Accumulate Mahindra & Mahindra Financial Services Ltd For Target 350 by Prabhudas Liladhar Capital Ltd
Digital Transformation Strengthens Lending Engine
We attended MMFS’ transformation tour covering its central processing center (CPC) and dealership operations, highlighting the company’s increasing use of technology, data and AI across the lending lifecycle. Digitalization has shortened the customer journey, with first-offer TAT reduced to ~20 minutes from 6–7 days earlier and normal cases processed in <1 hour with same-day disbursement. Proprietary 30+ years of repayment data and 40 risk cohorts support granular underwriting, while digital collections have reached 70–75%. Technology remains a key enabler of operating leverage for MMFS, with further benefits likely from AI-led processing, collections, risk-based pricing and cross-sell initiatives. We roll-forward our estimates to Sep’28E with an unchanged multiple of 1.5x Sep’28 P/ABV arriving at TP of INR350. Maintain ‘Accumulate’.
Faster financing improves dealer conversion:
MMFS’ digital lending push has materially reduced the time taken to provide customers with a financing proposition. MTezz app captures customer and vehicle details at source, while the Business Rule Engine (BRE) uses this information to generate a soft offer. The offer is typically available in ~20 minutes. At the dealership, the executive can thus provide a financing proposition while the customer is still evaluating tractors. This is particularly relevant in tractor financing, where certainty of funding can influence lender selection. Normal cases can now be processed in <1 hour, with same-day disbursement, vs. ~10 days earlier.
Proprietary data supports granular underwriting:
MMFS leverages 30+ years of repayment history alongside bureau- and customer-level information for underwriting. Customers are segmented into 40 risk cohorts, allowing LTV and pricing to be differentiated based on customer risk. The framework also supports underwriting of select new-to-credit customers using parameters such as geography, land-holding and crop mix. The new technology stack has also improved first-time-right (FTR) files, while process simplification and automation have reduced processing time from 40–50 minutes to ~7 minutes. About 65% of processes are now AI-enabled, assisting CPC teams in document processing. Digital consent has also reduced field intensity, with ~89% being completed digitally and field visits largely limited to mandatory verification.
Digital collections improving repayment efficiency:
The transformation extends beyond origination. MMFS has shifted 70–75% of collections to digital modes vs. 30% earlier, with e-mandate penetration at ~65%. Promise-to-pay (PTP) tracking, customer history and algorithm-led prioritization help collection executives focus on accounts that require greater intervention. Same-month collections have improved to 90–95 customers per 100 from 80–89 earlier, while repossession rates have declined to 2–3% from ~5% last year. Business teams are also responsible for early stage collections, ensuring accountability in sourcing and underwriting discipline.
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