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M&M Finance is a leading rural focused NBFC financing all types of 4 wheelers. Its subsidiary is engaged in rural housing finance. Presence in rural areas is a key strength as most auto OEMs are gearing up to increase sales to rural areas where there is greater potential given low penetration levels. However, the company is prone to spike in NPAs which result in higher provisioning. Corrective action is taken to keep defaults under control but the company is susceptible to this risk factor, more so than its peer group. We have a neutral view due to cheap valuations, strong pedigree and inherent strength of the sector despite poor management track record. The company should be able to recover well from the covid 19 pandemic due to good rural growth dynamics where the company is predominantly present, but 2nd Covid wave has played havoc with NPAs – 29-07-2021 Price: 148.70 Rating: Neutral Recommendation : Hold

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