Mahindra and Mahindra Financial Services (M&M Financial) has announced the discovery of fraudulent activities within its retail vehicle loan division. According to the company, forged know-your-customer (KYC) documents were used to embezzle company funds. The company has taken corrective actions, including the arrest of individuals involved, and estimates the financial impact of the fraud to be around 1.50 billion rupees ($18 million).
Investigations are ongoing, and M&M Financial has delayed the announcement of its quarterly results to May 30th due to the fraud investigation. Analysts have expressed concerns about the impact of the fraud on investor confidence and the company’s re-rating potential.
In September 2022, the central bank imposed restrictions on M&M Financial’s use of third-party services for loan recovery due to supervisory concerns. These restrictions were lifted in January 2023. Analysts believe that strengthening governance and compliance structures is crucial for the company’s long-term re-rating.
