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Nomura India maintained its ‘Reduce’ rating on the Mahindra Finance stock, citing higher share of AUM (54 per cent of AUM) falling into highly competitive segments like auto/cars, leading to potentially negative impact on yields. It said M&M Finance’s credit cost is likely to stay elevated due to the captive nature of the business and total ECL provision being at a multi-year low of 3.8 per cent. Besides, it said Mahindra Finance has underwhelming profitability on a structural basis with five and 10-year RoE being at 9 per cent and 11 per cent, respectively, the lowest among its peers. Nomura also raised concerns over expensive valuation and suggested a target of Rs 240, valuing MMFS at 1.4 timesFY26F BVPS.

“MMFS is one of our high-conviction stock ideas due to its attractive risk-reward & improving return ratios. We retain our high-conviction ADD rating on MMFS with a target price of Rs370, as we have valued the standalone entity at 2.2 times FY25F BV and added Rs20 per share for its subsidiaries,” said InCred Equities.