Non-banking financial company Mahindra and Mahindra Finance is aiming to reduce its net non-performing assets (NPA) ratio to below 4 per cent by March-end.
In the quarter ended December 31, 2021, the company's net NPA (stage 3 assets), stood at 5.63 per cent (as per IND-AS
Under the Reserve Bank of India's Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances (IRACP), released in November last year, its net NPA was at around 11 per cent in the third quarter of the current fiscal.
Its Vice-Chairman and Managing Director Ramesh Iyer said the company is committed to reducing net NPAs to below 4 per cent under IND-AS and below 6 per cent under IRACP, by March-end.
The non-bank may be required to make an additional provision in the range of Rs 500 crore to Rs 1,500 crore in Q4 FY22 in order to bring the net NPA below 6 per cent under IRACP norms.
Its gross NPA as per IND-AS was at Rs 7,223 crore (11.30 per cent) and under IRACP at Rs 10,897 crore (14-15 per cent) as on December 31, 2021.
The management believes that enhanced collections and legal efforts, including repossessions and settlements, should help reduce gross NPA (as per IRACP norms) by March-end.
"Fourth quarter is our best quarter from a collection perspective and you will see an improvement in the gross NPA number also," Iyer added.
In the quarter ended December, its standalone profit after tax (PAT) stood at Rs 894 crore, compared to a loss of Rs 274 crore in the year-ago period.
Iyer said the growth in profit was driven by improvement in asset quality and the resultant reversal in NPA provisions and higher collection efficiency.
He added that after the first-quarter results this year, the company made very high provisions because of the pandemic and market conditions. At that time, it had stated that around 80 per cent of the excess NPA provision will get reversed over the next three quarters.
"As of December 31, 2021, we have already reversed around 60 per cent of that provision. In the following quarter (Q4), there will be the further reversal of provisions," he said.
It had made a provision of Rs 2,517 crore in Q1 FY22. Of that, Rs 1,510 crore or 60 per cent has been reversed till Q3 of this fiscal.
During the third quarter, disbursements grew 28 per cent to Rs 8,023 crore from Rs 6,270 crore in the same period of the previous fiscal. The company's capital adequacy stood at a healthy 26.8 per cent and it maintained a provision coverage on stage 3 loans at 53.2 per cent.
As of the December quarter, it carried a total liquidity buffer of over Rs 11,000 crore.