July 31: MAS Financial Services Ltd. delivered a strong performance in the first quarter of FY27, with Net Interest Income, Pre-Provision Operating Profit , and Profit After Tax rising 43.9 percentage, 29.6percentage, and 24.7percentage year-on-year, respectively, to approximately INR 2.3 billion, INR2 billion, and INR1 billion. The performance was ahead of expectations, supported by improved margins and steady business momentum.
Net Interest Margin, calculated on Assets Under Management, expanded by 59 basis points quarter-on-quarter to 6.3%, aided by changes in the pricing and processing fee strategy, which supported yields, along with a 31 basis point decline in the cost of funds.
Disbursements increased 7.3% quarter-on-quarter to approximately ₹44.6 billion, while AUM grew 21.1% year-on-year and 5.5% quarter-on-quarter to ₹151.5 billion. Growth was led by the Micro Enterprise Lending and SME segments, which expanded 7.2% and 5.2% quarter-on-quarter, respectively. The housing finance subsidiary, MRHMFL, reported AUM of ₹9.8 billion, registering 22.9% year-on-year growth.
The company continued to maintain a stable asset quality profile, with early-stage delinquencies improving during the quarter. The 1-90 days past due ratio declined by 15 basis points quarter-on-quarter to 3.9%, while Gross Stage 3 and Net Stage 3 remained largely stable at 2.58% and 1.70%, respectively. Credit cost, calculated on average AUM, remained steady at approximately 1.64%, compared with 1.63% in the previous quarter. The accelerated growth in on-book AUM, however, weighed on credit costs during the period.
Business momentum and collections remained unaffected by the Middle East conflict and higher domestic fuel costs. While Commercial Vehicle demand was impacted by elevated fuel prices and tighter underwriting following the West Asia crisis, management expects momentum to recover over the next one to two quarters. The company reiterated its FY27 AUM growth guidance of 22-25% and remains focused on increasing the direct retail share to 70% from approximately 67% over the next eight to ten quarters.
The company expects sustained momentum in the MEL and SME segments, along with a recovery in CV demand in the second half of the year, to support AUM growth. MASFIN is also targeting a 35% medium-term CAGR for its housing finance subsidiary, while maintaining a strong focus on risk management.
Profitability is expected to benefit from improved margins and technology-led efficiency gains. NIM is guided at 8-8.5% for FY27, while incremental cost of borrowings stands at 9.2-9.25% and is expected to remain at 9.25-9.30%. The implementation of LOS/BRE systems and technology- and AI-led automation has improved operating efficiency, reduced headcount requirements, and lowered staff costs. These efficiency gains, coupled with improving margins, support the company's FY27 Return on Assets (RoA) guidance of 2.75-3.25%.
Asset quality remains a key focus area, with proactive underwriting measures helping mitigate risks related to the West Asia situation. Collections and repayment behaviour remained healthy during the quarter. While CV Gross Stage 3 edged up to 4.58%, asset quality across other segments remained broadly stable. The company also carries a management overlay of ₹176.3 million.
MASFIN has retained its credit cost guidance of 1.25-1.75%, noting that portfolio mix could influence the outcome, while maintaining profitability and RoA as key priorities. The company continues to focus on balancing growth with prudent risk management.
Overall, the outlook for MASFIN remains constructive, with FY27 AUM growth expected at the upper end of the company's guidance. The business is expected to deliver AUM, PPoP, and PAT CAGRs of approximately 23%, 21%, and 23%, respectively, over FY26-29E.
The view remains positive on MASFIN, with a 'LONG' rating retained and a March 2027 target price of ₹450, valued at approximately 2.2x Price-to-Adjusted Book Value . Key risks include potential asset quality deterioration in the direct retail book and weaker-than-expected loan growth.
