Mahindra's net profit grows 12% in June quarter

Beats estimates; tractor volumes grew 19%

Mahindra & Mahindra on Wednesday reported a strong profit growth during the quarter ended June, beating Street estimates, led by robust demand for tractor and utility vehicles.

The Mumbai-based company posted a standalone net profit of Rs 955 crore, a growth of 12 per cent, compared with Rs 850 crore posted in the corresponding quarter last year. The net profit was higher than the Bloomberg poll of analysts which was at Rs 893 crore.

While higher sales utility vehicles and tractors helped boost profits, other sources of income, such as dividends from subsidiaries and profit on transfer of agriculture business to a wholly owned subsidiary, also helped the company post good bottomline.

Helped by higher sales of utility vehicles which grew 13 per cent, thanks to new launches like TUV300 and KUV100, total automotive volumes including exports grew 10 per cent during the quarter to 110,959 units.

Tractor volumes grew 19 per cent, pushing M&M's market share to nearly 44 per cent, the highest in nine years. Pawan Goenka, executive director, M&M said: "We are recalibrating tractor demand from 10 per cent to mid teens for the year for the industry."

The company executive also said margins came under pressure during the quarter due to higher depreciation and discontinuation of tax benefits from its Haridwar plant. Margins stood at 10.7 per cent as against 11.9 per cent posted in the corresponding quarter last year.

"Overall, a weak quarter with slim margins of the automotive division being the key concern. We have a neutral rating on the stock as we believe more than the positives of the tractor segment doing well, headwinds in the automotive segment keeps us worried," Nitesh Sharma of PhillipCapital said.

Net standalone sales of the company grew to Rs 11,800 crore, a rise of 14 per cent as against Rs 10,348 crore in the corresponding quarter last year. 

The company further stated that it will launch petrol variants of XUV500 and Scorpio before the end of this year and next year, respectively.