M&M net up 36% at Rs 570 cr

Confirms interest in troubled Korean SUV maker SsangYong.

Mahindra & Mahindra (M&M), the country’s largest sport utility vehicles (SUV) and tractor maker, today posted a 36 per cent rise in standalone net profit at Rs 570 crore for the quarter ended March 31, on robust sales of SUVs and tractors. M&M had posted a net profit of Rs 418 crore in the year-ago quarter.

Net sales rose 46 per cent to Rs 5,278 crore, as compared to Rs 3,619 crore a year earlier. About 58 per cent of the company’s turnover was generated from automotive space, while the rest came from tractor and other segments.

Operating margin stood at 15.94 per cent, a full percentage point better than the third-quarter numbers. The current upward trend in commodity prices was expected to put pressure on margins moving forward, said the company.

Cost of raw materials consumed shot up by 34 per cent to Rs 3,120 crore, as compared to Rs 2,321 crore in the same quarter last year. Total expenditure increased 43 per cent to Rs 4,553 crore from Rs 3,182 crore.

Despite losing about 4,000 units due to lack of component availability during the reported quarter, M&M sold 59,526 units of utility vehicles, an increase of 24 per cent over 48,088 units sold a year earlier. Tractor sales were up 55 per cent to 44,344 units, compared to 28,679 units.

The company board recommended a dividend of 8.75 per share and a special dividend of 0.75 per share of face value Rs 5. Total dividend payout will be of Rs 623.75 crore.

Pawan Goenka, president (automotive and farm equipment), M&M, said, “There is still some constraint in components supply, basically in three areas — tyres, components compliant to new emission norms and castings. We do not see the issues getting sorted out at least before the first half of this financial year.”

Officials also said it had not changed the plan for capital expenditure for the coming period and would spend Rs 4,500 crore in next three years. It has a cash reserve of Rs 2,500 crore, with a debt-equity ratio of about 0.34.

The company sells three models in the utility vehicle (UV) space — Xylo, Scorpio and Bolero. M&M, along with its US-based partners International Trucks and Engine Corporation (ITEC), will shortly launch the heavy truck range, prices of which will be disclosed next week.

It is also working on a new multi-seater passenger van, based on the Maxximo (a light truck vehicle) platform, to take on Maruti’s Omni and Eeco. Tata Motors will also launch the Venture in the same space in July.

Tractors sales are expected to be robust this year, according to Goenka. He was recently given the charge of the farm equipment division of the company after Anjani Kumar Choudhari, the former president of the segment, wished to retire.

Senior company officials today confirmed that it had submitted a letter of intent to make a bid for troubled Korean SUV maker SsangYong.

“We have always maintained that we as a company would want to be in the premium SUV segment. SsangYong is present in that segment, so it fully compliments the interest. We see full synergy in products and markets. The company is present in those markets where we are not,” said Goenka.

“We have not made a due diligence (of SsangYong) yet, but will do it after we are short-listed by it later. We have to look at the economic viability of the company and how it fits into our strategy before we make a bid.”