The Hindu Business Line : Higher sales boost M&M net by 28 pc<br> To form subsidiary for LCV business

MAHINDRA & Mahindra Ltd (M&M) today reported 27.91 per cent increase in profit after tax for the quarter ended September 2005 to Rs 157.21 crore from Rs 122.91 crore in the previous corresponding period. Net sales/income from operations was up 23.18 per cent at Rs 1,914.81 crore (Rs 1,554.41 crore).

For the first half of 2005-06, the company posted 33.35 per cent rise in profit after tax to Rs 302.47 crore (Rs 226.82 crore) on 25.16 per cent increase in net sales/income from operations at Rs 3,726.68 crore (Rs 2,977.59 crore).

In a statement to the BSE, the company said that its board has approved an offer to sell up to 100,00,000 equity shares, aggregating 14.25 per cent of the paid-up share capital of Mahindra & Mahindra Financial Services Ltd (MMFSL), a 97.26 per cent subsidiary of M&M.

The board of MMFSL, which is scheduled to meet on October 27, will consider issue of equity shares through an IPO, which would include an offer to sell some of M&M's holding in that company.

Mr Uday Phadke, President (Finance & Legal Affairs) of M&M, attributed the company's second-quarter performance to a variety of factors including saving on expenses despite rise in material costs, reduced tax provisioning given the 2005-06 tax rate being lower by three percentage points, the benefit of manufacturing in tax-free locations such as Uttaranchal, and tax benefits on R&D expenses.

"This was because of very good cost management and better volumes in sales," said Mr Bharat Doshi, Executive Director.

The company's automobile sales for the period had grown only modestly (there was negative growth in LCVs and three-wheelers) but that of tractors was strong.

The second-quarter operating margin inched up to 11.39 per cent from 10.65 per cent in the first quarter.

However, the second-quarter operating margin was still below the 12 per cent of the first quarter.

Mr Doshi said that the company hoped to grow its operating margin if volumes maintained an encouraging trend.

"I think it should be a reasonably good year for tractors," said Mr A. Choudhari, President of Farm Equipment Sector, pointing to the prevailing agricultural scenario and the good monsoon.

On the Romanian Commerce Minister's recent comment that Tractorul was poised to go to M&M with formalities completed by year-end, Mr Choudhari said, "A schedule like that suits us. Negotiations are still going on."

The company will shortly form a subsidiary to transfer the LCV business and kick off its joint venture with International Truck and Engine Corporation, said Dr Pawan Goenka, President (Auto Sector). According to him, the Scorpio will start selling in Russia from next month.

The M&M scrip ended almost unchanged at Rs 361.45 on the BSE on Wednesday.

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