Mahindra and Mahindra Financial Services

The Board of Directors of Mahindra and Mahindra Financial Services announced their
issuance of equity shares through an INR 3089 crores Rights Issue on June 1 st, 2020. Existing
and eligible equity shareholders of the company were offered additional shares in
proportion to their existing holdings. The company opened the rights issue for subscription
on July 28th 2020 for the existing shareholders and closed it on August 20 th 2020. These
shares were offered in the ratio of one equity share for every one pre-paid equity share held
on the date of July 23,2020. On its meeting on August 17th, 2020, the Rights Issue Committee
finalised the allotment of 61,7764,960 equity shares at INR 50 per share at a discount on the
then market share price of a little less than INR 130. The management of Mahindra Finance
marked that the discounted pricing of their shares was to reward the shareholders on the
25th year of the company.

The funds were going to be used to repay/prepay certain outstanding borrowings of the
company, and increase long term capital and resources for meeting funding requirements
for the Company’s business activities and for general corporate purposes, and increasing the
net worth of the company. The company may have decided to raise capital through a rights
issue and not other sources because they were very quick in terms of getting approvals and
actually raising funds due to the SEBI’s temporary relaxation on certain provisions of the
rights issue to those rights issues which had opened on or before March 31 st 2021 (this was
done to provide financial relief due to the economic slowdown due to Covid).

In an interview with Business Insider, Mahindra and Mahindra Financial Services Vice
Chairman and Managing Director, Ramesh Iyer, said that the goal of the rights issue was to
boost the capital base of the company. Going from 15-17% capital adequacy to 19-20%
capital adequacy gives the company room for growth in the future plus additional leverage
capital for investments. The rights issue was also undertaken as a precaution against Covid.
There was a moratorium announced at the time on loan equated monthly instalments
(EMIs) from March 1, 2020 to August 31, 2020 with discussions being held for further
continuation of the moratorium. The rights issue was also an attempt by the company to
prepare for the worst-case scenario with their gross non-performing assets recording an
increase to 9.19% which was the highest in 8 quarters, decreased sales due to lockdowns,
and preparing for negative market conditions in the case Covid became far worse than what
anyone had anticipated.

Following the rights issue, Mahindra and Mahindra Limited had raised 3,089 crore rupees by
issuing shares to existing shareholders. There was an increase from 61,77,64,960 equity
shares to 123,55,29,920 equity shares in the paid equity shareholding of the company. The
shareholding percentage had increased from 51.19% to 52.1%. Shares of Mahindra Finance
closed 2.18 per cent up at ₹136.15 apiece on the BSE.