M&M slips 4% to hit an over 5-year low post weak June quarter results

Shares of Mahindra & Mahindra (M&M) hit an over five-year low of Rs 526, down 4 per cent on the BSE in intra-day trade on Wednesday after the company reported a 26 per cent decline in its consolidated net profit before exceptional items at Rs 918 crore for June quarter (Q1FY20). The fall in profit was attributed to sluggish domestic volume and increased cost pressure. The company had posted a profit of Rs 1,238 crore in the year-ago quarter.

Operational revenue during the quarter declined by 7 per cent to Rs 26,041 crore against Rs 28,062 crore in the corresponding quarter of the previous fiscal. Operating profit margin contracted 180bps to 14 per cent Q1FY20 from 15.8 per cent in Q1FY19.

M&M reported a one-time gain of Rs 1,367 crore for the quarter mainly on account of gain on sale of shares by M&M benefit trust; and gain on buyback by an associate / transfer of certain long term investments.

The slowing down of the economic activity coupled with the increase in freight capacity of existing fleet due to implementation of new axle loading norms has resulted in many transporters either reducing or temporarily suspending their fleet purchase plans.

For the passenger vehicle (PV) segment, Q1FY20 was the fourth consecutive quarter of reduction, the worst ever de-growth since Q3FY01. PV demand continues to be impacted by the slowing down of the overall economy, which along with tight credit conditions and delayed monsoon has impacted consumer sentiment in both urban and rural India. The stress in the agri sector and finance availability has impacted the demand for LCV, M&M said in a press release.

Thus far in the calendar year 2019, M&M has underperformed the market by falling 34 per cent, as compared to a 2 per cent rise in the S&P BSE Sensex. The stock was trading at lowest level since May 5, 2014.