A senior M&M official said the company is exploring all options to reduce its cost of funds, which stands at around 14 per cent. "We have pre-paid high-interest debt to the extent possible. After the latest tranche of debt retirement, our interest liability will fall further during the current fiscal," the official said.

At M&M, non-convertible debentures aggregating around Rs 130 crore carrying an interest liability of between 17.5 to 19 per cent. "In these cases, we will exercise the put option at the earliest due dates," the official said.The Mahindra group, which divested its 24 per cent holding in Otis Elevators for Rs 112.34 crore, is now weighing the option of unlocking investment in other non-core businesses as well. The group stake was held through the Mahindra Holdings, an M&M subsidiary.

The company may soon divest its stake in pharma company Schenectady Beck India, while M-Seal, its own adhesive brand, has also been put on the block. "We will gradually get out of businesses which are non-core for the group," the official explained.

During 1998-99, M&M's interest liability had increased to Rs 151.86 crore from Rs 122.88 crore during the previous year. Company officials said that the higher interest charges was due to the increase in surplus funds, which were borrowed at 12.5-13.5 per cent.

"For the 15-month period till March 31, 1999, the company had borrowed around Rs 300 crore, which resulted in an increase in the interest charges last fiscal," the official said.

With the turnaround in the automobile sector, M&M is bullish about its performance in this fiscal. "In the utility vehicle segment we are confident about a growth of around 10 per cent, while in tractors we will outperform the industry," officials said. During the first six months, M&M has improved its market share in both utility vehicles and tractors. While its share in the utility vehicles segment increased from 54.7 per cent to 60.7 per cent, its market share in tractors moved up from 26.8 per cent to 29 per cent.

The company sold 31,443 utility vehicles (29,370 units in the same period last year) and 36,658 tractors (32,366 units last year). In the tractor segment, the company's volumes shot up 13.26 per cent against the industry growth of 4.59 per cent.

During the first six months, M&M clocked a 34.75 per cent increase in net profit to Rs 111.64 crore, up from Rs 82.85 crore in the same period last year. The earnings per share (annualised) shot up from Rs 16.03 to Rs 20.57 during the period.