2.10% Dividend, 2:1 Bonus, & Rs 2,000 Crore Fundraising NBFC Stock Is Soon Attractive To Purchase; 25% Upside Is Saw

Following its Q4 results, smallcap NBFC Mas Financial Services is a compelling investment to add to your portfolio. Axis Securities is the most recent to advise BUY on MAS Financial because of the company’s encouraging quarterly results and initiatives to accelerate expansion. Key advantages for MAS include the announcement of a 5.10% dividend distribution in addition to a staggering Rs 2,000 crore in fundraising via NCDs and commercial papers. Notably, bonus shares were distributed by MAS at a 2:1 ratio prior to this.

With a market valuation of Rs 5,000.76 crore, the stock price of MAS Financial closed the day on April 26 at Rs 304.95 a share on the NSE, down 1.21%. This represents a buy-on-dips opportunity. The 52-week high and low of the stock are, respectively, Rs 387.95 and Rs 228.68.

Earnings for MAS Financial Services: PAT for MAS in Q4FY24 was Rs 68.05 crore, up 22.50% YoY, while total income was Rs 329.53 crore, up 23.04% YoY. FY24 PAT increased by 23.28% YoY to Rs 247.75 crore, while total revenue for the fiscal year increased by 30.29% YoY to Rs 1,224.57 crore.

In the meanwhile, assets under management for FY24 increased by 25.21% to Rs 10,125.61 crore. In contrast to the 2.23% gross stage 3 assets and L.48% net stage 3 assets of AUM as of December 31, 2023, the portfolio quality remained high and consistent at 2.25o/o gross stage 3 assets and 1.51% net stage 3 assets of AUM. Additionally, as of March 31, 2024, the firm still has a management overlay of 18.79 crores, or 0.24% of the on-book assets.

MAS Financial: In the next Annual General Meeting (AGM), the shareholders will need to approve a final dividend of Rs. 0.51 per equity share, or 5.10% of the face value of Rs. 10/-. This recommendation comes from an NBFC participant. The day the dividend will be paid, or the demand draft and warrants therefor, will be sent to the shareholders. If the shareholders agree, the Stock Exchange will be notified when the Board makes its decision.

MAS Financial has already distributed an interim dividend of Rs 3 per share, or 30%, for FY24. The firm paid dividends to shareholders in FY23 up to 36.50%, or Rs 3.65 per share.

Its dividend yield is 1.2% at the moment.

MAS Financial Fundraising: In addition, MAS has been granted permission to borrow money through the issuance of commercial papers and secured/unsecured non-convertible debentures up to a total of Rs. 500 crores and Rs. 1500 crores, respectively, in one or more tranches through private placement.

MAS Financial Bonus Issue: In February of 2024, MAS Financial issued 10,93,24,086 fully paid up equity shares at a rate of Rs. 10/-each as fully paid bonus equity shares to the eligible members of the company whose names are listed in the Register of Members of the Company/List of Beneficial Owners as of the Record Date, which is February 22, 2024. This equals a ratio of 2:1, meaning that for every one fully paid up equity share that already exists, two new fully paid up equity shares worth Rs. 10/-each are issued.

The bonus issue is thus in the 2:1 ratio.

Axis Securities’ Recommendation for MAS Financial Services: The note from Axis Securities provided a forecast, stating that “MAS’ ambitious growth plans will be supported by the ramping-up of the direct distribution network.” Even if the distribution ramp-up will need more Opex, MAS will be able to sustain its returns on assets (RoAs) due to stronger yields and generally stable credit costs supported by stable asset quality, at least in the near future. Therefore, we anticipate that throughout FY25–26E, MAS will generate a good RoA/RoE of 3–3.1%/16–18%.”

Axis Securities provided a thorough justification for its purchase, highlighting three important aspects. They are as follows:

1. Making direct distribution more robust:

The corporation intends to enhance its regional reach in order to lessen its reliance on the top four states. MAS intends to expand into Delhi NCR, Tamil Nadu, Karnataka, and Telangana to begin its next phase of expansion, even though the core geographies in the West have enormous growth potential and have already outpaced the growth potential in the targeted regions. MAS anticipates that the more recent regions will make a significant contribution to its goal of doubling AUM in the medium run.

Seeking to double AUM during the next three years:

Aside from supply chain financing, which is a subset of MSME loans for both new and existing clients, MAS plans to expand into the used car market, where it is already in the trial program. MAS will restrict its mix for salaried personal loans to 10% of total AUM. Furthermore, MAS hopes to significantly expand the housing financing portfolio, which will raise its share of the consolidated AUM. Over FY24–26E, we anticipate MAS to generate a robust ~24% CAGR AUM growth.

3. A recent improvement in CoF’s rating:

CARE has raised MAS’s credit rating from A+ (Positive) to AA- (Stable). Over the following six to nine months, this rating upgrading will help CoF improve by 15 to 25 basis points. Since MCLR makes up a higher portion of the firm’s borrowings, the company will bargain with its lenders for rates that take the upgrade into account. Additionally, MAS will be able to access capital market borrowings thanks to this.

Axis Securities thus said, “We maintain our BUY recommendation on the stock.”