Mahindra & Mahindra Financial Services Ltd Management Discussions

<dhhead>Management Discussion and Analysis</dhhead>

Mahindra & Mahindra Financial Services Limited – An overview

Mahindra & Mahindra Financial Services Limited (Mahindra Finance/MMFSL) is a subsidiary of the Mahindra Group’s flagship company Mahindra & Mahindra Ltd. (M&M)

(market capitalisation: H 2.73 trillion as on 3^rd May 2024), one of Indias leading business conglomerates. MMFSL is a leading non-banking financial company offices covering (NBFC) that provides a range of financial products services to borrowers in emerging India including MSMEs (micro, small, and medium enterprises).

Our Company is a formidable player in the financing of the purchase of new and pre-owned automotive vehicles, including tractors and commercialvehicles. The vision of MMFSL is to be a "Leading and responsible financial solutions partner of choice for Emerging India". Our new businesses include MSME lending and leasing, and our strategic emphasis is on the rural and semi-urban markets. We have had the opportunity to serve over 10 million customers since inception, relying on our extensivenetworkspreadacross1,370 27 states and seven union territories in India. Our ‘AAA’ credit rating is a sign of the inherent strength of our strong financial position and parentage.

Economic review

Global economy

The global economy witnessed demand resilience regardless of tightening financial conditions, simmering geo-political risks, and adverse weather patterns. Global growth came in stronger-than-expected in 2023, driven by the US economy, other emerging markets, and developing economies. Expansionary fiscal spending in advanced economies, strong labour markets and incomes, robust household consumption, and supply chain normalisation helped cushion the negative shocks stemming from geopolitical tensions in the Middle East and the war between Russia and Ukraine. However, the Euro area saw some lingering effects from high energy prices and weak consumer sentiments.

Globally, central banks were forced to raise interest rates to restrictive levels to keep the persistently high inflation in check. Tight credit availability and higher borrowing costs did cause strain to commercial real estate in some economies. Factors such as higher interest rates for extended period, supply disruptions, and price spikes could keep global financial conditions tight. The weakness in China’s property sector and local government financing constraints could also weigh on global growth prospects.

Outlook

Although many of these factors are still relevant, inflation is converging towards target levels across regions, thereby building expectations that policy rates will decline. Globally, the near-term priority for major landing’ by neither central banksisto facilitate a ‘soft lowering rates prematurely nor delaying rate cuts too much. According to the International Monetary Fund (IMF), global growth is projected at 3.2% in 2024 and 2025. Meanwhile, inflation is expected to fall to 5.9% in 2024 (vs. 6.8% in 2023) and to 4.5% in 2025. However, new commodity price spikes from geopolitical tensions and property sector woes in China could prolong tight monetary conditions and pose downside risks to growth forecasts. In summary, with the likelihood of a ‘hard landing’ receding as adverse supply shocks unwind, risks to the global outlook are broadly balanced.

Global growth forecast (%)
Particulars	2023	2024	2025E
World	3.2%	3.2%	3.2%
Advanced economies	1.6%	1.7%	1.8%
- United States	2.5%	2.7%	1.9%
- Euro area	0.4%	0.8%	1.5%
Emerging markets & developing economies	4.3%	4.2%	financial 4.2%
- China	5.2%	4.6%	4.1%
- India	7.8%	6.8%	6.5%

Indian economy

India continued to exhibit robust economic performance. Factors such as strong domestic demand, rural demand pickup, robust investment, and sustained manufacturing momentum have contributed to India’s resilience. The RBI and IMF projections forecast high growth rates for India, further reinforcing the positive outlook. In FY2024,

India’s buoyant domestic economic sentiment was reflected in strong GST collections, substantial growth in the manufacturing and services sectors, and record stock market performance, which underpinned India’s ability to navigate global challenges successfully. India is demonstrating a strong commitment to economic growth through substantial investments, dedicating approximately 30% of its GDP. This significant investment, coupled with consistent year-on-year GDP growth rates of 7% or higher, reflects the nations proactive approach towards fostering development and sustainable progress. As per RBIs survey the capacity utilisation in manufacturing sector is above the long term average at 74.7% for the quarter ended December 2023 and could remain elevated as growth receives support from improving consumer and business sentiment.

Global slowdown led to a moderation in India’s merchandise exports as well as merchandise imports, which helped narrow the merchandise trade deficit in FY2024, as exports showed a smaller contraction than imports. Services exports expanded at their fastest pace in FY2024, supported by rising software exports and business services exports. Owing to these developments, India’s current account deficit improved to 1.2% of GDP during the first nine months of FY2024, compared to the same period a year earlier. Retail inflation in FY2024 witnessed a significant decline, reaching its lowest level since the COVID-19 pandemic. Accordingly, as price pressures continue to abate in India, the RBI’s Monetary Policy Committee (MPC) held policy rates at their current levels, stating that the last mile of disinflation will involve aligning inflation with its target of 4.0% on a durable basis. Considering factors such as geopolitical conflicts, potential adverse domestic weather shocks, and the prediction of an above-normal monsoon this year by the IMD, the RBI projected CPI inflation for FY2025 at 4.5%.

Outlook

Overall, India’s growth momentum remains strong. The upturn in the investment cycle, a broad-based revival in manufacturing and services sectors, the government’s capex push, upbeat business and consumer sentiments, and strong corporate and bank balance sheets will accelerate growth. We should see the continuation of leveraged consumption and investment which should keep FY2025 GDP growth near 7.2%, according to the

RBI. Early indications suggest normal or above-normal monsoon which should improve agricultural income and lower inflation. Apart from improving consumer sentiment, the economy is benefiting from the revival in corporate sector project announcements, which augurs well for job generation. Volatile food prices, however, interrupt the path of disinflation and cloud the inflation outlook. The continuing effect of monetary policy action and stance is keeping core inflation muted. Spillovers from geopolitical hostilities, volatile global financial markets, and climate shocks are key risks to the growth and inflation outlook.

Macro economic snapshot - India

	FY2017	FY2018	FY2019	FY2020	FY2021	FY2022	FY2023	FY2024	FY2025E
Real GDP growth (%)	8.3	6.8	6.5	3.9	-5.8	9.7	7.0	7.6	7.2
CPI inflation (%)	4.5	3.6	3.4	4.8	6.2	5.5	6.7	5.1	4.5
WPI inflation (%)	1.7	2.9	4.3	1.7	1.3	13.0	9.4	0.4	3.5
Merchandise exports	5.2	10.3	9.1	(5.0)	(7.5)	44.8	6.3	(3.7)	3.3
(%, G&S)
Merchandise imports (%, G&S)	(1.0)	19.5	10.3	(7.6)	(16.6)	55.3	16.6	(5.5)	4.8
Current account balance (% of GDP)	(0.6)	(1.8)	(2.1)	(0.9)	0.9	(1.2)	(2.0)	(1.0)	(1.2)
Exchange rate (INR/$ - avg.)	67.1	64.5	69.9	70.9	74.2	74.5	80.4	83	82.7
10-year yield (% - March-end)	6.7	7.3	7.5	6.9	6.3	6.8	7.3	7.1	6.8

Source: Department of Economic Affairs

Indian

India’s diversified financial services sector is undergoing rapid expansion and evolution as new companies enter the market with distinct offerings. The industry expansion is supported by rising income, technological innovations in fintech, and digital payments domain, reforms by the government and growing opportunities for higher penetration. However, challenges remain in terms of financial literacy and access and utilisation of formal credit.

