M & M Steps On Gas, Bottomline Rises 24.5%

Tractor and auto major Mahindra & Mahindra has managed to beat expectations by posting a 24.5 per cent growth in net profit in 1996-97.

From Rs 168.08 crore, Mahindra's net profit rose to Rs 209.33 crore.

The earnings per share of the company went up to Rs 20.56 in 1996-97 from Rs 16.98 in the previous year. Buoyed by healthy results, the company has declared a dividend of Rs five per share on a capital base of Rs 101.79 crore.

The recession in the auto sector last year, however, took its toll on the company with growth rates slipping.

Sales has grown by 24 per cent against 1995-96 growth of 37 per cent. Profit growth is also at 24.5 per cent against 43 per cent last year. "One should also remember that these profits are after a provision of Rs 20 crore for contingencies and hence the actual profits are even higher, the figure of Rs 209.33 crore is above our expectations," Narendra Nagpal, auto analyst at BZW Securities told Business Standard.

 

The company managed to buck depressed markets conditions as vehicle production jumped 13.4 per cent and vehicle sales rose 18 per cent. The increased sales volumes came mainly from rural and semi urban markets which has been the company's key thrust areas, managing director, Anand Mahindra said.

Operational income rose 24.4 per cent to Rs 3,607.57 crore from Rs 2899.56 crore in the previous year. Operating profit rose to Rs 491.97 crore from Rs 369.83 crore in the previous year. PBT rose by 15.4 per cent to Rs 328.33 crore from Rs 284.58 crore previously.

The good performance came despite interests rising to Rs 80.51 crore from Rs 48.15 crore. Depreciation too rose to Rs 62.96 crore from Rs 42.33 crore.

Performance so far this year is already up. April-June 1997 figures show, the company produced 12,288 vehicles as against 11,090 units and dispatched 12,218 vehicles as against 12,057 of the corresponding period last year. The tractor division produced 12,970 tractors and dispatched during this period as against 8,966 and 9000 units of the corresponding period last year.

The M&M scrip moved up at major bourses yesterday following its market friendly results.

At the BSE, the scrip ended the day at Rs 357, a gain of Rs 13.25 over the previous close. Nearly 1.21 lakh shares worth Rs 4.26 crore changed hands at the BSE yesterday. At the NSE, the scrip moved up by Rs 12.85 to end the day at Rs 356.40.

The M&M GDR was steady at the London markets yesterday and at 18:00 IST, the GDR stood at $ 13.08 against a previous close of 13.20.

The bid price for the GDR was $ 12.80 while the offer price was at $ 13.38, sources said.

In the automotive segment the company produced 74,133 vehicles in 1996-97 as against 65,365 in the previous year and sold 75,048 vehicles as against 63,583 vehicles in 1995-96 registering.

Stiff competition from Telco's Sumo forced a sharp fall in M&M's market share in the utility vehicles segment. From 60 per cent last year, the market share slipped to 52 per cent.

With a good monsoon round the corner and a good harvest analysts expect M&M's fortunes to continue to be good in the current year.

"With the expectation of overall economic growth pegged at 6-7 per cent backed by a robust increase in agricultural income, we expect to see sustained demand for our products, which largely cater to the rural markets in the country,'' Mahindra said.

The tractor division of M&M produced and sold 58,028 and 57,379 units respectively in 1996-97 as against 49,651 tractors produced and 50,005 units sold in 1995-96. The company currently has a 26 per cent share of the tractors market.