The RBI announced Draft Guidelines for Banks and Non-Banking Finance has to maintain 5% General provision on giving loans on commercial and current projects loans. This 5% affected the Loans profit margins for this banks and NBFCs. The Power Finance Projects also applicable by these Guidelines.
REC LTD Market price is moving in Ascending channel and market has rebounded from the higher low area of the channel
Shares of REC Ltd., Power Finance Corporation Ltd. (PFC), and Indian Renewable Energy Development Agency (IREDA) experienced a significant decline of up to 11 percent on May 6, erasing most of the gains made in the previous week. REC and PFC stocks had reached record highs in the preceding week due to an impressive rally driven by robust fourth-quarter earnings.
The sharp downturn followed the release of draft guidelines by the Reserve Bank of India concerning project financing. These guidelines propose a 5 percent general provision requirement on all existing and new project loans in the construction phase, i.e., before commercial operations commence. These regulations are expected to apply to both banks and non-bank lenders. REC and PFC serve as key agencies responsible for financing projects in the power sector.
IREDA shares also faced continued losses, falling by up to 6 percent, marking their most significant single-day decline since December 2023. The stock has seen a decline of over 10 percent in the past five sessions.
Analysts at IIFL Securities anticipate no impact on the Return on Equity (RoE) of non-bank lenders like REC, PFC, and IREDA. However, they expect a potential decrease of 200 to 300 basis points in their tier-1 capital ratio, which could also influence their valuation multiples.
Despite the recent substantial increase in share prices, analysts believe that these stocks remain relatively undervalued. Additionally, with the improving financial strength of REC and PFC and the consistent growth in power demand in India, these stocks present a compelling investment opportunity.
The Tata Tech company reported weak Q4 profit for Jan- Mar 2024 Quarter. 18% Net profit fall down and Revenue growth at less than 1% as Rs.1301 cr in Q42024 compared to 1289.5 Cr in Q32024. EBITA Margin maintained 18.4% and Growth will come back in next quarter due to order book weightage in BMW, Aerospace clients and other educational clients.
TATA TECHNOLOGIES Market price is moving in descending channel and market has fallen from the lower high area of the channel
Tata Technologies witnessed a 5 percent decline in its share price on May 6 as investors reacted unfavorably to the company’s lackluster performance in the January-March quarter.
The company reported a net profit of Rs 157 crore for the March quarter, representing an approximate 8 percent decrease sequentially from Rs 170 crore in the previous quarter. This decline in profitability was primarily attributed to subdued revenue growth and reduced other income due to a one-time deferred tax asset write-back.
Revenue growth also remained sluggish, registering a modest increase of less than 1 percent to Rs 1,301 crore in Q4FY24 compared to Rs 1,289.5 crore in Q3FY24. JM Financial noted that the subdued revenue growth was largely due to the project ramp-down by Tata Technologies’ major services client, Vinfast. Additionally, the management indicated that there would be some continued residual draw-down in the Vinfast account in Q1FY25.
Operational performance, however, remained relatively stable quarter-on-quarter, with the EBITDA margin standing at 18.4 percent in Q4.
Looking ahead, JM Financial revised its constant currency revenue growth estimates for Tata Technologies’ services segment to 11 percent-15 percent for FY25-26. The brokerage explained that the reduction in growth estimates for FY25 was influenced by the expected residual decline in Vinfast’s business in Q1, coupled with a slightly weaker performance than initially anticipated. JM Financial also adjusted its margin assumptions for FY25/26 downward by 60 basis points each to reflect a more subdued outlook provided by the management.
Despite the challenges, JM Financial remains optimistic about Tata Technologies’ growth prospects, citing a more diversified portfolio compared to previous years. The brokerage believes that despite the weakness in the Vinfast account, the company’s contracts with BMW, aerospace clients, and educational institutions will help sustain its underlying momentum.
M&M Finance: Mahindra Finance Q4 Net Profit Falls 10% to Rs 619 Crore
The M&M Finance reported 10% net profit decline in the Q42024 as Rs.619 cr. This profit decline due to one of branch in North Eastern area made Fraudlent applications of KYC accounts nearly 2887 numbers, Nearly Rs.135.19 cr value is Fraud allegations by Employees in the Vehicle loans disbursements. Same frauds is checked in other branches and no issues in other branches.
MAHINDRA & MAH FIN Market price is moving in Ascending channel and market has reached higher low area of the channel
Company Net profit declined to Rs.1760 cr in this year and Net interest rose to 14% as Rs.1974 cr and Net income rose by 23% to Rs.13562 cr in this FY 2023-2024.
Mahindra & Mahindra Financial Services disclosed a 10 percent decrease in standalone profit and tax, amounting to Rs 619 crore for the January-March quarter of the fiscal year 2023-24.
In its regulatory filing, the non-banking finance company revealed that a fact-finding assessment of fraud at its Aizawl branch during the quarter identified 2,887 loan accounts with potential fraudulent activities. These loans, with an outstanding net recoverable balance of Rs 135.9 crore as of March 31, 2024, have been fully provided for.
The company elaborated that the fraud pertains to retail vehicle loans disbursed by the company, involving collusion between its employees, vehicle dealers, and bank employees. The fraudulent activities included forgery of KYC and other asset-related documents, resulting in the misappropriation of company funds. In response, Mahindra Finance engaged a law firm and an accounting firm to conduct a comprehensive fact-finding assessment of the suspected irregularities.
Despite this setback, the company assured stakeholders that an exhaustive analysis of customer contracts across its portfolio at a national level confirmed no similar instances of fraud elsewhere. As a proactive measure, Mahindra Finance outlined initiatives to reinforce controls, including expediting the centralization of document reviews and implementing digital due diligence tools for customer onboarding.
During the March quarter of the fiscal year 2023-24, Mahindra Finance recorded a total income of Rs 3,706 crore, reflecting a 21 percent increase from Rs 3,057 crore in the corresponding period of the previous year. Net interest income also rose by 14 percent to Rs 1,971 crore during the fourth quarter of FY24.
For the entire fiscal year 2023-24, the company’s profit after tax declined by 11 percent to Rs 1,760 crore, while total income surged by 23 percent to Rs 13,562 crore.
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