Growth drivers

• Rising income

Rising disposable incomes generate increasing demand for financial services across all income brackets in India, including insurance and retail banking services. Leveraged consumption, especially among wealthier households, presents opportunities for growth and expansion of various financial services. High net-worth individuals (HNWI) in India is expected to rise to 16.5 lakh by 2027, growing 107% from 7.9 lakh in 2022.

• Financial inclusion

India’s financial inclusion index (FI-index), an indicator of how well the financial services have been extended to the unbanked population (0 implies complete financial exclusion, 100 indicates full inclusion), stood at 60.1 for March 2023 compared to 56.4 in March 2022. Improvement in FI-Index was mainly contributed by dimensions related to "usage" and "quality", reflecting deepening of financial inclusion. India’s Digital Public Infrastructure has helped transfer $ 400 billion of benefits to beneficiaries in the last five years.

• Fintech

Massive investments, innovation, growing internet penetration, Unified adoption of the Payments Interface (UPI), and partnerships with government, banks and other fintechs have contributed to the sector’s growth. The Central Bank is working toward expanding retail use of CBDC by allowing payments for defined benefits e.g. gift cards.

Financialisation of savings

India’s gross savings stood at 29% of GDP, amounting to over $ 1 trillion. The total mutual fund folios as on 29th February 2024 stood at 17.42 crore, with a number of folios under equity, hybrid, index, and solution-oriented schemes, wherein the maximum investment from the retail segment as per AMFI stood at about 13.95 crore. Total SIP accounts grew from 636 lakh in March 2023 to 820 lakh in March 2024. According to CRISIL, the financialisation of savings is likely to accelerate, with the managed funds industry anticipated to grow assets under management (AUM) to H 315 lakh crore by FY2027 from H 135 lakh crore in FY2022.

Growingpenetrationoffinancial products

India already has the second-highest smartphone users globally and is the second-largest internet user market. With increasing mobile and internet users, these products are now more accessible and convenient to customers, propelling industry growth. Higher internet penetration in rural areas over the coming years, initiatives to increase financial literacy, and expansion of the fintech ecosystem beyond metros and Tier I and Tier II

urban centres can help tap into the currently under served rural areas, MSMEs, new-to-credit customers, and lower income classes.

• Government initiatives

In budget 2023-24, the government revamped the credit guarantee scheme. The inflow of H 9,000 crore ($ 1,080.97 million) into the corpus of the credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will give MSMEs more access to collateral-free loans. The Government has also approved 100% FDI for insurance intermediaries and increased FDI limit in the insurance sector to 74% from 49%.

Industry structure and developments

Overview

NBFCs have emerged as the crucial source of finance for a large segment of the population, including SMEs and economically unserved and underserved people. They have managed to cater to the diverse needs of the borrowers in the fastest and most efficient manner, considering their vast geographical scope, understanding of the various financial requirements of the people, and extremely fast turnaround times.

NBFCs play an important role in credit intermediation, providing last-mile credit delivery with the help of technology. They are critical to the financial inclusion process, complementing the banking system by supporting the growth of millions of MSMEs, and independently employing people. Over the years, NBFCs have seen a rising credit-to-GDP ratio ("credit intensity") and a growing role in credit provisioning vis-a-vis scheduled commercial banks.

Source: RBI

The NBFC sector continued to witness an upward trend in credit growth between September 2022 and September 2023. The gross advances grew by 20.8% a substantial increase from 10.8% a year ago. This growth was predominantly fuelled by a strong increase in personal loans (32.5% growth) and lending to agriculture industry (43.7% growth).

In fact, over the past four years, the personal loans category surged by a CAGR of 33%, significantly outpacing the overall credit growth of nearly 15% CAGR.

Performance in FY2024

Credit growth of NBFCs outpaced that of banks. Disbursements by NBFCs (excluding Infra-NBFCs) remained higher than pre-pandemic levels for the first half of FY2024 on the back of strong consumption demand. Moreover, collection efficiency of NBFCs was healthy in the first half of FY2024 and is expected to stay robust on the back of improved economic activity and a favourable outlook for most sectors. Further, the NBFC sector’s momentum has been augmented by the proliferation of digital lenders offering alternative financing options.

An ongoing improvement in asset quality can be observed as GNPA (Gross Non-Performing Assets) ratio of NBFCs is seen declining from 5.7% in FY2022 to 4.6% in FY2023.

Financial position

GNPA of NBFCs improved by 110 bps to 4.6% in FY2024 from 5.7% in FY2023 driven by higher credit demand and improved collection efficiencies. In line with the decline in GNPAs, the capital position of NBFCs remained robust. NBFCs remained comfortably capitalised despite a fall in overall levels due to strong business growth. The Capital to Risk (Weighted) Assets Ratio (CRAR) of 27.6% at the end of September 2023 rose 20 bps from September 2022 levels. This remains well above the regulatory requirement of 15%. NIMs grew to 4.3% in FY2024 vs 4.1% in FY2023.

As per RBI data, NBFCs have achieved a marked improvement in its key financial ratios in FY2023. RoA has improved by 80 bps to 2.6% in March 2023 from 1.8% in March 2022. Similarly, it witnessed 320 bps improvement in ROE. NIM has seen a positive upward trend from 4.1% in March 2022 to 4.3% in March 2023.

Key regulatory developments

With the increasing size and growth of NBFCs, the regulations are getting tighter, and the scrutiny is intensifying to make the business model more robust and relevant. Confronted with the risk of a spillover effect in the financial services industry, the RBI is taking all These changes aim to address governance issues, strengthen risk management practices, and ensure higher levels of supervision. A few of the regulations guiding the sector are:

Higher risk weights to unsecured lending

Risk weights were raised by 25 bps to 125% on retail loans, due to indiscriminate growth in the unsecured loan portfolio, especially in personal loans and credit cards. It implies higher capital allocation for underwriting unsecured loans, thereby pressuring the capital levels. Raising capital at this juncture may not be attractive as investors exercise caution on the back of these developments. Restrictions were also imposed on banks lending to NBFCs by increasing risk weights.

