Demand stays strong, margin trajectory key for Mahindra & Mahindra

M&M posts steady Q3FY26 results with robust auto and tractor growth; EV push and commodity costs seen as key factors shaping margins ahead

Mahindra & Mahindra (M&M) delivered Q3FY26 results more or less in line with consensus estimates. Trends in the automobile segment look strong. Tractors could continue to log high volume growth, given the recovery of demand in rural areas. The company is pushing its electric vehicle (EV) exposure and this may have some negative impact on margins.

 

Revenue grew 26.1 per cent year-on-year (Y-o-Y) to Rs 38,500 crore, with lower average selling price (ASP) growth in the auto segment. The overall operating profit margin expanded 100 basis points Y-o-Y to 14.7 per cent. The operating profit grew 27 per cent Y-o-Y to Rs 5,670 crore. The Q3FY26 net profit at Rs 4,000 crore was in line with estimates.

 

The FES (farm equipment) segment margin rose 210 basis points Y-o-Y to 20.2 per cent, while auto margin was maintained at 9.5 per cent. Analysts are looking at revenue growth in the high teens through the mid term, with similar growth rates in operating and net profit. The company has reiterated its commitment to 15–20 per cent earnings per share (EPS) growth and 18 per cent return on equity (RoE).

 

Tractor segment margins stood at 20.2 per cent, up 210 basis points Y-o-Y and up 50 basis points quarter-on-quarter (Q-o-Q), which was near consensus, while auto margins were 9.5 per cent, down 20 basis points Y-o-Y and up 30 basis points Q-o-Q. It recognised a one-time extraordinary expense of Rs 98 crore for the new labour code. Higher dividend income from subsidiaries led to strong growth in other income to Rs 750 crore. Adjusted net profit grew 35 per cent Y-o-Y to Rs 4,000 crore for Q3FY26.

 

The RoE for 9MFY26 stood at 20.1 per cent, exceeding guidance of 18 per cent. The company targets an initial public offering (IPO) for its electric three- and four-wheeler division, Last Mile Mobility (LMM), by next year. Commodity inflation persists across precious metals, copper and aluminium. Hedging has cushioned the impact, and there was a small price hike in January.

 

Auto and tractor saw strong volume growth. M&M may beat industry growth rates in tractor and commercial vehicle segments and it has new sports utility vehicle (SUV) launches lined up. But high marketing spends may be the norm. M&M is the leading SUV player, with revenue market share of 24.1 per cent, up 90 basis points Y-o-Y. In the light commercial vehicle (LCV) (less than 3.5 tonne segment), M&M volumes grew 20 per cent Y-o-Y to 81,000 units, with market share up 10 basis points to 51.9 per cent. In January, it launched the new XUV7XO and it plans two new refreshes in the internal combustion engine line-up in CY26. In EVs, it launched the XEV 9S and no new EV launches are scheduled. In LCVs, it plans to launch two LCV variants in CY26.

 

The XUV7XO has seen robust demand. Management claims 70 per cent of bookings are skewed towards top-end variants. The company is facing supply constraints for such variants. The tractor market share dropped 20 basis points Y-o-Y to 44 per cent due to engine supply constraints. Management believes this was temporary, and a planned expansion will normalise supply.

 

In SUVs, volumes rose 26 per cent Y-o-Y to about 179,000 units. However, revenue market share has declined over the last couple of quarters due to the winding down of the old XUV700 ahead of the new launch. Segment demand was backed by GST rate cuts and replacement demand.

 

The company has sold over 41,000 eSUVs in the first 10 months of deliveries (Mar’25–Jan’26), with EV demand from new geographies. Around 80 per cent of EV customers are new to the Mahindra brand. EV exports may follow an approach of initial focus on right-hand-drive markets.

 

The PLI benefits for EVs are accruing, with XEV 9E (all variants) and XEV 9S Pack 3+ eligible, while Pack 1 and 2 variants of the 9S and BE 6 variants are expected to qualify in Q1FY27. Mahindra Electric Automobile Ltd (MEAL) has accrued the full 13 per cent PLI incentive but accruals may vary between 8–13 per cent depending on supplier eligibility. Semiconductor availability is tight globally.

 

The company has capacity expansion plans, with debottlenecking at Chakan and Nashik in CY26 to add 6,000–7,000 units per month across Scorpio N, Thar and Bolero. In CY27, there will be NU_IQ platform launches. In CY28, a greenfield Nagpur facility for tractors will start production. EV capacity will increase by 7,000–8,000 units in FY27. The NU_IQ platform will add 10,000 units in CY28, scaling to 500,000 units over time. Tractor exports are expected to improve in FY27.