Mumbai, Oct. 26: Mahindra & Mahindra (M&M) plans to sell 14.25 per cent of the shares in its subsidiary, Mahindra & Mahindra Financial Services (MMFSL), in the market through an initial public offer (IPO).

One crore shares will be put on the block in a move that sources close to the company said could be replicated for its other subsidiaries. The company told exchanges today that the board of its subsidiary would meet on Thursday to consider issuing equity through an IPO.

At the board meeting that took stock of second-quarter results today, the directors approved the offer for 14.25 per cent of M&M Financial Services, 97.26 per cent owned by the parent.

Analysts have suggested that the non-banking finance company looks poised to fetch high valuations in its flotation because it has been successful in carving a distinct niche for itself since it started business in 1993-94.

The firm has been financing purchases of Mahindras’ range of utility vehicles and tractors. “In many ways, therefore, it has a ready clientele,” an analyst said.

Mahindra Financial Services was incorporated in 1991, with M&M, Kotak Mahindra and M&M dealers as equity holders. It has a network of 256 branches spread across semi-urban and rural areas. These cover almost 80 per cent of the districts in the country.

The company extends loans through hire purchase, loan and leases to clients, who number more than 3 lakh. It even finances cars of Maruti, Hyundai and Tata Motors.

Mahindra Financial Services also has its own subsidiary, Mahindra Insurance Brokers, whose disbursements in 2004-05 were around Rs 3343 crore and its net profit at Rs 82.28 crore, up from Rs 67.62 crore in 2003-04.

Net jumps 28%

M&M’s second-quarter profit leapt 28 per cent to Rs 157.2 crore from Rs 122.9 crore in the same period last year.

The rise was attributed to strong sales, particularly farm equipment, and lower operating costs. Net sales and income grew 23 per cent to Rs 1914.8 crore.

First-half earnings climbed 33 per cent to Rs 302.5 crore (Rs 226.8 crore), while net sales and operating income rose 25 per cent to Rs 3726.7 crore. However, the company was cautious on projections for the full year.