Mahindra Finance to Raise ₹2,996 Crore Via Rights Issue

Mahindra & Mahindra Financial Services Ltd. (MMFSL), a prominent non-bank financial company, has announced the final terms for its proposed rights issue aimed at augmenting capital. The company intends to raise an aggregate amount not exceeding ₹2,996.16 crore through the issuance of equity shares.

The board, having received in-principle approvals from BSE and NSE, approved the issue of 15.44 crore fully paid-up equity shares. Each share has a face value of ₹2. The issue price has been set at ₹194 apiece, which includes a premium of ₹192 per share. Shareholders applying for the rights shares are required to pay the entire issue price at the time of making the application.

Issue Structure and Timeline

MMFSL has designated Wednesday, 14 May 2025, as the record date. This date will determine the eligible shareholders who will be entitled to receive the Rights Entitlement (RE). The subscription window for the rights issue is scheduled to open on May 22, 2025. It will close on June 6, 2025. The company's board retains the flexibility to extend the issue closing date by up to 30 days.

The Rights Entitlement ratio has been fixed at one rights equity share for every eight fully paid-up equity shares held by the eligible equity shareholders as of the record date. Prior to the issue, the company had 1,23,55,29,920 outstanding fully paid-up equity shares. Assuming full subscription, the post-issue outstanding shares would be 1,38,99,71,160.

Eligible RE holders have the option to either apply for the rights equity shares by paying the full amount on or before the closing date, or renounce their REs, either fully or in part. Renunciation can be carried out through the secondary market platform of the stock exchanges or via an off-market transfer within the prescribed timelines. The last date for on-market renunciation of REs is June 3, 2025, while off-market renunciations will be accepted until June 5, 2025.

Recent Financial Performance Context

The capital raising announcement follows the company's recent financial results. For the fiscal year 2025, MMFSL reported a 33% surge in post-tax profit, reaching ₹2,345 crore, up from ₹1,760 crore in fiscal 2024.

However, the standalone net profit for the quarter ended March 2025 experienced a 9% decline, settling at ₹563 crore compared to a profit of ₹619 crore in the corresponding period last year. Core net interest income saw a 9% rise to ₹2,156 crore, supported by a 17% increase in the loan book. Despite this, the company's interest margin narrowed to 6.5% from 7.1% year-on-year. Disbursements during the March quarter showed a modest 2% increase. A notable factor impacting the Q4 bottom line was a significant 34% increase in provisions or credit costs, which rose to ₹457 crore from ₹341 crore last year.

Earlier in the fiscal year, for the third quarter (FY25), the company had reported a strong 63% year-on-year increase in standalone profit after tax to ₹899 crore. Total income for the December quarter was ₹4,144 crore, up 19% YoY, and disbursements of ₹16,467 crore reflected a 7% YoY growth. Disbursements for the first nine months of the fiscal year stood at approximately ₹42,370 crore, a 4% increase over the previous year.

Shares of Mahindra Finance ended 2.35% lower at ₹255.15 apiece on the BSE ahead of the rights issue announcement on May 8, while the benchmark Sensex recorded a 0.5% decline. As of 10:45 AM, the company’s share was trading 2.65% lower at ₹248.10. The rights issue proceeds are expected to strengthen the company's capital base, supporting future growth initiatives and meeting regulatory capital requirements. 

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