Mahindra and Mahindra (M&M) was back in the black during the January-March quarter on the back of strong growth in automotive and farm segments. Net profit was, however, muted at Rs 163 crore on a year-on-year basis due to exceptional charges of Rs 840 crore undertaken as impairment provisions for long-term assets and other exposures. The company stemmed losses in its international subsidiaries, which was a big drag in the fourth quarter last year. Overseas losses, exacerbated by Covid-19 led disruptions, had led M&M to post a massive net loss of Rs 3,255 crore in January-March 2020.
M&M’s revenue from operations surged a sharp 48% year-on-year to Rs 13,338 crore with strong growth in both automotive and farm equipment segments. Farm equipment segment revenue was up 60% y-o-y, with highest-ever fourth quarter domestic volumes.
Auto segment revenue was up 43% y-o-y with a strong booking pipeline for its key products. However, the global shortage of semi-conductors impacted the production and sales for the quarter. The company sold 1.06 lakh total vehicles during the quarter, registering a rise of 18% y-o-y.
Operating income (earnings before interest, tax, depreciation and amortisation) during the quarter was up 60% y-o-y to `1,960 crore, while the operating margins surged 110 basis points y-o-y to 14.7%, though impacted by rise in commodity prices.
For the full year ended March 31, 2021, M&M posted a net profit of Rs 923 crore, up 25% compared to last year. The revenue from operations declined 1% to Rs 44,574 crore during the year. Total vehicles sold during the year declined 26% to 3.48 lakh units. The full year Ebitda was up 10% to Rs 6,977 crore versus last year. Addressing the media in an earnings video conference, Anish Shah, managing director & CEO, M&M, said, “We have had a strong performance in both our auto and farm businesses despite it being a tough year. High input prices impact our margins but capital allocation policies gave out some outstanding results and a robust cash generation.”
Last year, M&M had decided to put its loss-making international subsidiaries into three categories. These included businesses with a clear path to profitability in a three- to five-year timeframe with 18% RoE, companies that have a strategic quantifiable impact, and subsidiaries where there is no clear path to profitability with no strategic quantifiable impact, to be exited.
Shah said the categorisation exercise of all international auto and farm subsidiaries has been completed. “We had taken losses of Rs 3,429 crore from our international subsidiaries in FY20. In FY21, that number was still quite high at close to around Rs 2,400 crore. But with actions taken, we expect that number to come down very significantly to Rs 300 crore this year, and then move towards break-even and profit after that,” he said.
While M&M decided to stop investment in Ssangyong and shut down Genze as part of this exercise, it has restructured Pininfarina Automobile and Mahindra Automotive North America (MANA) during the year. “MANA is on a break-even this year and profit after that. Auto side is a bit slow but strong promise in Pininfarina. Genze has been shut down and MANA restructured so will show lower loss and better product portfolio,” Shah said.
However, challenges due to the second wave of Covid-19 will have an impact on the April-June 2021 quarter. Rajesh Jejurikar, executive director, M&M, said that the first quarter will be a dampener. but demand will be strong once things open up. “Things will stabilise July onwards,” he said. As for supply, he said that plants in Maharashtra are slowly coming back while the supply situation will remain dynamic, and there would be challenges due to semi-conductor shortages.
On rural demand, Jejurikar said things have also slowed down in rural India due to the impact of the second Covid-19 wave. However, there are signs of revival over the last one week. “Fear factor among customers was preventing them to put margin money, but as cases recede, we see confidence coming back over the last one week or so. All fundamentals remain strong in rural, right from good crop to prices. So, tractor sales should pick up from June and the rest of rural and automotive from July onwards,” Jejurikar said.
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