India Ratings affirms Mahindra Finance's long-term rating at 'AAA' with 'stable' outlook

The agency has also affirmed the company's short-term rating at 'IND A1+'.

India Ratings said that the ratings continue to reflect Mahindra & Mahindra's (M&M's) credit strength and considers MMFSL to be core to M&M's operations, as it supports a substantial proportion of the parent's business and shares its parent's brand name and has strong operational linkages with it.

The ratings also consider MMFSL's diversified funding profile and the competitive cost at which MMFSL raises funds.

MMFSL has demonstrated an improvement in its profitability in 9M FY25 due to better margin and an improvement in its asset quality as reflected in the reduced credit cost.

Although there was an increase in MMFSL's leverage due to growth in the loan book however India Ratings believes M&M will support MMFSL in terms of timely equity infusion as and when needed.

The agency further stated that the developments like a sustained reduction in the reliance of M&M on MMFSL in vehicle financing; a significant dilution in MMFSL's operational linkages with M&M; a sustained increase in the leverage, resulting in tier I reducing below 15% on a consistent basis; and any weakening of M&M's credit profile or its ability to support MMFSL could lead to a negative rating action.

Mahindra & Mahindra Financial Services (MMFSL) (Mahindra Finance) is a large non-banking finance company and M&M is a leading Indian automobile manufacturer. Besides financing M&M's vehicles, MMFSL is the holding company of the group's other financial service forays, including rural housing finance.

The scrip shed 0.18% to currently trade at Rs 271.10 on the BSE.

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