In a significant strategic move, Mahindra & Mahindra Financial Services Limited (MMFSL) has announced a Rights Issue of up to INR 3,000 crore, aimed at strengthening its Tier 1 capital base and fueling long-term growth. This development follows the Board of Directors' meeting held on 2nd May 2025, during which a fresh resolution was passed to undertake the rights issue, taking advantage of the SEBI’s newly simplified capital raising norms.

Previously, the Board had approved this fundraise on 13th February 2025, but with the recent amendments to SEBI’s (Issue of Capital and Disclosure Requirements) Regulations, 2025, the company decided to reinitiate the process under the revised, faster, and more cost-efficient framework.

Strategic Intent Behind the Capital Raise

MMFSL is a prominent NBFC in India, catering largely to the Emerging India segment. The capital infusion is aimed at supporting the company’s ambitions of accelerated growth, especially in the secured asset segment, which has been growing at an impressive CAGR of 20% in recent years.

The Rights Issue will augment Tier 1 capital by over 200 basis points, providing the financial muscle needed to expand lending, maintain high asset quality, and navigate upcoming opportunities within India's consumption-driven economy.

Leveraging SEBI’s Simplified Rights Issue Norms

The amended SEBI regulations have significantly simplified the Rights Issue process, reducing procedural overheads and timelines. These reforms are aimed at encouraging more companies to opt for equity-based capital raising, particularly in the mid-cap and NBFC segments.

By adopting this streamlined route, MMFSL expects to optimize both time and cost, while ensuring that the capital raise is more accessible to eligible shareholders.

Focus on Secured Asset Growth and Asset Quality

MMFSL has been focusing heavily on its secured asset portfolio, which forms a strong foundation for the company’s balance sheet. The company has consistently maintained its Gross Stage 3 (GS3) assets below 4% throughout FY25 — a strong indicator of robust credit quality.

Additionally, credit costs have remained under 2%, underscoring the effectiveness of the company’s risk management framework and prudent lending practices.

Strengthening Financial Backbone for Future Growth

As a AAA-rated NBFC, MMFSL aims to capture growth opportunities in rural and semi-urban India through a well-diversified product offering, including vehicle loans, SME lending, personal finance, and insurance distribution. The capital raised will allow MMFSL to:

• Expand its presence in underserved markets.

• Leverage technology and digital platforms to improve customer reach.

• Maintain liquidity buffers for operational resilience and regulatory compliance.

The Board sees this rights issue not just as a capital-raising activity, but as a strategic enabler for MMFSL’s long-term aspirations aligned with India’s expanding consumption base.

Building Shareholder Value

The Rights Issue is structured to be shareholder-friendly, ensuring eligible investors can participate in the company’s growth journey. By raising primary capital, the company intends to:

• Improve capital adequacy, especially Tier 1 ratios.

• Fund high-quality loan book growth.

• Retain financial flexibility amid dynamic interest rate and regulatory environments.

This capital raise is expected to support MMFSL’s ambitions over the next few years, during which it will likely benefit from the economic tailwinds driven by rising income levels, improved rural demand, and infrastructure-led development.

Long-Term Outlook and Confidence in India’s Growth Story

With India poised to become a $5 trillion economy, companies like MMFSL are positioned to thrive by servicing underserved customer segments through innovative financing solutions. MMFSL’s strategy of quality-led growth, supported by a strong capital base, aligns well with this trajectory.

The Rights Issue also reflects management’s confidence in the business fundamentals, future visibility, and the need to remain well-capitalized amid evolving macroeconomic conditions.

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