Scale-based regulation for NBFCs

Reserve Bank of India ("RBI") has notified Scale Based regulations ("SBR") on 22 ^nd October 2021. Your Company has been categorised as an NBFC- Upper Layer vide press release

th

dated 30 September 2022, issued by RBI and further dated 14^th September, 2023 issued by RBI. Your Company has always endeavoured to maintain the highest standards of compliance within the organisation and will continue to do so going forward. The Company continues to comply with all the applicable laws, regulations, guidelines, etc. prescribed by the RBI, from time to time including the norms pertaining to capital adequacy, non-performing assets, etc. Your Company’s asset liability management is reviewed on quarterly basis by a focused Board level committee viz. Asset Liability Committee. ech Your Company’s liquidity coverage ratio (LCR) was 313% as on 31st March 2024 against the mandatory requirement of 85%.

Your Company has adopted all the mandatory applicable policies under SBR like Large Exposure Policy, Internal Capital Adequacy

Assessment Policy (ICAAP), Compliance Policy, etc. Your Company has also put in place Compliance Risk Assessment Framework and Compliance Testing programme in compliance with the RBI circular dated 11th April 2022.

To have a robust framework and process for Business continuity, your Company has implemented Business Continuity Policy (BCP), which, inter alia includes identification, monitoring, reporting, responding, and managing the risks, including mitigating risks of a significant or prolonged business disruption, in order to protect the interests of the Companys customers, employees, and stakeholders. for a strong and resilient structure. Your Company continues to invest in talent, systems and processes to further strengthen the control, compliance, risk management, and governance standards in the organisation.

RBI asks NBFC-MFIs to lower interest rates

In February 2024, the Deputy Governor expressed concerns over some MFIs disproportionately increasing their margins and warned of regulatory action against the misuse of regulatory freedom by MFI lenders under the new regime. Several microfinance players cut interest rates after the RBI pushed them to pass on the benefits of higher margins to borrowers.

Arrangements with card networks

The RBI, via notification, asked card issuers not to enter into any arrangement with card networks that refrain from availing of the services of other card networks. The card issuer shall provide an option to their eligible customers from multiple card networks at the time of issue.

Barring of first loss default guarantee (FLDG) vide press release The RBI digital norms barred banks and NBFCs from using the FLDG arrangement equated with synthetic securitisation. The FLDG model benefitted the institutions as they were protected from default as the fintech bore part of the risk. However, now the industry is examining alternative co-lending arrangements and models.

According to industry players, the changes being announced by the RBI and the rising compliance costs may lead to consolidation in fintsector. The minimum the fast-growing cost of compliance has nearly doubled over the past year. These overheads include investments in technology, data protection and privacy, and internal and external audits, among other expenses. As a result, certain smaller players will eventually become part of bigger regulated entities.

Prudential norms for Income Recognition, Asset Classification and Provisioning offtake growth reaching (IRACP) on advances

We maintain such provisions in the books which adequately cover requirements under both IND-AS and Income Recognition, Asset Classification and Provisioning (IRACP) norms as notified by RBI. As on 31st March 2024, GNPA (IRACP) was higher by approximately H 1,363 crore in comparison to GS 3 (IND-AS). This remained range bound during the year and no additional provisioning was required on account of the IRACP. In comparison to the IRACP requirement, we maintained an excess provision of H 1,295 crore under IND-AS.

Outlook

NBFCs are set to grow their AUM by 12-14% in FY2024 and FY2025. With Indias GDP steadily approaching a 7 % annual growth rate, inflation being double subdued, and credit digits, it sets the right pitch for NBFCs to embark on the next wave of strong growth. The increased risk weight for NBFC loans under the new RBI regulations will raise costs for NBFCs. However, the impact could be short-term in nature as NBFCs will be able to adjust their lending rates accordingly.

In the long-term, growth is expected to be supported by a strong push towards digitisation, consumer sentiment, strong auto sales, and resilient housing demand. Further, factors such as higher provisioning, stronger balance sheets, receding asset quality concerns, and normalising funding situation would enable NBFCs to drive credit demand.

Automobile/vehicle financing

The Indian automobile industry is poised for continued growth, fuelled by rising purchasing power, increasing urbanisation, and government initiatives. India’s strategic tariff and FDI policies have fostered a robust automotive sector, making it the world’s fourth-largest car producer. India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world.

The two-wheelers segment dominates the market in terms of volume, owing to a growing middle class and a huge percentage of India’s population being young. Moreover, the growing interest of companies in exploring the rural markets, further aided the growth of the sector. Rising logistics and passenger transportation industries are driving up demand for commercial vehicles. Future market growth is anticipated to be fuelled by new trends, including the electrification of vehicles, particularly three-wheelers and small passenger automobiles. As per data from Society of Indian Automobile Manufacturers (SIAM), the total auto production (including PVs, CVs, 3W, 2W and quadricycles) was 2.8 million units in FY2024, registering 9.7% growth over the previous year. However, auto production was yet to fully catch-up to pre-pandemic levels, being 8% down from 2019 production levels.

Total domestic auto sales rose by 12.5% y-o-y in FY2024 at 24 million units, led by strong growth in PV sales, 2W and 3Ws. PV domestic sales at 4.2 million units (0.7 million units exports) in FY2024 was 25% higher than pre-pandemic 2019 levels. CV, 2W and 3W sales volumes were yet to catch up to pre-pandemic levels. 2W sales posted 13% y-o-y growth in FY2024 to 18 million units, but lower than the 21 million peak in FY2019.

Table: Domestic sale (in million units)

Category	2020-21	2021-22	2022-23	2023-24	1 Year CAGR	3 Year CAGR
Passenger vehicles	2.71	3.07	3.89	4.22	8.48%	15.91%
Commercial vehicles	0.57	0.72	0.96	0.97	1.04%	19.39%
Three wheelers	0.22	0.26	0.49	0.69	40.82%	46.38%
Two wheelers	15.12	13.57	15.86	17.97	13.30%	5.93%
Grand total	18.62	17.62	21.20	23.85	12.50%	8.60%

(Source: Society of Indian Automobiles Manufacturers)

The government’s strategy and policies are intended to promote greater adoption of electric vehicles in response to growing customer demand for cleaner transportation options. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles.

In addition, several initiatives by the GoI such as the

Automotive Mission Plan 2026, scrappage policy, and

Production-Linked Incentive (PLI) scheme are expected to make India one of the global leaders in the two-wheeler and four-wheeler market.

Rural India remains a key market for the auto sector; the Indian tractor industry has remained resilient throughout and has seen consistent export growth.

In FY2024, the industry exported 97,828 tractors compared to 1,24,542 units during the same period in FY2023. Softness in tractor sales in calendar year 2023 could be partly attributed to El Nino and high food inflation adversely affecting rural incomes, keeping rural demand recovery uneven. Decline in exports can also be associated to recessionary conditions in EU.

Outlook

According to CRISIL, the NBFC vehicle finance AUM is expected to clock growth of 17% to H 8.1 lakh crore by 31st March 2025, from H 5.9 lakh crore as on 31st March 2023. The growth will be driven by rising demand for commercial vehicles (CVs), cars, utility vehicles (UVs), and two-/three-wheelers. Returns on managed assets is projected to remain range bound at 2.0-2.2% over next two fiscals. NBFCs will likely leverage their last-mile connectivity and deep entrenchment in micromarkets to focus on used-vehicle financing. Overall, the vehicle financing sector remains highly dynamic in India, where digitisation and partnerships allow industry players to gain an edge over their competition.

