Mahindra & Mahindra Shares Fall 6%, Sharpest Drop in 7 Months: Here's Why

Shares of Mahindra & Mahindra (M&M) plunged 6% to Rs 2,666.45, its sharpest intra-day fall in seven months, on the BSE in Friday’s intra-day trade after the company announced to invest in the proposed rights issues of its subsidiaries, Mahindra & Mahindra Financial Services Limited (MMFSL) and Mahindra Lifespace Developers (MLDL).

On Thursday, the company’s board approved a proposal to subscribe to the equity shares of Mahindra & Mahindra Financial Services Limited (MMFSL) and Mahindra Lifespace Developers Limited (MLDL) to the full extent of the company’s Rights entitlement. The company also said it is prepared to subscribe to additional shares as well as to any unsubscribed portion of the Rights Issue (s) up to the total issue size. MMFSL and MLDL are listed subsidiaries of M&M.

M&M Financial Services has approved raising up to Rs 3,000 crore through a rights issue, while Mahindra Lifespace Developers plans to raise up to Rs 1,500 crore via a similar route. MMFSL will offer and issue fully paid-up equity shares of face value of Rs 2 per share, not exceeding Rs 3,000 crore.

Shares of M&M ended 3% higher on Thursday at Rs 2,840.30 on the BSE. The stock has witnessed a strong rally over the past year, rising 53.18%. However, it has seen some short-term selling pressure, falling 4.65% over the last week.

At the time of writing, the stock was trading at Rs 2,681.10, down 158 points or 5.6% on the NSE. It has surged over 44% in the last one year.

The rights issues are expected to strengthen the balance sheets of MMFSL and MLDL, providing fresh capital for future growth and expansion opportunities.

“The board has delegated the authority to certain principal officers of the company inter alia to take a final decision with respect to the Investment in the aforesaid rights issue(s) upon receipt of intimation from MMFSL and MLDL regarding the terms and conditions of the respective rights issue(s) including the issue price,” M&M said in a statement.

M&M Financial Services reported a 63% year-on-year increase in its net profit to Rs 899 crore for the quarter ended December 2024, driven by a significant drop in provisions and strong loan book growth. However, the company’s asset quality declined, with stage 3 assets rising to 3.9% in December, up from 3.83% in the previous quarter and net stage 3 assets climbing to 2.0% compared to 1.59% a quarter earlier. The company’s shares fell around 2.5% on Friday to Rs 273.60 on the NSE. The stock has slipped over 5.5% in the last one year and over 11% in the previous six months.