Utility vehicle and tractor segment market leader Mahindra & Mahindra today posted an estimate-beating net profit rise of 22 per cent in the second quarter, driven by surging demand for diesel-driven SUVs.

The Mumbai-based company posted a net profit of Rs 902 crore during the quarter ended September 30, as against a net profit of Rs 737 crore in the same quarter a year before.

Analysts tracking the company were expecting net profit at Rs 820-830 crore for the reporting quarter. Higher realisations and continued demand for the XUV 500, its highest premium SUV, helped higher profits.

The results announcement helped the stock close 3.6 per cent higher at Rs 857.55 as against its previous close of Rs 827.80 on the Bombay Stock Exchange.

Despite the larger subdued sentiment in the automotive market, M&M managed to sell 62,751 units during the quarter, 32 per cent more than in the same quarter last year. Its smallest utility vehicle, Quanto, was also launched.

“The growth in profit despite the relentless increase in material costs is due to good volume performance by the automotive sector and tight control on expenses,” said the company. Net sales grew 33 per cent to Rs 9,659 crore in the reporting quarter as compared to Rs 7,244 in the corresponding quarter last year. Overall tractor sales, however, declined 12 per cent. The company has a domestic market share of 40 per cent and said local sales declined nearly 14 per cent to 47,065 units, due to a below-normal monsoon and increased competition.

The share of revenue from the farm equipment sector declined to 28 per cent from 38 per cent during the quarter. It declined to Rs 2,653 crore in the quarter, a drop of six per cent from the Rs 2,823 crore recorded in the same quarter last year.

“Tractor sales have been declining but the trend should improve in this quarter. Increasing dieselisation of the market has helped M&M the most. Higher margins from the tractor segment was under pressure in Q2 but UV sales made up for the loss, though not completely”, said a Mumbai-based analyst.

Standalone margins declined to 11.4 per cent in the quarter from 12 per cent recorded a year before. Total expenses increased to Rs 8,872 crore during the quarter, a rise of 34 per cent from 6,599 crore posted in the same quarter last year.

A large contribution of Rs 323 crore from ‘other income’, namely dividend received from group companies, pushed the net profit higher. Last year in the same quarter, the dividend received thus was Rs 248 crore.

With a little more than 5,000 bookings for the seven-seater Quanto, a compact utility vehicle, and with festive sales at its peak, analysts are expecting the company to outperform the rest of the pack in the coming quarters.

Additional director
M&M has appointed D Vijayalakshrni an additional director with effect from today, representing Life Insurance Corporation of India on the board of directors. The appointment shall be valid up to the next annual general meeting.

Source: Business Standard

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