M&M posts flat net at Rs 897cr

Net sales of the company rose 5% to Rs 11,000 c

Strong demand for tractors helped negate the falling sales of passenger vehicles for Mahindra & Mahindra, India’s largest tractor and utility vehicles manufacturer, as the company posted a near-unchanged net profit for the quarter ended March 31.

The Mumbai-based company posted a stand-alone net profit (including MVML) of Rs 897 crore for the quarter, a growth of 0.9 per cent against Rs 889 crore posted in the same quarter last year. The company beat the Street expectation of Rs 838 crore. The March quarter also included a one-time exceptional gain of Rs 52 crore from the sale of investments.

Revenue contribution from the tractor division rose 31 per cent to Rs 3,187 crore during the quarter against 28.4 per cent in the corresponding quarter last year at Rs 2,853 crore. The company sold 138,567 units of tractors in the period, an increase of 12 per cent compared to 123,767 units in the same period last year. Tractors returned with a earnings before interest and tax margin of 17 per cent. Net sales rose five per cent to Rs 11,000 crore for the quarter as against Rs 10,486 crore in the same quarter last year. Adjusted for the merger of trucks and buses subsidiary, revenues were up 4.3 per cent to Rs 10,413 crore, better than estimates. The demand for utility vehicles remained muted during the quarter in the sector, with M&M getting the worst hit. The company, with a market share of 43 per cent in the segment, sold 16 per cent less vehicles in the quarter at 60,900 units versus 72,076 units a year ago.

The excise duty reduction during the interim budget forced the company to issue compensations to its dealers. The total loss due to the change in excise duty during the quarter stood at Rs 130 crore, however the company said that the loss was shared with the dealers and refused to specify the actual loss taken on its books.

Pawan Goenka, executive director, Mahindra & Mahindra said, “The passenger vehicle industry is running at 50 per cent capacity utilisation. We have had 'no production' days and that will continue. We do not expect further drop in market share in the UV segment. The segment should see a higher growth in the industry this year”.

The company said that there have been some positive signals from the truck segment following an increase in enquiry levels and growing optimism amongst buyers. “The second half should see a turnaround”, added Goenka.

During the quarter, the company also amalgamated Mahindra Trucks and Buses (MTBL) into itself. A loss of Rs 300 crore was added to the company’s books which allowed it to have a tax reversal of Rs 175 crore in the quarter in the combined results of Mahindra & Mahindra and Mahindra Vehicle Manufacturer (MVML).

Moving forward the company is predicting an industry-wide growth of 6-8 per cent in tractor sales and 8-10 per cent in automotive sales this year.