(TMA)

Highlights of interim union budget FY2025

The automotive sector contributes significantly to India’s GDP and employment. The Union Budget touched upon the following critical areas for the mobility sector:

Push towards electric vehicles

Customs duty exemption has been extended to the import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in EVs The H 2,671 crore in the interim budget for FAME III for FY2025. To promote EVs, the Ministry of Heavy Industries has also sanctioned 6,862 e-buses for various cities, state transport undertakings, and state governments for intra-city operations. Also, customs duty reduction from 21% to 13% on lithium-ion cells and viability gap funding support for battery storage systems with a capacity of 4,000 MWh in Budget FY2024 will push the EV sector.

Production-linked incentive scheme

The Interim Budget reveals a substantial increase in the allocation for the automotive industry (PLI) Production-

Linked Incentive scheme for 2024-25, reaching H 3,500 crore. The PLI scheme for advanced chemistry cell and battery storage has seen a notable hike from H 12 crore to H 250 crore. Also, tenure of PLI for automobiles and auto components have been extended by one year.

Urban public transportation

The government proposed H 1,300 crore for electric buses and H 24,931 crore for metro projects. The funds mark a 7.57% increase from the previous year’s allocation for mass rapid transit system and metro projects. Under the PM-eBus Sewa scheme, the government aims to procure 10,000 electric buses for 169 cities through public-private partnerships. The scheme, with a total outlay of H 57,613 crore, will continue until 2037.

MSME financing

India’s micro, small, and medium enterprises (MSME) sector accounts for almost 33% of the country’s GDP and 45% of total employment, creating nearly 120 million jobs across all industries and being a key driver of credit offtake. The small companies account for 40% of the nation’s overall industrial production and 42% of all Indian exports. NBFCs play a critical role in funding this emerging sector by offering a variety of loan products tailored to address the specific needs of MSMEs like, term loans, working capital loans, cash credit, equipment financing, etc.

Digitised MSME loans

The RBI enabled end-to-end digitisation of loans to MSMEs in 2023 and complete digitalisation of Kisan Credit Card (KCC)-based loans.

Emergency credit line guarantee scheme (ECLGS)

As on 31st January 2023, 1.2 crore MSME units availed of the ECLGS scheme. Collateral-free resources, aggregating H 3.6 lakh crore, were raised. Bank credits to MSME registered a CAGR of 14.2% from FY2019 to FY2024.

Lean manufacturing competitiveness for MSMEs

Under the MSME Competitive (Lean) Scheme, MSMEs will be assisted in reducing their manufacturing costs through proper personnel management, better space utilisation, scientific inventory management, improved processing flows, reduced engineering time, and so on.

Micro and small enterprises cluster development programme (MSE-CDP)

The MSE-CDP was established with the goal of assisting MSMEs in developing and being sustainable by addressing challenges with information technology, skills and excellence, and market access. The plan assists in setting up Common Facility Centres with GoI assistance of up to

80% of the project cost and infrastructure facilities with GoI assistance of up to 70% of the project cost.

Performance in FY2024

Credit flow to MSMEs continues to grow, catalysed by technology and data-analytics-oriented lending. This credit growth is broad-based and expanding among semi-urban and rural MSMEs. GNPA ratios of MSMEs fell to 4.7% in September 2023 from 6.8% in March 2023.

Regarding the quality of the MSME loans, banks reported further improvement in the first half of the current financial year, according to the latest Financial Stability Report by the Reserve Bank of India (RBI), released in December 2023. The MSME gross non-performing assets (GNPA) had declined to 4.7% in September 2023 from 6.8% in March 2023 and 7.7% in September 2022. In March 2022, the GNPA ratio was 9.3%.

Outlook

The MSME sector is projected to grow at 7% in FY2025, resulting in increased credit demand and rise in the share of credit disbursed to MSMEs by SCBs and NBFCs. The government’s emphasis on self-sufficiency through the ‘Atmanirbhar Bharat’ initiative and the positive effects of the PLI scheme should drive demand for credit in the MSME segment. As economic activity picks up gradually with the support of fintech and other digital lending solutions in the sector, MSMEs’ demand for credit will likely increase as the sector also experiences the ease of doing business digitally.

Housing finance

Driven by important policy initiatives such as Housing for All, 2.55 crore units had been constructed in rural areas under the Pradhan Mantri Awas Yojana by 18^th March 2024. Further, with the government developing mega infrastructure projects such as highways, airports, metros, etc., real estate and housing finance are experiencing both quantitative and qualitative growth. In the future, growth in the affordable housing finance industry will be driven by an under-penetrated market and digitally enabled services.

Performance in FY2024

The Indian housing finance market is projected to be $ 385 billion in 2024. The segment is expected to clock a healthy ~24% CAGR from FY2024 to FY2033 on account of a rise in disposable income, healthy demand emanating from smaller cities, attractive interest rates, and government thrust on housing. The share of the higher ticket size segment (> H 1.5 million) increased from 76% in 2018 to 85% in 2023. The release of pent-up demand was reflected in the housing market as demand for housing loans increased. Despite rising interest rates and real estate prices, customer interest remained strong, as even with an increase, the rates remained below earlier cycles. Consequently, housing inventories fell to 4,81,566 units at the end of March 2024 across nine major cities from 5,18,868 units at the end of December 2023.

Outlook

In the Interim Union Budget FY2025, the government proposed to increase the PM Awas Yojana Fund to H 80,671 crore, which will result in the construction of an additional two crore houses in the next five years. In FY2025, the sector will likely see robust growth due to rising income and favourable government initiatives. ICRA expects the asset quality indicators of HFCs not be significantly impacted by the rise in interest rates as the nation’s housing market remains in an upcycle.

54,00,000

Mutual funds

According to the AMFI, the mutual fund industry’s net asset under management (AUM) was H 53.40 lakh crore at the end of March 2024, indicating investors’ continued faith in the markets. Of the total AUM, retail AUM across equity, hybrid, and solution-oriented schemes stood at an all-time high of H 31.2 lakh crore. As equity-oriented mutual funds registered a net inflow of H 1.84 lakh crore in FY2024, SIP inflows continued to soar. SIPs stood at H 1.99 lakh crore, 27.6% higher than the previous financial year.

Outlook

The Indian MF industry is expected to double its valuation to H 100 lakh crore by 2030. MFI growth is expected to be driven by differentiated perspectives on investing and retail participation from young investors. With a strong foundation for continued growth, the industry is expected to adapt to evolving market conditions, explore innovative investment avenues, and cater to the diverse needs of investors.

