Mahindra & Mahindra Limited (M&M) on Wednesday said the company has reported a drop of 35% in its net profit from core activities after tax for the quarter ended September 30, 2008 of Rs 185.7 crore as against Rs 285.9 crore over the same period last year on back of foreign exchange losses coupled with high material costs and steep interest rates.
The company suffered an exchange loss of Rs 117.8 crore (Rs 77.8 crore net of tax) during the quarter. Further, M&M said the exchange loss includes a notional loss of Rs 96.7 crore on account of the revaluation of the company?s net foreign currency borrowings.
During the quarter, the company transferred its logistics business to a wholly owned subsidiary with effect from April 1, 2008 and merged with itself Mahindra Holdings & Finance Limited (MHFL), its wholly owned subsidiary, with effect from February 1, 2008.
The financial impact of these transactions has been reported by the company under special adjustments after ascertaining profit after tax from ordinary activities for the quarter. On account of these, the figures for the quarter are not comparable with that of the previous year. The net profit after special adjustments stands at Rs 227 crore for the quarter under consideration.
The gross revenues and other income of the company for the quarter ended September 30, 2008 stands at Rs 3,695.2 crore as against Rs 3,239.5 crore during the corresponding period last year, a growth of 14.1%. The M&M stock gained 8.25% on the Bombay Stock Exchange (BSE) on Wednesday to close at Rs 302.50. The stock was trading at a 52-week low of Rs 236 on the BSE on Monday, Oct 27.
In a media release the company said, ?The runaway increase in the material costs in a highly turbulent economic environment which saw a precipitous fall in the value of Indian rupee and a steep climb in the interest rates exerted considerable pressure on our operating margins and profits.?
On a consolidated basis, Mahindra group has reported 5% drop in the consolidated profit after tax after deducting minority interests for the quarter ended September 30, 2008 of Rs 373.3 crore as against Rs 392.6 crore in the corresponding quarter last year. The gross revenues and other income for the said quarter grew by 19% to Rs 7,741.4 crore from Rs 6,502.6 crore during the same period last year.
During the period, the group also accrued an exceptional profit of Rs 33.1 core out of the private placement of shares by group subsidiaries, Mahindra Retail Pvt Ltd and Mahindra Residential Developers Ltd.
The company further said it will continue to focus on cost controls, process efficiencies and product innovations to meet customer expectations despite the global uncertainties.