The country’s largest utility vehicle manufacturer, Mahindra and Mahindra (M&M), on Wednesday beat analysts’ estimates by posting a 12.4% growth (Y-o-Y) in its standalone net profit at R955.2 crore during the April-June quarter on the back of exceptional gain and other income.
However, its operational performance was below expectations. The company’s revenue during the period increased 14% to R11,943 crore year-on-year basis due to a healthy growth in volume. The company had an exceptional gain of R91 crore during the period relating to transfer of agri business to a wholly-owned subsidiary company. Its other income increased 31.9% to R216.8 crore while finance cost declined 37.8% to R24.2 crore on yearly basis.
During the quarter, M&M sold 1.96 lakh units, up 14% compared to a year-ago period. Auto sales grew by 10.9% to 1.21 lakh units and tractor volumes increased 19.6% to 74,594 units Y-o-Y. Operating profit on standalone basis increased by 3.3% to R1,285.54 crore, which was below estimates and margin contracted by 112 basis points to 10.76%, again below expectations. This was due to the automotive segment, where the tax exemption for the Haridwar plant came to an end in FY16.
In the farm equipment segment (FES) the market share went up to 43.9% which is the highest ever on the back of robust volumes. The revenue in the segment increased from 14.44% Y-o-Y to R4,117.64 crore.
“The tractor market is growing and the market share has been the highest ever during the quarter. Though exports were subdued, exports of tractors in the neighbouring countries has grown substantially,” V Parthasarathy, CFO, M&M, said.
“We are expecting good growth in the tractor segment and given the kind of rainfall we have seen the tractor segment is expected to grow more than 10% during the year. During the quarter most of the growth has come from the utility vehicle segment and this year we will see the full effect of the launches done last year,” said Pawan Goenka, executive director, M&M.
The company’s South Korean subsidiary Ssangyong has turned profitable since the last three quarters and the management is hopeful of growth in the future despite headwinds in exports to Europe and slowdown in the South Korean automobile market. M&M said profit on consolidated basis (M&M and Mahindra Vehicle Manufacturers) increased by 15.9% Y-o-Y to R961.6 crore.