India’s largest tractor and utility vehicles manufacturer, Mahindra and Mahindra (M&M), posted a 5.7% year-on-year growth in consolidated net profit for the quarter ended December to R967 crore. The increase in profitabililty was mainly on account of an exceptional gain of R300 crore.
The exceptional gain was on account of the merger of Mahindra Engineering Services (MESL), an M&M subsidiary with Tech Mahindra. As a part of the merger, M&M received shares of Tech Mahindra, in lieu of its holding in MESL. M&M has accounted for the excess of the fair value of the shares thus received over the cost of the company’s holding in MESL as an exceptional item.
M&M reported net sales of of R9,260 crore in the October-December quarter, 10.75% lower than the year earlier. This was on account of lower tractor and utility vehicle sales during the December quarter, compared to the year earlier. While the decline in utility vehicle sales was marginal, tractor sales fell 26% during the quarter.
The Anand Mahindra-led company’s earnings before interest, tax, depreciation and amortisation (Ebitda) fell almost 33% during this period to R1,080 crore.
Declining sales hit M&M’s margins as well. The company’s expenses as a percentage of net sales rose to 91.19% from 88.38% in the December 2013 quarter. The company’s Ebitda margin declined to 11% from 14% a year ago.
Pawan Goenka, president of M&M’s automotive and farm equipment sectors, attributed the lack of growth in the company’s sales of utility vehicles to shortage of new launches in this segment. “The de-growth that we had in this quarter was higher compared to the rest of the industry. We have a strong product pipeline and will launch one new product and a new variant of existing cars from next quarter,” Goenka said.
On the other hand, the consolidated net profit of the entire Mahindra Group, which includes other businesses like Mahindra Finance, Mahindra Holidays and Tech Mahindra dropped 24.39 % year-on-year to R930 crore. The consolidated gross revenue and other income stood at R18,372 crore, down 11.16%.