbursements stood at approximately ₹15,560 crore in the June quarter, while business assets grew around 12% year-on-year to ₹1.37 lakh crore. Collection efficiency remained at 95%, unchanged from the year-ago period.

Stage-3 assets are estimated at 3.4-3.5% as of June 30, compared with 3.4% at the end of March and 3.8% a year earlier. Stage-2 assets are estimated at 4.9-5.0%, versus 4.8% in the preceding quarter and 5.9% in the corresponding period last year.

The company also said it ended the quarter with a liquidity chest of over ₹14,600 crore.

Why Is Citi Bullish On M&M Finance?

Following the update, Citi reiterated its 'Buy' rating on the stock with a target price of ₹380 per share. This implies an upside potential of close to 20% from current levels.

The brokerage said M&M Financial's asset quality remained resilient during the quarter, with only a marginal seasonal increase in overdue accounts. It expects management overlays of ₹217 crore and estimated write-offs of around ₹490 crore to help keep credit costs under control, while noting that the company's liquidity remained strong with a cash buffer of over ₹14,600 crore.

Jefferies Flags Some Key Risks On M&M Finance

Jefferies maintained its 'Hold' rating on the stock with a price target of ₹325 per share.

The brokerage said collection efficiency remained stable at 95%, while Stage-3 assets were broadly unchanged and Stage-2 assets rose only marginally, performing better than typical seasonal trends.

However, it retained a cautious stance, citing a subdued growth outlook and potential monsoon-related asset quality risks despite what it described as "reasonable valuations."

Shares of M&M Finance are trading 4.5% higher on Friday at ₹332.2. The stock is up 15% in the last one month, but is still down 18% for the year.