20250424_MFIN_Laporan Hasil Pemeringkatan_31877691_lamp1.pdf

                                                                                                          Rating Rationale


 Key Strengths

 Very strong likelihood      As a core subsidiary of MUFG Bank, PEFINDO expects Mandala Finance to receive unwavering support during
 of support from MUFG        expansion and financial distress. Mandala Finance plays a strategic role within MUFG’s portfolio by strengthening its
 Bank                        presence in the multi-purpose motorcycle financing segment, particularly in eastern Indonesia. This positioning
                             complements the focus of fellow group member and parent, Adira Finance, which primarily concentrates on car
                             financing. MUFG’s strong control over Mandala Finance is evident through its substantial 89.3% ownership stake and
                             management team representation. In addition, Mandala Finance also enjoys stronger access to low-cost funding from
                             its bank partners, contributing to a more competitive cost of funds. MUFG Bank is among the largest global banks, and
                             demonstrates considerable financial strength, as evidenced by its consolidated total assets of JPY 413.2 trillion, total
                             equity at JPY 21.6 trillion, and profit at JPY 1.8 trillion as of FY2024, underscoring MUFG Bank's superior capability to
                             provide timely and extraordinary support.

 Very strong                 PEFINDO projects Mandala Finance’s capitalization profile to remain very strong over the near to medium term,
 capitalization              underpinned mainly by its high equity base, profit accumulation, and moderate dividend payout ratio. Mandala
                             Finance’s equity base has continued to grow steadily to IDR3.9 trillion in FY2024 from IDR3.4 trillion in FY2023 and
                             IDR3.2 trillion in 2022 due to stable profit accumulation. The high equity base should provide sufficient cushion to
                             absorb potential business risks and support its high financing growth strategy at 12%-15% over the near term. We
                             expect its debt-to-equity ratio (DER) to remain favorable, projected at 0.7x-1.2x over the medium term, underpinned
                             by a historically low leverage profile consistently below 1.0x over the past five years. This low leverage affords Mandala
                             Finance greater flexibility to pursue growth faster than more highly leveraged peers, even with a high growth strategy.

 Strong profitability        PEFINDO projects Mandala Finance will maintain its strong profitability performance in the medium term, given the
 performance                 significant contribution of high-yield used motorcycle financing receivables in its financing portfolio. Moreover, it has
                             a strong presence in less competitive regions outside Java, allowing for more pricing flexibility. Mandala Finance
                             recorded a high average lending rate of 38%-39% in the past five years while paying an average cost of funds of 9%-
                             10% during the same period, which led to a favorable margin of above 35%, far above the industry average of 10%-
                             12%. These strong margins effectively offset its elevated operating expenses, which stem from the need for extensive
                             infrastructure and human resources to penetrate underserved markets, manage receivables, and maintain direct
                             customer interactions. Furthermore, Mandala Finance’s cost of funds has been declining, supported by improved access
                             to funding from its banking partners—reflected in a lower cost of funds of approximately 8.5% in FY2024, compared
                             to around 10.3% in FY2023. Given this business model, Mandala Finance is well-positioned to sustain a strong return
                             on average assets from 7% to 9% over the near to medium term.

 Key Weaknesses

 Moderate asset quality      Mandala Finance’s asset quality profile is projected to remain moderate over the medium term, with its non-performing
                             receivables (NPR) ratio (overdue >30 days) expected to remain high at 5.5%-6.5%. As of FY2024, the Company’s NPR
                             ratio remained high at 5.8%, despite improving from 6.0% as of FY2023. Mandala Finance’s target market of the middle-
                             to-low-income segment inherently carries higher credit risks and is more susceptible to economic downturns. While
                             the Company has intensified collection efforts and strengthened customer analysis to mitigate delinquencies, we
                             expect its improvement in asset quality to be gradual over the near to medium term.



 Environmental, Social and Governance (ESG) Factors in the Rating Assessment

 ESG factors are neutral considerations in Mandala Finance’s credit rating assessment. Mandala Finance is a motorcycle financing company focusing
 on new motorcycles, tapping low-to-middle-income segments. Therefore, we view that Mandala Finance has a positive consideration in our social
 factor assessment as Mandala Finance’s services provide its customers, with more than 90% from the low-to-middle income segment, access to
 motorcycle financing to increase their welfare. Conversely, we view a moderately negative consideration of the environmental segment, as most of
 the items financed are fuel-based motorcycles. Mandala Finance’s governance is assessed as neutral, as the Company has established its standard
 operating procedures with strong supervision from its parent and regulator. Overall, these ESG considerations do not have a material impact on
 Mandala Finance’s financial profile.




http://www.pefindo.com                                                    2/3                                                                April 2025

                                                                                                                            Rating Rationale




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was made. The rating is a forward-looking opinion regarding the rated party’s capability to meet its financial obligations fully and on time, based on assumptions
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http://www.pefindo.com                                                                 3/3                                                                          April 2025