Mahindra & Mahindra Financial Services Ltd on Wednesday reported a 55 percent year-on-year rise in standalone net profit to ₹882 crore for the September quarter, helped by 15 percent growth in standalone assets under management (AUM) and what the company called “pretty much the all-time low” in loan stress.
The company’s passenger vehicle disbursements grew 28 percent in the September quarter from a year earlier, chief executive Raul Rebello said on an analyst call. Passenger vehicles are the largest segment, accounting for 41 percent of Q2 disbursements, or ₹6,826 crore of ₹16,499 crore. Used vehicle disbursements grew 15 percent, below the 22 percent growth in total disbursements.
On a consolidated basis, profit after tax rose 61 percent to ₹911 crore in the quarter.
For the first half of FY27, consolidated profit rose 68 percent to ₹1,838 crore, while standalone profit rose 62 percent to ₹1,780 crore.
Standalone revenue from operations grew 15.5 percent to ₹5,164 crore, and earnings per share were ₹6.34, against ₹4.10 a year earlier.
Here are Autocar Professional’s five key takeaways from Mahindra & Mahindra Financial Services Ltd’s Q2 FY27 earnings:
1. Passenger Vehicles Lead, but Festive Demand Is Softer
The company reported 16 percent growth in commercial vehicle disbursements and construction equipment, 13 percent in tractors and 13 percent in SME lending. Three-wheelers grew 32 percent, and the company’s other businesses, including personal loans, farm implements, gensets and prime housing, grew 71 percent.
On a standalone basis, passenger vehicles accounted for 40.1 percent of business assets at the end of September, commercial vehicles and construction equipment for 18 percent, pre-owned vehicles for 12 percent, tractors for 12.2 percent and SME lending for 6.6 percent, according to the presentation.
Wheels disbursements grew 21 percent and non-wheels disbursements 52 percent, according to Rebello. He attributed the latter to investments made over the last couple of years and to the business being “so early in the game”. The company’s narrower measure of new growth engines, which covers SME, personal loans and prime housing, grew 38 percent. Non-wheels now account for 20 percent of consolidated lending assets under management of ₹1,56,311 crore, a share that includes trade advances.
Used vehicles trail in growth but not in margins. Rebello told shareholders in July that used vehicles, like tractors, “inherently have a higher margin profile” than some other segments. He added that the company was “very keen” to meet its target, set some years ago, of moving return on assets from 2 percent to 2.2 percent and eventually to 2.5 percent.
However, early festive demand is weaker. Underlying commerce and unit disbursements fell from last year’s levels in the first 10 days of Navratri, he said, though last year’s base was inflated by pent-up demand.
2. Profit Growth Rests on a Weak Base
Standalone net profit for the first half rose 62 percent to ₹1,780 crore, while consolidated profit rose 68 percent to ₹1,838 crore. Rebello put return on assets at 2.3 percent for the half, and the presentation shows this is on a standalone basis, with 2.2 percent for the quarter.
However, the comparison is against a weak base. Standalone net profit in the September 2025 quarter was ₹569 crore, and Rebello told shareholders in July that growth in the first half of FY26 was “very muted”.
Profit has barely moved since. Pre-tax profit of ₹1,162 crore in the September quarter compares with ₹1,186 crore in June. It also compares with an average of about ₹1,175 crore per quarter in the second half of FY26, before a one-time labour-code charge. Net profit slipped slightly from the June quarter.
Lower provisioning helped. Impairment charges fell 16 percent to ₹630 crore, a drop that accounts for about 29 percent of the ₹414 crore increase in pre-tax profit. Write-offs, however, rose 19 percent to ₹987 crore in the first half, while other impairment charges fell to ₹212 crore from ₹580 crore.
Rebello said profit growth was “not sustainable, right, at the 70 percent levels”. Such quarters, he said, “have to be read in context with what credit cost has done to the equation”.
