Difficult Q1 for M&M’s auto, tractor segments

Impacted by the continuing industry slowdown, Mahindra & Mahindra (M&M) posted a 5.98 per cent fall in standalone net profit at ₹881.78 crore in the first quarter ended June 30.

The automobile manufacturer had posted a net profit of ₹937.91 crore during the same period a year ago.

“This has been a difficult quarter for the industry and M&M, and for M&M it was difficult in auto and tractor segments. We have been able to maintain our margin growth as we were a bit more guarded on discounts than the industry,” said Pawan Goenka, Executive Director and President (Automotive & Farm Equipment Sectors).

On an average, the automotive industry provided 3-5 per cent discounts, Goenka said in a press conference, adding “we were not very aggressive”.

Income up The company posted a total income of ₹10,451.41 crore during the reporting quarter, a rise from ₹10,186.75 crore posted during the comparable three-month period a year ago.

Shares in M&M fell 1.42 per cent to close at ₹1,229.10 on the BSE on Friday, when the Sensex itself fell 260 points or a little over 1 per cent.

M&M’s net profit, along with that of Mahindra Vehicle Manufacturers Ltd (M&M’s subsidiary set up to source products), rose 4.3 per cent to ₹896.4 crore (₹859.8 crore in Q1 of previous financial year).

“The overall industry growth was flat. A host of measures – no incentives and cost controls – helped us maintain the price margins,” said M&M Chief Financial Officer VS Parthasarathy.

M&M will also launch five new products – three passenger and two commercial vehicles - in the next 15 months. In addition, it has also lined up a two-wheeler launch soon, Goenka said, without divulging details.

The Mumbai-based company has earmarked a capital expenditure of ₹10,000 crore (₹7,500 crore capex and ₹2,500 crore investments) for FY-15, FY-16 and FY-17.

On the export front, Goenka said that Chile is a cause for concern due to the overall economic slowdown, while neighbouring countries such as Sri Lanka, Nepal and Bangladesh were “good”.

The company said its outlook on the economy in the short-term remains “cautious”.

Rural transformation Addressing the company’s shareholders at its AGM, M&M Chairman and Managing Director Anand Mahindra said in addition to selling tractors, the group companies will work together to bring in rural transformation.

The company’s agri-business group will provide a range of services to farmers to help improve technology, provide seeds and know-how to upgrade inputs.

For instance, Mahindra Shubhlabh will work with farmers to grow more value-added crops and fruits and brand and market their output to deliver higher returns.

Better living Mahindra Solar will distribute power, while Mahindra Financial Services will lend money to buy tractors and also to build houses.

Mahindra Insurance Brokers will insure their lives and health, while Mahindra Namaste will groom in vocational skills, he said.

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