M&M net up 77% to Rs 734 crore

Utility and tractor manufacturer Mahindra & Mahindra today posted a 77.6 per cent rise in the third-quarterly standalone net profit, with higher sales mitigating the company’s input cost pressures.

The company reported a Rs 734.7 crore net profit for the quarter ended December 31, compared to Rs 413.7 crore in the same quarter a year ago. Financial analysts tracking the company were estimating the net profit to be in the region of Rs 630-680 crore.

The net profit also took into account an exceptional item of Rs 117 crore, which rose out of profit on exercise of the put option the company held on a long-term investment. In addition, a sum of nearly Rs 42 crore came as dividends received from other group companies.

M&M shares, which were on a steady decline over the past few trading sessions closed four per cent higher at Rs 654.2 on the Bombay Stock Exchange.

“The growth in the profit of the company despite the relentless increase in material costs is due to a good volume performance by both vehicles and tractors, tight control on expenses and prudent financial management resulting in lower interest costs,” said the Mumbai-based company.

The rise in prices of steel, rubber and other raw materials used to make vehicles and components has led to an erosion in margins of some automotive companies. India’s largest car maker, Maruti Suzuki and the largest two-wheeler maker, Hero Honda, had reported a 18 per cent and 20 per cent decline in net profit, respectively, for the same quarter recently.

Net sales of Mahindra & Mahindra grew by 35.6 per cent to Rs 6,074 crore for the reporting period, against Rs 4,478 crore posted in the corresponding quarter last year. Sales of tractors improved with a growth of 30 per cent at 1.28 lakh units, while utility vehicle sales stood at 56,211 units, during the period.

A Mumbai-based analyst said: “Better cost reduction initiatives and better than expected sales realisation have boosted margins of the company. However, the extent to which the company has revised its prices upwards may not be enough to cover for the rise in raw material prices.”

The total expenditure grew by 35 per cent for the reporting period to Rs 5,299 crore, against 3,925 crore posted in the same quarter last year. The analyst said operating margins of M&M was impressive at around 15 per cent.

After the recent launch of a pick-up truck, M&M has promised to launch more models in the coming months to boost volumes and also to maintain its lead in the utility vehicle segment. It presently has a share of 62 per cent in the domestic market.