M&M Financial’s upgrade is based on four primary factors that support the investment case for the non-banking financial company (NBFC), such as continued outperformance of rural demand over urban, strong growth potential in tractors, pre-owned vehicles, and SME lending, contained volatility in gross stage 3 and gross stage 2 metrics, with better credit cost management and limited downside risk.
The brokerage noted that rural consumption and demand continue to outperform their urban counterparts. This trend provides a supportive macroeconomic backdrop for M&M Financial, whose core lending operations are primarily focused on rural and semi-urban markets.
According to Citi, volatility in GS3 (Gross Stage 3) and GS2 (Gross Stage 2) asset quality metrics was contained in the first quarter of the current financial year. It noted that improved internal management is expected to help in maintaining stability in credit costs.Even in an adverse situation, Citi estimated that the potential impact on book value would be limited to 5% – 6%, highlighting what it sees as a relatively resilient balance sheet.
At the current price, M&M Financial is trading at a price-to-book multiple of 1.3 times December 2026, which Citi considers to be factoring in concerns around near-term growth moderation and asset quality.
Out of the 37 analysts that have coverage on M&M Financial, 16 of them have a “buy” rating, 15 have a “hold”, while six of them have a “sell” recommendation on the stock.
Shares of M&M Financial are trading 1.4% higher on Wednesday, at ₹255.45. The stock has declined 5.5% in the last one month.
