M&M Finance, a non-bank lender, witnessed a 5% drop in shares after announcing the postponement of its earnings meeting due to the detection of a ₹150 crore fraud. The fraud primarily involved retail vehicle loans disbursed by the company and included forgery of KYC documents, resulting in the misappropriation of company funds. This revelation led to the delay of the board meeting scheduled to discuss earnings for the January-March quarter.
Fraud Detection Details
The fraud came to light during the January-March quarter, leading to the arrest of several individuals, including an area business manager and other employees from the North East branch. M&M Finance promptly reported the matter to the Reserve Bank of India’s central fraud monitoring cell and assured that investigations were in progress, with corrective actions underway.
Impact on Stock Prices and Financial Performance of M&M Finance
Following the fraud disclosure, M&M Finance shares plummeted by 8% in early trading. The company’s decision to defer the board meeting further exacerbated concerns, leading to increased trading volumes. The estimated financial impact of the fraud is expected to be around ₹150 crore, as indicated by the company. Despite the setback, M&M Finance continues to implement corrective measures and address other agenda items, such as discussing borrowing limits and issuing non-convertible debentures.
Financial Performance Insights
Despite the fraud incident, M&M Finance reported a 12% year-on-year decrease in net profit for the October-December quarter, attributed to increased credit costs. However, there was a significant sequential increase in profit compared to the previous quarter. The company also recorded a 10% rise in net interest income and a 7% growth in disbursements from the previous year.
While the fraud revelation has impacted M&M Finance’s stock prices and necessitated the deferral of its earnings meeting, the company remains committed to addressing the situation and maintaining its financial performance amidst challenging circumstances.
