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| M&M: Xylo could kick-start growth |
| Shobhana Subramanian & Varun Sharma / Mumbai Feb 18, 2009, 00:59 IST |
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It’s been a relatively good start to the new year for Mahindra and Mahindra with both utility vehicles and tractors finding more takers in January than they did in December. Moreover, the new Xylo — a multipurpose vehicle — should do well because it’s been competitively priced. Industry watchers say that apart from taking away some share from other players in the UV segment, it could also eat into the sedan segment.
Moreover, the Xylo should find a market in the taxi segment too. However, given that the economy could slow down in 2009-10, how strong the demand for passenger vehicles will be next is hard to tell. It could be a while before there’s a meaningful pick up in volumes across the industry even though interest rates on car loans may have been trimmed.
Market leader Maruti Suzuki turned in relatively good numbers in January and the management believes February could be better given that the Swift continues its good run. According to SIAM, between April 2008 and January 2009, sales of passenger cars fell just over a per cent compared with the corresponding period in the previous year.
 Meanwhile, December 2008 was a disappointing quarter for M&M with revenues coming off by about 15 per cent to Rs 2,519 crore. Operating margins were weak partly because of foreign exchange losses and also because the auto division posted a loss of Rs 10.43 crore at the earnings before interest and tax (ebit) level.
That was not too surprising because UV sales have been weak for the better part of the current year and moreover, input costs have been high. The farm equipment segment, which contributes around 45 per cent to the company’s revenues did better than the auto segment though operating margins fell 300 basis points y-o-y to 10.65 per cent. Lower prices of raw materials should help improve operating margins for M&M in the months ahead. What has also hurt M&M are foreign exchange losses—the reported profit after tax at Rs 1.19 crore was down a sharp 99.7 per cent y-o-y with forex losses amounting to around Rs 182 crore.
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