Shares of Mahindra & Mahindra Financial Services Ltd. gained after the RBI lifted restrictions on the company for appointing third-party agents for recovery or repossession.
On Sept. 22, 2022, the RBI had directed the firm to "immediately cease carrying out any recovery or repossession activity through outsourcing arrangements, till further orders" after a pregnant woman was allegedly killed in Jharkhand by the vehicle financier's representatives.
"The lifting of restrictions came sooner than our assumption and is timely at the beginning of Q4, which is seasonally a strong quarter for recoveries," Morgan Stanley wrote in a Jan. 4 note. "We think the positive impact on earnings' forecasts is limited, but investor sentiment and the stock price could benefit more."
The brokerage maintained its 'overweight' stance on the company, adding that the removal of the overhang could drive the stock price higher amid expectations of a boost to collections and recoveries. It has a target price of Rs 275, implying a potential upside of 17%.
ICICI Securities expects the development to further boost the company's already improving asset quality. "Separately, M&M Financial continues to report robust growth of 22% and 4% QoQ in disbursements and AUM respectively, in Q3," it said.
It also has a bullish "add" rating and raised its target price to Rs 256 from Rs 237, implying a potential upside of over 9%.
Separately, the board of the company said it will meet on Feb. 3 to consider its financial results for the quarter ended December 2022.
Shares of the company gained as much as 3% intraday to Rs 241.15 apiece, before closnig the day only 0.7% higher.
Of the 33 analysts tracking the company, 17 maintain 'buy', 16 suggest 'hold' and five recommend 'sell', according to Bloomberg data. The 12-month consensus price target implies a downside of 1.3%.
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