M&M Q3 PAT rises 40% YoY to Rs 531 crore

Mahindra & Mahindra (M&M) reported 40% jump in net profit to Rs 530.86 crore on a 16% rise in revenues to Rs 14,056.54 crore in Q3 FY21 over Q3 FY20.

The results include the combined earnings of M&M and Mahindra Vehicle Manufacturers (MVML), which is a manufacturing unit of M&M.

The company recorded an exceptional expense of Rs 1213.98 crores for the quarter ended 31 December 2020, which represents impairment provisions for certain long-term assets and other exposures.

Profit before tax in Q3 December 2020 stood at Rs 1025.30 crore, up by 31.1% from Rs 782.08 crore in Q3 December 2019. Tax expense during the quarter increased by 23% year-on-year (YoY) to Rs 494.44 crore.

M&M sold 1,15,272 vehicles in the domestic market in Q3 FY21, which is lower by 7% as compared to 1,23,353 vehicles sold in Q3 FY20. The automaker's tractor sales improved by 20% YoY to 97,420 units in the third quarter on the back of a robust rural story. M&M expects strong demand to continue.

On a consolidated basis, the company reported a net profit of Rs 704 crore in Q3 December 2020, up 252% over net profit of Rs 200 crore in Q3 December 2019. Total income increased 11% YoY to Rs 21,868 crore in Q3 FY21.

M&M said that capital allocation actions, a 220 bps increase in standalone operating margins on the back of a 20% growth in tractor volumes and a 12% revenue increase in the auto business were the reasons for improved profitability.

Capital allocation actions were targeted at loss-making subsidiaries; these actions have made a significant contribution to the financial performance. They include turnaround of businesses, restructuring to achieve profitability and exit from multiple businesses, it added.

The increase in operating margins was driven by cost optimization and operating leverage. Shortage of semi-conductors impacted availability of engine control units (ECUs), due to a high dependence on one supplier. However, steep increase in commodity prices were partially offset by a sales prices increase and value engineering actions.

"Demand for auto continues to be strong. The UV business grew 11% though production was lower than demand due to ECU and steel shortage, M&M said.

Further, M&M announced that its South Korean arm, Ssangyong Motor Co (SYMC), filed an application before the Bankruptcy Court for commencement of rehabilitation proceedings on 21 December 2020. It is now preparing and plans to submit a pre-packaged rehabilitation plan (p-plan) with equity investment from an investor and debt from local lenders. There is no increase in the company's exposure as compared to Q2 FY21.

Separately, the tractor major announced the appointment of Manoj Bhat as the group chief financial officer with effect from 2 April 2021. Dr. Anish Shah the current deputy managing director and group CFO of the Mahindra Group will assume the role of managing director and chief executive officer from 2 April 2021. Manoj Bhat will report to Dr. Anish Shah and will be a part of the group corporate office leadership team.

M&M's business is diversified across farm equipment, auto and automotive components, real estate, hospitality, information technology, defence and aerospace and financial services.

Shares of M&M gained 0.59% to currently trade at Rs 871.65 on the BSE.

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