M&M net beats Street estimate

Bharat Doshi retires in November, will continue as a non-executive director

Riding on the continued demand for sports utility vehicles (SUVs), Mahindra & Mahindra (M&M), India’s largest manufacturer of utility vehicles and tractors, posted higher than expected net profit for the fourth quarter.

The Mumbai-based company posted a growth of two per cent in net profit at Rs 889 crore for the quarter ended March 31, against Rs 875 crore in the corresponding quarter of last year.

Analysts tracking the firm had assumed a net profit of Rs 760 crore for the reporting quarter. Adjusted net profit for the quarter stood at Rs 799 crore, a growth of 29 per cent compared to Rs 618 crore posted in the same quarter last year.

The company, which makes SUVs such as the XUV500 and Scorpio, had recorded a tax gain of Rs 256 crore in the same quarter last year. Further, a profit of Rs 90 crore was reported in the reporting quarter on the sale of four per cent stake in Mahindra Holidays. The adjusted net profit excluded these items, the company said.

Operating profit margin during the quarter stood at 14.4 per cent. Last year’s corresponding quarter had reported a margin of 12 per cent.

Net sales for the period stood at Rs 11,366 crore, a rise of over 10 per cent compared to Rs 10,288 crore posted for the same month a year ago.

In the utility vehicles space, the company recorded sales of 72,076 units in the reporting quarter, a growth of 23 per cent over the same period last year, with an overall market share of 48 per cent in the segment.

Tractor sales of Mahindra and Swaraj brands fell 4.97 per cent to 46,107 units, against 48,517 units sold in the same period last year. It has a market share of 37 per cent in the tractor segment.

The company cautioned that increased competition will result in further denting of its market share in the coming quarters. The three per cent hike in excise duty imposed on SUVs in the Budget has put pressure on volumes, said the company.

Pawan Goenka, president, automotive and farm equipment sectors, M&M, said, “The SUV segment has become very competitive; market share is bound to go down and we will have to compromise with it. The three per cent increase in excise duty will have some effect on sales.”

The company, however, is planning to take some short-term measures, which will allow it to escape the additional tax. This will mean slight reengineering of its vehicles. “We will take some short term measures to neutralise the increase in excise duty”, added Goenka.

Bharat Doshi to retire in November
Bharat Doshi, executive director - finance, will retire in November. However, he will continue to be on the company’s board in the capacity of a non-executive director.