M&M posts highest quarterly profit on CV boost, rural show

Mumbai: Mahindra and Mahindra, the country’s largest tractor maker reported its highest-ever quarterly profit for the September quarter of FY19, posting a growth of 26 per cent on the back of higher margin commercial vehicles, tractors, and a one-time exceptional gain.

The company posted a net profit of Rs 1,779 crore as against the Bloomberg estimate of Rs 1,325 crore. This number was buoyed by a one-time gain from the sale of long-term investments worth Rs 134 crore. The revenue for the quarter grew just 6 per cent to Rs 12,790 crore, with tractor sales witnessing a decline of 5 per cent during the quarter and automotive sales growing by 9 per cent.

These numbers represent the consolidated performance of M&M and its wholly-owned subsidiary Mahindra Vehicle Manufacturers (MVML).


A spike in raw material prices by about 3 per cent which the company partially passed on and rise in discounts by about Rs 2,000 to Rs 2,500 per vehicle pulled down operating profit margins by 150 basis points to 14.5 per cent.

Reviewing the Q2 earnings, Pawan Goenka, MD at Mahindra & Mahindra, said the spacing of the festival (Dussehra and Diwali) this year had an impact on tractor volumes and hardening of macroeconomic factors of fuel prices, increased insurance cost had an impact on the sentiment and thereby passenger vehicle sales.

“All macroeconomic factors have had a moderating impact on Mahindra’s performance. The festive season has been better than last year but not as good as we expected,” Goenka said. He added that with almost 90 per cent farm dependent regions receiving normal rainfall, the double-digit growth forecast of 12-14 per cent for the tractor market has been retained, however, with a downward bias of 12 per cent.

Goenka also said that with the adverse macroeconomic factors, a double-digit growth in passenger vehicle seems unlikely and the company has revised the guidance to 7-8 per cent growth for the industry. Lack of new launches in the car market also had an impact on the overall market, but the launch of Marazzo was a positive development, and Goenka said the company has been able to reach peak capacity for the model with over 13,000 bookings for the multi-purpose vehicle.

Interestingly for Mahindra, the sales of rural areas surpassed urban areas for the first time making up for 51 per cent of its overall passenger vehicle sales.

On the way ahead, Goenka said a fall in fuel prices and expected rise in liquidity running up to the elections may drive demand, as fears of rising interest rates remain.

The company plans to launch the new compact SUV S201 in the last quarter of FY19 which will help build on the momentum of Marazzo and on the electric vehicle front, the E-KUV is slated for launch by middle of 2019, followed by another from the S201 platform.