Insurance industry

India is predicted to have the fastest-growing insurance sector among G20 nations for the next five years until 2028, with a real-term growth of 7.1% in total insurance premiums. As per IRDAI, India will be the sixth-largest insurance market within a decade, leapfrogging Germany, Canada, Italy, and South Korea. The growth rate for the global insurance market is projected to be ~2.4%. According to the RBIs Economic Survey 2022-23, India is among the fastest-growing insurance markets globally and is likely to be in the top six insurance markets by

2032. Digitisation and an increase in the FDI limit are likely to drive increased long-term capital flow to the insurance sector in India.

India’s insurance penetration in FY2024 is estimated to be 3.8% of the GDP. The market share of private-sector companies in the non-life insurance market rose from 15% in FY2004 to 62% in FY2023. In H1 FY2024, non-life insurance players saw a premium income increase to H 1,42,802 crore due to strong demand for health and motor policies. The general insurance industry saw a growth of 14.9% in H1 FY2024. The business growth for the first half of FY2024 was driven by health (especially the group segment), motor, and crop insurance.

Outlook

The Indian insurance industry is likely to be among the fastest-growing insurance markets over the next decade. The life insurance business is expected to grow by 6.7%, backed by rising demand for term life cover by the middle-income group and increased adoption of insurtech. The non-life insurance sector is likely to grow by 9.7%, driven by economic growth, improvements in distribution channels, government support, and a favourable regulatory environment like sponsored mass health programmes such as ‘Ayushman Bharat’. Moreover, IRDAI has committed to providing ‘Insurance for All’ by 2047, which would lead to massive demand stimulation for the insurance industry in the coming years. With government initiatives, technological innovations, and regulatory frameworks shaping the industry, the prospects are likely to remain robust.

Business review

The business environment has witnessed a broad-based growth with further strengthening of our position in the financing of passenger vehicles, pre-owned vehicles, and tractors. The disbursement of H 56,208 crore was the highest ever, an increase of 13.5% over the previous year. This helped us reach a significant milestone, with our loan book exceeding H 1,00,000 crore. The growth has been a mix of gaining scale in our core area of rural and semi-urban markets coupled with building a presence in Emerging India by catering to the mass-segment. New business verticals like SME lending (including loans against property) and leasing are being scaled up. The business growth was complemented by a strong improvement in asset quality, wherein Gross Stage 3 improved from 4.5% (as of March 2023) to 3.4% (as of March 2024). Similarly, Gross Stage 2 improved from 6.0% to 5.0% during the year.

We continue to hold leadership positions in the Tractor and Mahindra UV (utility vehicles) financing segments. Our market share has also further improved during this period across manufacturers. We continue to partner with auto aggregators to generate leads in the pre-owned vehicle finance space.

Quiklyz, a leasing solution launched in FY2022, continues to enhance its presence in the B2B segment and is expected to grow as rising demand for EVs is expected to boost the rental and leasing market.

Our Company is now rated AAA across all credit rating agencies. This shall gradually reflect an improvement in borrowing rates and the ability to access more investors.

Overall, we continue to focus on sustained momentum in disbursements, improving asset quality, and robust collection efficiency, with a continued focus on talent retention and technology initiatives.

Business performance

Operational review

The key operational highlights are:

Total income was Rs.13,562 crore in FY2024 compared to Rs. 11,056 crore in FY2023, an increase of 22.7%, primarily led by asset and disbursement growth. Disbursements for FY2024 were at Rs. 56,208 crore, a growth of 13.5% over the previous year. Business Assets rose to Rs. 1,02,597 crore in FY2024 from Rs. 82,770 crore in FY2023, an increase of 24.0%. Strong Capital Adequacy at 18.9%, D:E ratio of 5.08 and maintained a comfortable liquidity chest Rs. 7,950 crore.

Maintained a healthy Provision Coverage Ratio (PCR) of 63.2% for Gross Stage 3 in March 2024. Customer base crossed 10 million customers. Employee base stood at 26,662 as on 31st March 2024.

SCOT analysis

Strengths

Stakeholder and customer relationships

• Long-lasting relationship across multiple OEMs and channel partners.

• Empowered local workforce. customer

• Deep Rural and Semi-urban (RUSU) presence and in-depth customer understanding. RUSU livelihoods acumen. Diversified product range as per customer needs.

• Customer and brand trust.

• Wheels leadership - strong position in the vehicle financing; market leader in tractor financing.

• Vast distribution network and wide coverage.

• Strengthened processes to manage volatility.

• Agile operations and control functions across compliance, risk, audit, underwriting and collections.

• Comfortable capitalisation and liquidity profile.

• Streamlined credit costs.

Challenges

• Limited MMFSL perceived presence beyond wheels financing.

• Weaker digital/technology capabilities than peers.

• Elevated cost of borrowing.

Opportunities

• Growing resilient middle-income segment with diverse and growing financial needs.

• Resurgent economic activity, increasing formalisation and digital economy.

• Rise of ecosystem partnerships and platforms.

Threats

• Rising competition from banks.

• Impact on demand in the backdrop of sustained inflation.

• Uncertain global political environment.

Financial overview

The following table presents the Company’s standalone abridged financials for FY2024, including revenues, expenses, and profits.

Abridged statement of profit and loss

(H in crore)

Particulars	For the year ended 31st March, 2024	For the year ended 31st March, 2023	Change (%)
Revenue from operations	13,404.14	10,928.80	22.6%
Other income	158.28	127.29	24.3%
Total revenue	13,562.42	11,056.09	22.7%
Expenses
(a) Employee benefits expenses	1,712.63	1,584.27	8.1%
(b) Finance costs	6,426.94	4,576.72	40.4%
(c) Depreciation, amortisation, and impairment	228.71	187.23	22.2%
(d) Impairment on financial instruments	1,822.79	999.23	82.4%
(e) Other expenses	1,015.88	956.06	6.3%
Total expenses	11,206.95	8,303.51	35.0%
Profit before exceptional items and taxes	2,355.47	2,752.58	-14.4%
Exceptional items (net) - income/(expense)	-	(54.51)	-
Profit before tax	2,355.47	2,698.07	-12.7%
Tax expense	595.85	713.75	-16.5%
Profit for the year	1,759.62	1,984.32	-11.3%

Key ratios
Particulars	For the year ended 31st March, 2024	For the year ended 31st March, 2023
PBT/total income	17.4%	24.4%
PBT/total assets	2.0%	2.8%
PAT/total income	13.0%	17.9%
RONW (Avg. net worth)	10.0%	12.1%
Debt/equity	5.08:1	4.39:1
Capital adequacy	18.9%	22.5%
Tier I capital	16.4%	19.9%
Tier II capital	2.5%	2.6%
Book value (In H)	147.0	138.3
NIM (gross spread)	6.8%	7.6%

Explanation for variation of 25% or more in key financial ratios

PBT/total income and PBT/total assets decreased by over 25% from previous year due to higher provision release in FY2023. The total provision write-back for FY2023 was INR 1,214 crore compared to a provision of INR 108 crore in FY2024, leading to lower PBT ratios for FY2024.

