Mas Financial: Riding the Waves of Consistency in the NBFC Universe

 

Are you on the lookout for a financial star that's been shining brightly in the ever-evolving world of Non-Banking Financial Companies (NBFCs)? If so, let's take a closer look at the remarkable journey of Mas Financial.

 

Picture this: a financial institution that's been navigating the choppy waters of the NBFC space with unwavering consistency. Even a global pandemic could only muster a minor hiccup in its otherwise stellar performance. 

With a steadfast commitment to growth, stable margins in the face of funding cost challenges, and an asset quality that gleams like polished gold, Mas Financial is a well-capitalized NBFC with an enticing path ahead.

 

The Shifting Landscape

 

One of the most intriguing aspects of Mas Financial's journey is the shift in its distribution mix, tilting the scales in favor of its own retail reach. 

This strategic move is poised to support a robust Return on Assets (RoA) in excess of 3 percent. The housing finance subsidiary is an area that could pleasantly surprise investors, adding a layer of excitement to this financial tale.

 

Encouraging Signs of Growth

 

Mas Financial's presence spans seven states, primarily in Gujarat, and covers five product categories, ranging from micro enterprise loans to personal loans for salaried customers. While its core products, micro and SME loans, continue to flourish, newer ventures are also gaining traction. 

The company's confidence in crossing the Rs 10,000 crore AUM milestone in FY24 remains unshaken, even in the face of rising competition, thanks to the colossal opportunity at hand.

 

Margin Magic

 

In a world where banks saw their margins expand with variable rate asset books, Mas Financial, as an NBFC, faced challenges with its borrowings tied to the MCLR. Despite this, it weathered the storm remarkably well, maintaining an interest margin of 6.8 percent in the last reported quarter. 

With expectations of slightly rising funding costs, Mas Financial's pricing power with borrowers is a valuable asset, allowing it to confidently aim for margins in the range of 6.75-7 percent.

 

The Armor of Capital

 

The company boasts a robust liability management system, diversified funding sources, and a capital adequacy ratio of over 25 percent, putting it in a strong position compared to many competitors.

 

Asset Quality: A Consistent Gem

 

Mas Financial has a shining track record of maintaining pristine asset quality, with only a minor blip during the pandemic. The recent quarter showed a slight sequential improvement in gross and net Stage 3 assets, with negligible restructuring. The provision buffer of over Rs 21 crore adds another layer of security.

 

The Retail Revolution

 

Mas Financial's unique distribution model is undergoing a transformation. The share of its own retail distribution has steadily increased, rising from 42 percent in March '21 to 63 percent today, with plans to exceed 70 percent in the coming three years. While this shift may lead to increased costs and credit expenses, the potential for higher interest margins positions Mas Financial for an RoA in the range of 2.75-3 percent.

 

The Housing Finance Surprise

 

With a housing finance subsidiary focusing on affordable housing, the growth trajectory has begun to pick up. Assets under management for this entity grew by over 31 percent YoY, boasting excellent asset quality and a healthy capital position, making it a potential source of positive surprises.

 

The Outlook: Bright and Steady

 

As long as macroeconomic conditions remain favorable, there seems to be little risk to Mas Financial's asset growth of 25 percent, with stable margins and an RoA hovering around 3 percent. An earnings CAGR of close to 22 percent between FY23-FY25e paints a promising picture. 

While the stock has already outperformed the benchmark Nifty in the past year, its consistent performance makes it a solid choice for a long-term portfolio, ready to be added to with each market dip.

 

In the ever-changing world of finance, Mas Financial stands as a testament to the beauty of consistency and stability. So, investors, keep an eye on this star as it continues to light up the NBFC sky.