M&M beats street, Q1 net up 20% at Rs 726 cr

Mahindra & Mahindra , India's biggest utility vehicle manufacturer, posted a better-than-expected 20% rise in quarterly profit as strong demand for its sporty cars offset sluggish sales at its key tractor business, boosting its shares.

Mahindra, the world's largest tractor maker, accounts for 40% of the tractor market in India, where sales are under pressure as economic growth cools and a poor monsoon and a looming drought slash demand.

"The drought-like conditions prevailing in several [Indian] states today has only added to the risks facing domestic companies," the company said in a statement. "Our near term outlook on the economy is cautious and watchful."

Mahindra, the flagship of the $14.4 billion Mahindra Group, and the owner of South Korean car maker Ssangyong Motor, said profit growth was due to a 32% increase in passenger vehicle sales over the same period last year.

Profit for the fiscal first quarter rose to Rs 726 crore, Mahindra said, as revenue jumped 40% to Rs 9,248 crore.

Analysts, on average, had expected profit of Rs 625 crore on revenue of Rs 9,045 crore, according to Thomson Reuters I/B/E/S.

Shares in the automaker, valued at around $7.5 billion by the market, extended gains to 4.0% after the results. The stock was up 3.8% at 0845 GMT, on a Mumbai market up 0.6%.

Mahindra's passenger car sales have outpaced local rivals such as Maruti Suzuki and Tata Motors thanks to huge demand for its new XUV 500 SUV and its all-diesel line-up, a fuel that is far cheaper than petrol in India due to state subsidies.

Sales of its tractors, including exports, fell 1% during the three months ended in June from a year earlier.

India said last week that it would suffer its first drought in three years as monsoon rains fail to meet average amounts, dealing a blow to India, where more than half the farmland lacks irrigation.