Mahindra and Mahindra reports 33% rise in net profit

Mahindra and Mahindra (M&M), country’s largest utility vehicle manufacturer, on Friday reported a 33.29% y-o-y increase in its standalone net profit to R10,860.05 crore for the quarter ended December 31 as a result of an exceptional gain of R363.78 crore from the sale of investments in subsidiary companies.

The company had reported a net profit of R834.47 crore in the corresponding period last fiscal.

The Mumbai-based manufacturer’s net sales fell marginally by 0.33% y-o-y to R10,860.05 as result of 7% decrease in the automotive segment revenue and substantial increase in excise duty. Although revenue from the farm equipment segment increased 20% y-o-y due to increase in sales of tractors after a good monsoon.

As result of the declining volumes, the manufacturer missed the Bloomberg’s revenue estimates of R11,385.80 crore. Due to the exceptional gain, M&M managed to beat Bloomberg’s net profit estimates of R879.88 crore.

The adverse impact of demonetisation, which continues to affect volumes from rural markets and declining volumes from compact SUVs KUV 100 and TUV 300 has impacted the top-line of the company.

“The festive season in October helped in boosting demand for tractors but overall Q3 saw some pressure on volumes because of demonetisation. The Rabi sowing this year has exceeded the overall sown area from previous year and there is also an increase of 10% and 14-16% respectively in MSP of oil seeds and pulses,” the company noted in a press release.

At an operating level, the EBITDA of the company increased by 3.69% y-o-y to R1,299.35 and the operating margins during the quarter improved by 46 basis points to 11.96% on the back of reduced expenses.

At a consolidated level which include M&M and its subsidiary MVNL, the net sales increased by 1.17% y-o-y to R10,586.81 crore but the net profit during the period fell by 6.75% y-o-y to R801.70 crore.

The total vehicles sold by the company decreased by 8.3% y-o-y to 1,12,852 vehicles during the quarter. Utility vehicles sales declined by 11.7% y-o-y at 51,772 units, but the same for tractors increased by 20% y-o-y at 72,363 units.

The Mumbai based car maker also announced that it plans to make an investment of R1,500 crore at its Nasik and Igatpuri plants in Maharashtra. The project constitutes development and manufacture of its new product codenamed U321, covering joint investment at Nasik and Igatpuri.