Discussion on financial performance

• Revenue from operations during FY2024 increased by 22.6% over the previous year. This was primarily due to the average loan book in FY2024 being higher than the previous year. Disbursements improved with each passing quarter, resulting in the closing loan book being higher by 24.0% over the previous year.

• Net interest income grew by 9.8% over the previous year. During the current year, your Company’s credit rating remains stable at ‘AAA’ across all credit rating agencies.

• Net Interest Margin (Gross Spread) for the year stood at 6.8%, compared to 7.6% in FY2023. The higher interest range regime continued to impact the Gross spreads throughout the year. Interest income has increased by 22.6% y-o-y in FY2024.

• The cost-to-income ratio for the year decreased during the year to 41.4% as compared to 42.1% in FY2023, a result of prudent execution and control over costs. Your Company continues to invest in new collection-related processes, upgrade its IT infrastructure, and bring in new talent. Operating expenses have increased 8.4% y-o-y in FY2024 due to continued investments in future growth-oriented areas and digital initiatives, which will result in cost optimisation over the medium term.

• The profit before tax for FY2024 was lower by around 12.7% at H 2,355 crore as against H 2,698 crore in FY2023. Your Company, however, continued to maintain a robust provision coverage of 63.2% in FY2024 vis-a-vis 59.5% in FY2023.

• Profit After Tax (PAT) for the year stood at H 1,760 crore, lower by around 11.3% compared to H 1,984 crore in FY2023.

• Return on Equity (RoE) for the year stood at 10.0% against 12.1% in FY2023. Return on Assets (ROA) for the year stood at 1.7% compared to 2.3% for the previous year.

Segment-wise disbursement performance

Asset Class	Year ended Mar-24	Year ended Mar-23	y-o-y
Passenger vehicles	23,297 (42%)	18,132 (36%)	28%
Commercial vehicles and construction equipments	12,135 (22%)	10,778 (22%)	11%
Pre-owned vehicles	9,745 (17%)	8,258 (17%)	18%
Tractors	5,724 (10%)	5,864 (12%)	-2%
3 Wheelers	2,496 (4%)	1,992 (4%)	25%
SME	2,029 (4%)	3,483 (7%)	-42%
Others*	782 (1%)	834 (2%)	-6%
Total	56,208 (100%)	49,541 (100%)	13%

*Others include gensets, personal, and consumer loans - Figures in bracket indicates share of overall disbursement

• The passenger vehicle market has witnessed a notable shift towards premiumisation, with customers increasingly favouring SUVs. As a result, the share of passenger vehicles in disbursements increased from 36% to 42%.

• The tractor industry saw a moderation in demand last year, resulting in a 2% y-o-y growth slowdown in this segment.

• Recognising the evolving customer landscape, we have also strategically expanded our focus in the pre-Thyielded positive results, ownedvehiclemarket. as evidenced by 18% growth in this segment.

Business outlook

In our quest to realise the full potential of financial and deepen our presence across Emerging India, we plan to add over 150 branches over the next 12-18 months while continuing to invest in strengthening distribution, technology backbone, digital assets, and human capital across functions and businesses.

We are also putting in additional safeguards and further strengthening our checks and balances by deploying digital due diligence tools around customer onboarding and accelerating the timeline for the centralisation of document reviews, ensuring our business model remains robust with its inherent ability to mitigate such risks.

Risk and concerns

Considering how volatility in the operating environment can have an unprecedented impact on global businesses, our Company is adopting a more proactive risk management and mitigation framework. The Risk Management Committee assists the Board in overseeing various risks, including reviewing and analysing risk exposures related to our Company. The Risk Management Committee regularly reviews risk management measures, and followed thereafter by the Board. Periodic diligence is performed, and recommendations for corrective actions and process changes are thereafter implemented.

Risk management process

The risk management system is integral to all major functions within our Company. The process includes these key elements:

• A strategy that is driven by objectives and principles.

• Assignment of responsibilities.

• ‘ATMA’ (Avoid - Transfer - Mitigate - Assume) risk management framework approach and reporting cycle to identify, assess, mitigate, monitor, and report the risks that our Company is or may be exposed to.

• A combination of top-down and bottom-up approaches to the risk assessment and management process.

• A risk-monitoring plan that outlines the review, challenge, and oversight activities.

• Outside-in reporting procedures ensure risk information is actively monitored, managed, and appropriately communicated at all levels within the Company.

• Developing risk appetite statements with the strategic planning process, then monitoring and reporting on these statements.

The risk management framework is based on assessing risks through analysis and understanding of the underlying risks before undertaking any transactions and changing or implementing processes and systems. This risk management mechanism is supported by regular review, control, self-assessment, and monitoring of key risk indicators. The key risks are the following:

Credit risk

Credit risk is defined as the possibility of losses associated with a diminution in the credit quality of borrowers or counterparties. In MMFSL’s portfolio, losses stem from outright default due to the inability or unwillingness of a customer or counterparty to meet commitments concerning lending and other financial transactions. Alternatively, losses result from a reduction in portfolio value arising from an actual or perceived deterioration in credit quality.

Approach: effective management of credit risk is a critical component of comprehensive risk management and is essential for the long-term success of the organisation. Credit risk management encompasses the identification, measurement, monitoring, and control of credit risk exposures.

• The stringent credit appraisal system and post-disbursement monitoring ensure high-quality loan assets with a low probability of default.

• A borrower credit rating framework is adopted to avoid the limitations associated with a simplistic and broad classification of loans and exposures into a ‘good’ or a ‘bad’ category. Proposals with high-risk classifications are recommended to the higher level of credit approvers with suitable mitigations.

• Proactive risk mitigation through proprietary early warning signals which is measured through various key risk indicators such as Early delinquency, Non-starters and Quick mortality, etc.

Liquidity risk

Liquidity risk refers to the inability of a company to either meet its financial obligations, including debt servicing, or its inability to raise funds from external sources at optimal pricing.

Approach: We continue to have a comprehensive Liquidity Risk Management (LRM) framework that is governed by the Liquidity Risk Management Policy and Procedures approved by the Board. The Asset Liability Committee (ALCO) of the Board and the Asset Liability Management Committee (ALMCO) oversee the implementation and ensure adherence to the risk tolerance and limits set as per the LRM framework. Further, to minimise any impact of any external shock, our Company maintains a liquidity buffer as required under the Treasury Chest Policy, which is reviewed by both ALCO and ALMCO at regular intervals. Our Company has a well-diversified lender profile with no undue concentration on funding sources. Our Company has a well-diversified lender profile with no undue concentration on funding sources. The concentration of borrowing through various sources is also monitored to ensure a diversified borrowing mix.

Interest rate risk

This refers to the fluctuations in interest rates, which could adversely affect borrowing cost, interest income, and net interest margins of Companies in the financial sector. Approach: The ALCO and ALMCO regularly review the sensitivity analysis, which projects our Company’s vulnerability to changes in interest rates. The LRM framework has defined a judicious borrowing mix that allows the Company to manage interest costs. It has also defined a judicious investment mix, which allows us to optimise returns. Prudential limits on borrowing and investments ensure the Company does not take any undue risks. All these policies and review mechanisms assist in making the necessary realignments to lending and borrowing decisions to mitigate any interest rate risks.

