M&M slips after brokerage downgrade

Mahindra and Mahindra fell 1.18% to Rs 1,388 at 13:13 IST on BSE after a prominent domestic brokerage firm cuts its rating on the company to 'reduce' from 'add'.

Meanwhile, the BSE Sensex was down 168.27 points, or 0.62%, to 27,097.05.

On BSE, so far 17,000 shares were traded in the counter, compared with an average volume of 2.76 lakh shares in the past one quarter.

The stock hit a high of Rs 1,397.60 and a low of Rs 1,380 so far during the day. The stock hit a record high of Rs 1,421 on 4 September 2014. The stock hit a 52-week low of Rs 767.10 on 10 September 2013.

The large-cap company has an equity capital of Rs 307.94 crore. Face value per share is Rs 5.

The brokerage cited valuations as the key reason. The brokerage said M&M has lost 13% market share in the utility vehicle segment over the past two years. The brokerage described that as a significant loss.

The brokerage added that further re-rating of the stock will depend on curtailing subsidiary losses, improving consolidated return on capital employed.

On a comparable basis, the combined net profit of M&M and its 100% subsidiary Mahindra Vehicle Manufacturers (MVML) rose 4.3% to Rs 896.40 crore on 1.09% decline in gross revenue plus other income to Rs 10823.30 crore in Q1 June 2014 over Q1 June 2013.

MVML, located at Chakan near Pune, was set up as a 100% subsidiary of M&M with a view to sourcing contemporary products for expanding the market offerings of M&M.

Mahindra Group enjoys a leadership position in tractors, utility vehicles, information technology, financial services and vacation ownership. In addition, Mahindra enjoys a strong presence in the agribusiness, aerospace, components, consulting services, defence, energy, industrial equipment, logistics, real estate, retail, steel, commercial vehicles and two-wheeler industries.

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