While the low base effect triggered high volumes and improved operating margins resulting in a healthy growth of 849% in the third quarter, M&M senior management expressed concern over the possible withdrawal of stimulus package and the higher burden of rising inputs cost. During the third quarter, M&Ms operating margins stood at 14.90% as compared to 2.94% in the same period last year. On a quarter-on-quarter basis, the companys operating margins didnt appear as impressive since the operating margin in the September 2009 quarter was 18%.
The company had posted a net profit of Rs 702.9 crore in the quarter ending September 30, 2009.
Speaking at a press conference, Pawan Goenka, presidentautomotive sector M&M, said, A lot depends upon what happens in the forthcoming Budget. More than the rising input costs, the possible reversal of the stimulus package is concerning the industry. Goenka said that it will have negative impact on the company as well as industry. Goenka, also the president of Society of Indian Automobile Manufacturers (SIAM), hinted at another price increase if excise duty was increased to 8% in the Budget.The industry has taken a price increase of between 1 to 2% to pass on rising input costs and has been talking of a further rise if the stimulus package is withdrawn.
Uday Phadke, president finance, added, The credit policy could see a moderate short-term hike in interest rates. He added that the company expects currency rates to stabilise in the coming quarter and exports tobe better quarter-on- quarter basis. The company has a capex plan of Rs 7,000 crore over four years, including this financial year, and has till date invested Rs 650 crore of it. M&M has a surplus of Rs 2,000 crore on its balance sheet and will look at hitting the market for funds only when required. However, Goenka said that the volumes of the industry will not be significantly affected by the increase in interest rates.
He said, We are not too worried by any rise in interest rates because we can manage it to a certain extent. Commodity prices are on an upswing and it depends on how much we can absorb.