Operational risk

Operational risk is a critical component of organisational risk management frameworks. It encompasses the potential for financial loss arising from internal deficiencies or failures as well as external events such as legal and reputational challenges. Approach: The Operational Risk Management Policy serves as a strategic tool in establishing a structured governance framework to address and mitigate these risks effectively. By adopting the proactive risk management approach outlined in the policy, organisations have enhanced their resilience to operational vulnerabilities. This involves clearly defining roles and responsibilities, implementing segregation of duties, and delegating powers appropriately. Through the deployment of multiple operational risk management frameworks, organisations have bolstered their defences against potential threats. Additionally, Key Risk Indicators (KRIs) have been identified for monitoring critical risks at a defined frequency to enable corrective actions on time. The KRIs are statistics and/or metrics, which provide insight into the organisations risk position. By adhering to these guidelines and leveraging the recommended strategies, the Company has strengthened its operational risk management capabilities and upheld its overall resilience.

Business risk

Being an NBFC, we are exposed to various external risks, which directly affect sustainability and profitability. The most prominent risks are industry risk and competition risk. Our customers also have their earnings linked to agri-output and its prices. The timely and spatial distribution of monsoons and other climatic factors plays an important role in the earning and repayment capabilities of our customers. The volatile macroeconomic scenario and sector-specific imbalances can result in loan asset impairments.

Approach: A dedicated team evaluates the trends in the economy and various other sectors. In line with market trends, our Company has developed tailor-made products and is reviewing new growth engines like SME, digital operating model, and leasing to deepen market penetration and de-risk the business from overdependence on its core, which is vehicle finance. Driven by a nimble-footed sales force, a wide range of products, continuous efforts to further improve turnaround time, and a customer-friendly culture, we are efficiently

Compliance risk

It is the risk arising out of legal or regulatory actions consequent to failure to comply with applicable statutes, regulations, directions, standards, and guidelines. Approach: Our Company adheres to the guidelines issued by the RBI and other regulators, including Capital Adequacy, Fair Practice Codes, RBI Reporting, Asset Classification and Provisioning Norms, etc., to ensure zero tolerance on the non-compliance aspect.

Vide the notification RBI/2021-22/112 DOR.CRE.REC. No.60/03.10.001/2021-22 dated 22^nd October, 2021, the regulator has brought about a revised scale-based regulatory framework for NBFCs. In October 2023, the RBI issued a scale-based regulation through Master Direction for the NBFC.

The regulatory framework classifies NBFCs into four layers (Base, Middle, Upper, and Top) based on their size, activity and perceived riskiness. MMFSL has been classified under the Upper Layer.

Appropriate processes and systems have been put in place to comply with the requirements prescribed for Upper Layer NBFCs. Internal Capital Adequacy Assessment Process and Stress Testing have been implemented as part of scale-based regulation with the adoption of appropriate risk assessment methodologies.

To mitigate compliance risk and ensure timely dissemination and adherence to information on regulatory prescriptions and guidelines, the Company has put in place a mechanism a circular Management process) to disseminate the stakeholders regulatory guidelines with specific actionable emanating from the same for timely implementation. Further, the Company has implemented a compliance testing programme covering critical regulations to assess the level of compliance with them. The outcome of testing is shared with the concerned department, suggesting improvements, if any, and with senior management. The action on suggested improvements, if any, is being monitored for implementation.

Human capital risk

Risk of undesired attrition of good performers and critically skilled employees.

Approach: The Company strives to have contemporary, employee-friendly policies and a people oriented culture. MMFSL mitigates the risk of attrition by ensuring continuous analysis and action planning in all areas to constantly improve our people practices. Each year, we do a comprehensive study to identify employee pain areas and implement solutions around the identified areas. The compensation the Company paid is comparable with other companies of our class and size. Regular benchmarking is done to understand the variances. Regular connections aheadofthe curve. between business managers and HR ensure that employee concerns are addressed proactively to reduce regrettable attrition. The Company also invests in training and upskilling our workforce.

Information technology risk

With the rise of technology-dependent services, it is critical to keep any technology and cyber risks under check and keep them to an acceptable level. Approach: We treat IT risks using a multipronged approach that includes periodic testing of internal controls, conducting periodic simulations and drills to check readiness, using backups that are enabled with ransomware protection, and continuous threat hunting and monitoring using AI and ML-enabled technology solutions. The Company also uses multiple cyber security tools for vigilant monitoring, audit logging, suspicious activity reporting, and prevention of unauthorised access. The Company also uses secure and multi factor authentication for system resources, conducts continuous data replication at periodic intervals with a fall-back DR site, and holds cyber risk insurance to minimise the impact.

Emerging risk

Emerging risks encompass geopolitical developments, widespread economic stress scenarios, pandemics, etc,. which may have impacts on societies and economies worldwide. Unprecedented stress events (e.g., COVID-19) rattle the usual functioning of the business for protracted time periods, adversely disrupting the macroeconomic environment.

Approach: Our conservative capital structure policies ensure that our Company always remains adequately capitalised. The liquidity chest ensures that such shocks can be absorbed without impacting our credit rating or debt servicing capability. Our reach ensures we are always connected with our customers during challenging times.

Our Business Continuity Plans and processes ensure the business keeps running with adequate security measures.

Market risk

Market risk is the risk of losses arising from fluctuations in interest rates, credit spreads, foreign currency rates, equity prices, commodity prices, and other factors, such as market implied volatility, that may lead to a reduction in earnings, economic value, or both.

Approach: Our Company is safeguarded against any market risk owing to its prudent approach of continuously maintaining and monitoring market-linked securities, as per internal and regulatory guidelines.

Climate risk

The risk from climate change may involve environmental degradation, rising sea levels, and shifts in weather patterns that threaten food production, the impact of which is global in scope and unprecedented in scale. The risk from climate change may also entail irregular weather conditions, such as sporadic monsoons, which significantly affect the economic growth in the Indian context. Climate change may also involve the risk of economic losses caused by physical damage to property and assets from extreme weather conditions and natural calamities. Our carbon footprint also poses a risk in terms of our decreased rating on the ESG front.