Moreover, asset quality has improved. Gross Stage 2 and Stage 3 assets fell to 8.1 percent from 9.7 percent a year earlier, which Rebello called “pretty much the all-time low”. Gross Stage 3 assets were 3.42 percent, against 3.94 percent a year earlier. Credit cost was 1.6 percent, within the 1.3 percent to 1.7 percent range the company targets. The capital adequacy ratio, however, fell to 17.98 percent from 19.50 percent a year earlier.
3. Funding Costs Squeeze Margins
Finance costs grew faster than interest income from the June quarter, so interest income net of finance costs slipped slightly to ₹2,391 crore. That is still 13 percent higher than a year earlier.
Rebello blamed a liquidity buffer that has roughly doubled from last year, to ₹16,150 crore from ₹8,550 crore. The company built it as a hedge against the West Asia crisis and El Niño. He also blamed festive-season trade advances that earn no interest. He said loan income in the September quarter was “at an absolute baseline” and should recover as those advances turn into loans.
Rebello said India has had one rate increase so far and the company must “brace for possibly more”. Management said a 25-basis-point increase applied to the floating book would lead to almost 10 basis points of the existing borrowing stock being repriced within a quarter, and that refinancing would cost more. Chief financial officer Pradeep Kumar Agrawal expects the cost of funds to move “towards the upward trajectory”.
Most vehicle loans carry fixed rates, which limits how quickly the company can pass costs on. Rebello said new vehicle loans will be priced higher, while floating-rate non-wheels loans reprice faster. Competition is intense in salaried lending, where the company does not operate. It is milder in self-employed segments, where he sees room to price in higher costs, though he called it very early days for doing so.
In July, Rebello said net interest margin had “climbed back to the 7% clip”, with a medium-term range of 7 percent to 7.2 percent.
This week, Rebello said the margin sits at the lower end of 7 percent and the company needs to achieve its return-on-assets target of 2.2 percent to 2.5 percent for FY31.
He pointed to a “denominator effect” from the liquidity buffer and trade advances, which he described as “not structural but more seasonal in nature. Cost will have its challenges”.
4. Insurance Fees Face Regulatory Risk
Insurance agency fees rose 73 percent to ₹305 crore in the first half. That equals about 3 percent of standalone revenue and roughly 13 percent of first-half pre-tax profit, before related costs.
A new consultation paper on insurance could cut into that income. Rebello said it “can have a material impact if it is implemented suo motu as is”, adding, “If it comes as is, there will be a shave-off in our fee income.”
He said the initial suggestions on motor insurance, covering third-party and own-damage cover, would mean “quite a shave-off” for Mahindra Insurance Brokers, its broking arm. The company couldn’t yet quantify the effect and would “wait and watch”, he said.
Nonetheless, Rebello said the corporate agency business is young. The company began benefiting from its agency licence only in the last four to five quarters and is “still early in the day” on scale. He hopes growth will offset some of any loss.
5. AI Is Trimming Costs, but the Evidence Is Early
Cost-to-income fell to 36.7 percent in the first half from 39.4 percent a year earlier. Rebello said AI-orchestrated loans carry lower acquisition costs and that “you can connect some of these dots” to cost-to-income ratios.
The company put disbursements through its digital and AI-orchestrated channel at ₹1,663 crore in the quarter, up from ₹1,291 crore in the June quarter. Rebello said these loans are AI-enabled, not end-to-end AI. They cover mainly top-up loans to existing customers, used vehicle loans, personal loans and parts of dealer-led business. He said it is too early to see any differentiated asset-quality trend among these customers.
Rebello said AI-enabled workflows now cover 75 percent of the back office. The presentation shows bot coverage in collections at 28 percent, through more than 12 vernacular AI bots. In July, he told shareholders that digital and “phygital” channels accounted for close to 9 percent of monthly customer acquisitions and had cut the cost of acquisition by close to 25 percent to 30 percent on business sourced through them.
Headcount, which Rebello said had remained static for two years, is now rising as the company pivots back to growth. Rebello said part of the increase reflects off-roll staff moving on-roll, and that the used vehicle business “is still a person-driven business”.
Rebello maintained the company’s medium-to-long-term target of 16 percent to 18 percent growth in assets under management. He said the company does not give quarterly or yearly commitments.