According to market sources, the auto major plans to leverage its "Internet space for building a Web presence for the automotive sector". The stock has, for the past two days, been locked in the upper circuit-filter. On February 3, M&M touched a high of Rs 558.7 on the NSE, while on BSE, the stock traded at Rs 550 in mid-session. However, a correction at close saw the stock falling to Rs 520-levels. Brokers say the correction is a good time to accumulate the stock.

At a time when most auto stocks are being hammered on the bourses, thanks to the unimpressive third-quarter performance of most companies, M&M has bucked the trend. On the back of higher growth in both tractor and utility vehicle sales, M&M's turnover has risen by 17 per cent to Rs 993.3 crore. Net profit has increased by over 20 per cent to Rs 77.7 crore from Rs 63.2 crore in the corresponding period last year. Apart from Ashok Leyland (whose sales are up 33 per cent), and Hero Honda, most other automobile companies have not fared too well in the third-quarter.While Telco and LML are in losses, TVS saw a dip in PAT and Bajaj Auto's showing was nothing to write home about.

Fundamentally, the outlook for the sector where M&M operates is positive. The demand for utility vehicles and tractors is showing good growth and with the cost-cutting measures in place, maintaining profit margins should not pose a major problem for the company. For the nine months of FY 2000, the company has earned a net profit of Rs 189.3 crore. Marketmen expect the company to end the year with a net profit in the range of Rs 250-260 crore as compared with Rs 228.5 crore last year.

On an equity capital of Rs 108.5 crore, the annualised earnings per share work out to Rs 23, which give a discounting of 29. While this appears to be reasonable for an automobile stock, considering the IT edge of the company, (mainly on account of the strong fundamentals of its subsidiary, Mahindra British Telcom), the discounting is attractive. Apart from Mahindra British Telecom, in which M&M holds 60 per cent equity stake, the other infotech companies in the group are M-Assist and M&M Networking, both of which are 100 per cent subsidiaries. The company has also recently forged two joint ventures which will develop web-sites for the auto as well as tractor industries. Besides, there are are rumours of an IPO from M&M's software arm and a possible Nasdaq listing in future.