Mahindra Finance eyes new biz categories for growth

livemint.com:

Mint. The rural and semi-urban India focussed Mahindra Finance is keeping a sharp eye on its margins as it looks to building a prolific, diversified financial services business, Raul Rebello, MD & CEO designate told Mint in an exclusive interaction.

Rebello will take charge of the NBFC and its subsidiaries from April next year. Leading NBFCs in the vehicle lending space like Mahindra Finance and Shriram Finance have expressed concerns that rising cost of borrowing from banks is leading to margin pressure in several lending categories for NBFCs.

Mahindra Finance, which is primarily a vehicle financier (with passenger vehicles and commercial vehicles together accounting for 93% of its disbursements) is banking on working with partner banks to stay viable in segments such as lending to the commercial vehicle fleet and certain PV sub-segments where high borrowing costs make these segments increasingly "unattractive" for NBFCs, as well as find partners for new business verticals like payments, insurance and investments. "We have to optimize between growth, margins, and asset quality.

Now, if we just grow without keeping our focus on margins, then we're not really going to be a viable enterprise going forward. So, we do realize that because of our distribution, and because of all the tailwinds in the auto sector — this year's festival season went well — there is an inherent growth happening in the vehicle finance space.

But if we are to tick the second box of being prolific on margins, then participating in some of these segments on our book doesn't really make sense, because it will start shrinking our margins", Rebello said. "So, what we have decided is we'll maximize the benefit we get from our distribution in a manner