Approach: Our Company has been working towards identifying frameworks to assess and keep track of the progression of seasons and climate change and how the adverse impact of such climate change on the business can be reduced. This involves identifying and mapping sustainability and climate change risks for inclusion in the risk register. With new-age emission norms being rolled out and the changing preferences of consumers - for green vehicles, our Company is focusing on financing environment-friendly CNG and electric vehicles. Our Company has been disclosing its environmental performance and strategies to identify climate risks and opportunities on international non-financial reporting platforms, viz., CDP (Carbon Disclosure Project) and DJSI (Dow Jones Sustainability Indices) portals. These disclosures imply the transparent nature of MMFSL towards its key stakeholders, commitment, and a strong sense of responsibility towards the environment. MMFSL has achieved its milestone of formulating its first TCFD (Task Force on Climate-related Financial Disclosures) report for the current fiscal year. The TCFD report is complemented by the CRA (Climate Risk Analysis) report, which would further help MMFSL to foresee the risks arising through climate change to our Companys operations, assets, and financial performance and how to tackle them. Being a service sector organisation, our major source of emissions comes from usage of grid electricity. We aim to explore opportunities to install solar facilities at our major branches. Simultaneously, we are continuing to replace obsolete technologies with new and updated technologies with more energy-efficient alternatives, including BLDC fans, 5-star-rated air conditioning, and LED lighting. We have also positioned our services to catalyse the green transition and increased lending of environmentally friendly transportation solutions, which include 3-wheel commercial EVs, 4-wheel EVs, and CNG-fueled vehicles. Furthermore, we have been involved in various afforestation programmes, which is in line with the country’s ambition to increase the forest cover by up to 33% to support carbon sink and carbon sequestration.

Material developments in human resources

At Mahindra Finance, our employees form the bedrock of all initiatives. It is with this deep-rooted philosophy that HR policies are conceived and implemented, making for an employee-centric approach.

We believe in providing a positive work environment that fosters growth and learning. As part of our unwavering commitment to fostering an inclusive workplace, we have taken significant strides to implement best-in-class practices that promote diversity, equity, and inclusion throughout our organisation. We strive to create an environment that respects and appreciates the unique contributions of each employee. We prioritise building diverse teams and ensure that every voice is heard, valued, and taken into consideration when making decisions that shape our Companys future.

To keep our sales team motivated and engaged, we designed market-driven business rewards, which received immense appreciation from the employees and people managers for driving the overall performance of the organisation.

Our commitment to exceptional customer service led to the launch of the Customer Service Excellence (CSE) programme in May 2023. This initiative equips our front-line staff, the backbone of our customer interactions, the knowledge, skills, and tools they need to excel. Transformational leadership development programme: This programme targets high-potential senior managers and equips them with the skills and mindset to become future leaders within the organisation. Spanning a year (February 2023 - January 2024), the initiative focuses on nurturing an "Evolved Style of Leadership" through a rich learning experience.

MMFSLs CPC 0.5 initiative aimed to streamline customer onboarding by digitising, standardising, and centralising the loan disbursement process. To ensure a smooth transition for employees in Operations and Accounts, a comprehensive training programme, CPC 0.5 Training Intervention, was rolled out.

MMFSL has launched a strategic partnership with Manipal Academy of BFSI to offer a specialised business training programme called ‘Prarambh’ exclusively for women candidates. This programme aims to provide women with a pathway to careers in the financial services sector. The first batch of 38 candidates underwent a 30-day certification course focusing on sales and finance.

Achievements

We have been certified as a Great Place to Work (GPTW) for millennials by the Great Place to Work Institute. We are honoured to receive this certification, and we remain committed to continuously improving our workplace practices and experiences. In addition, Mahindra Finance has been recognised among:

• Indias Best Companies to Work for 2023: Top 100

• Best in industry: NBFC

We have also received ‘Best Place to Work in India’ by Ambition Box and ‘Happiest Workplace for Women’, awarded by India Today.

Information technology

The field of Information Technology is constantly evolving, leading to a significant transformation in the way customers interact with businesses. As digital leaders, it is imperative to act swiftly and provide effective solutions that not only cater to present needs but also anticipate future scenarios. Digital technology has transitioned from being just a business channel to becoming the very core of a business itself. Overcoming obstacles related to processes and mindsets is vital to achieving seamless remote customer service, doorstep product delivery, and digital sales.

Enhancing digital reach

To empower our employees, customers, and stakeholders, we are offering robust digital alternatives through a redesigned unified app for customer acquisition, underwriting, and collection processes. These tools complement the traditional reliance on physical appraisal and building customer relationships at the local level. Embracing the shift from conducting business digitally to becoming digitally-led businesses is now an integral part of our organisational strategy.

Our focus on mobile technology has made our mobile app a crucial channel for various aspects of customer service, brand loyalty, customer retention, new customer acquisition, and revenue generation. The MF Customer app, available in 11 languages, allows customers to manage loan accounts, make EMI payments, apply for vehicle loans, and access other services. In the fiscal year 2023, app users increased by 40%, reaching 8.7 lakh users, and collections from the app doubled. Additionally, we are developing a dealer app to provide essential business information to our partners and salespeople across India.

Leveraging technology

Our digital initiatives extend across different segments and products, including auto loans, pre-owned car loans, leasing, and SMEs. The introduction of OneApp has equipped our on-field employees with decision-making capabilities through digital intervention, enhancing collection efficiency and transforming our business digitally. The Used Car Digi Loans initiative, in collaboration with industry-leading brands, offers customers personalised loan offers from Mahindra Finance, expediting purchasing decisions and improving customer satisfaction.

We prioritise enhancing our core operations by adopting cloud-based loan origination and management systems and utilising advanced API platforms for scalable transactions. Digitalisation has streamlined loan processing while still maintaining strict checks. Leveraging data sciences and artificial intelligence, we utilise business intelligence dashboards and machine learning models for strategic initiatives in lending, retention, and business expansion.

In terms of risk management, we align our processes with ISO 27001:2013 and the COSO framework to minimise risks. We conduct periodic risk assessments, employ a defence-in-depth strategy, and leverage technology, monitoring, and audits to mitigate risks. Data privacy practices are actively adopted in line with government initiatives on data privacy.

Internally, we have established robust controls to safeguard assets and ensure operational excellence.

Multiple policy frameworks are in place to control business processes, and Risk and Control dashboards are periodically updated for organisation processes. Internal auditors conduct audits annually, ensuring compliance with defined controls and regulatory frameworks.

Internal control systems and their adequacy

We have established an adequate internal control mechanism to safeguard all our assets and ensure operational excellence. The mechanism also meticulously records all transaction details and ensures regulatory compliance. We have multiple policy frameworks to ensure adequate controls on business processes. Further, Risk and Control dashboards have been defined and are periodically updated for all important operational processes. At periodic intervals, the management team and statutory auditors ensure that the defined controls are operative. The Mahindra Group has a dedicated team of internal auditors to conduct an internal audit. Every year, this team defines the audit agenda for the year, which is implemented after approval from the Audit Committee. Reputed audit firms also ensure that all transactions are correctly authorised and reported following the relevant regulatory framework. The reports are reviewed by the Audit Committee of the Board. Wherever necessary, internal control systems are strengthened, and corrective actions are initiated.

Cautionary statement

Certain statements in the Management Discussion and Analysis describing the Company’s objectives and predictions may be ‘forward-looking statements’ within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward-looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effects of economic and political conditions, in India, volatility in interest rates, new regulations and government policies that may impact the Company’s business as well as its ability to implement the strategy. The Company does not undertake to update these statements.