Mahindra Finance’s FY25 PAT jumps 33%! Here’s how SME lending and AI tools are powering its big leap

Mahindra Finance FY25 Results: How Is the NBFC Reshaping Its Growth Story With SME Lending and Digital Transformation?

Mahindra & Mahindra Financial Services Limited (Mahindra Finance), one of India‘s most prominent non-banking financial companies (NBFCs), announced its audited financial results for the fourth quarter and full year ended March 31, 2025. Reporting a 33% year-on-year growth in standalone Profit After Tax (PAT), Mahindra Finance showcased not only solid financial performance but also strategic intent in diversifying its portfolio and embracing digital evolution. The Board also proposed a final dividend of ₹6.50 per share, reflecting growing confidence in future earnings.

Positioned as a critical financial intermediary in rural and semi-urban India, Mahindra Finance is navigating the evolving financial services landscape with renewed focus on SME financing, vehicle loan optimisation, leasing, and insurance. These segments are increasingly powered by digital transformation and data-driven underwriting tools, laying the groundwork for long-term profitability.

What Drove Mahindra Finance’s 33% PAT Growth in FY25?

The standout metric from FY25 was the 33% rise in PAT to ₹2,345 crore, up from ₹1,760 crore in FY24. Total income rose 19% to ₹16,075 crore, driven by both interest and non-interest income streams. Net Interest Income (NII) expanded 15% to ₹8,176 crore. Despite a slight dip in the NII margin from 6.8% to 6.5%, effective cost control and risk management supported a healthier bottom line.

The Pre-Provisioning Operating Profit (PPOP) climbed 14% to ₹4,765 crore. Credit costs declined from 1.7% in FY24 to 1.3% in FY25, a direct result of stronger recoveries and improved borrower quality, especially in the SME segment. Return on Assets (ROA) rose to 1.9%, indicating enhanced efficiency in asset deployment across Mahindra Finance’s wide-ranging rural footprint.

How Has Mahindra Finance Maintained Balance Sheet Strength and Asset Quality?

Mahindra Finance closed FY25 with a gross loan book of ₹1,19,673 crore, reflecting 17% year-on-year growth. The capital adequacy ratio was a robust 18.3%, with Tier-1 capital at 15.2%, significantly above regulatory thresholds. The company held a liquidity buffer of over ₹10,400 crore, providing a cushion against market volatility.

Asset quality metrics also improved during the year. Stage 3 assets (gross NPAs) declined to 3.7% from 3.9% in the previous quarter, and Stage 2 assets reduced to 5.4%, bringing the combined GS2+GS3 to a manageable 9.1%. Provision coverage on Stage 3 loans was maintained at a prudent 51.2%, ensuring adequate buffer for credit losses.

Is Mahindra Finance Becoming More Than Just a Vehicle Financier?

Yes—Mahindra Finance is actively moving beyond its traditional dominance in vehicle finance. While the company remains a market leader in tractor financing and ranks among the top five NBFCs for vehicle categories including commercial vehicles (CVs), passenger vehicles (PVs), and three-wheelers, FY25 marked a deliberate expansion into non-vehicle financial services.

The standout performer was the SME finance vertical, where disbursements rose 48% over FY24, contributing to a 28% increase in the segment’s asset base. As of March 2025, SME assets stood at ₹6,148 crore. Notably, secured products like Loan Against Property (LAP) now account for 43% of SME lending, helping keep asset quality strong—Stage 3 assets in this portfolio were just 1.1%.

Leasing disbursements grew 31% annually, driven by both business-to-business (B2B) and calibrated business-to-consumer (B2C) initiatives. Mahindra Finance has also expanded its insurance partnerships to ten major providers across life, health, and non-life segments, supported by the launch of a digital insurance portal.

How Is Digital Transformation Powering Operational Efficiency?

FY25 saw Mahindra Finance double down on digital investments. The company rolled out an AI-based early warning system for delinquencies, digitised field collections, and revamped its customer-facing mobile app. These tools improved collection efficiency, which remained stable at 97% in Q4 FY25.

Operationally, the firm completed 100% implementation of Centralised Processing Centres (CPCs), revamped its retail branch model, and restructured its collections operations into product-based verticals. These changes led to improvements in efficiency, standardisation, and customer experience. Internally, Mahindra Finance also ran the Emerging Leadership Development Program to groom future-ready managers and onboarded senior professionals from banking and fintech sectors.

How Are Subsidiaries and Global Ventures Contributing to Growth?

Consolidated PAT for FY25 stood at ₹2,261 crore, up 16% year-on-year. However, Q4FY25 saw a PAT dip of 32% to ₹456 crore due to operational pressures and provisioning in subsidiaries like Mahindra Rural Housing Finance, which posted a loss of ₹227.9 crore for the full year.

In contrast, Mahindra Ideal Finance in Sri Lanka reported stellar performance with PAT rising 42% to LKR 146 million and net loans growing 73%. Mahindra Manulife Investment Management also made progress, with Average AUM growing 87% year-on-year to ₹26,766 crore.

Mahindra Finance USA LLC, the joint venture with Rabobank subsidiary De Lage Landen, recorded marginally lower profits at USD 16.9 million in FY25 due to softer agri-equipment financing demand in North America.

What’s the Market Sentiment and Institutional Activity Around M&MFIN Stock?

As of April 22, 2025, Mahindra & Mahindra Financial Services Ltd (NSE: M&MFIN) closed at ₹277.15, rising 0.49% on the day. The stock is up 4.60% year-to-date and 3.39% over the past five trading sessions, reflecting renewed investor optimism following the earnings announcement.

Foreign Institutional Investors (FIIs) increased their holdings from 10.49% to 10.68% in Q4FY25. Mutual fund ownership also rose marginally to 17.48%, and the total institutional stake climbed to 41.99%, up from 41.66%, indicating strong institutional support.

On valuation, M&MFIN’s stock trades at a Price-to-Earnings (P/E) ratio of 13.74, well below the sector average of 32.77, and a Price-to-Book (P/B) ratio of 1.69. The dividend yield is attractive at 2.29%. Analysts remain mixed: out of the surveyed group, 4 have given strong buy ratings, 11 recommend buying, 12 suggest holding, while 6 advocate selling. The consensus rating stands at “Hold”.

This outlook suggests Mahindra Finance is seen as a steady performer with a sound balance sheet and growing digital edge, though some concerns linger over subdued disbursement growth in legacy segments.

What’s Next for Mahindra Finance in FY26?

Mahindra Finance is well-positioned to build on FY25’s gains. The company aims to deepen penetration in SME and LAP segments, enhance digital and analytics capabilities, scale its leasing and insurance businesses, and gradually establish a mortgage lending footprint. A continued focus on governance, operating efficiency, and cost rationalisation will underpin these growth initiatives.

The company’s FY25 recognitions, including accolades for workplace culture, leadership development, and employee engagement, reinforce its position as a future-ready NBFC. With robust liquidity, improved asset quality, and a diversified lending engine, Mahindra Finance enters FY26 with strategic clarity and operational strength.