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Increase in expenditures has led Mahindra & Mahindra (M&M) to post a lower growth in its standalone net profits for the quarter ending June 30 at 8 per cent, even as net sales saw a stronger growth of 30 per cent.
In the quarter, the company saw raw material costs rise 34 per cent to Rs 4,373 crore, while expenses on the purchase of traded goods almost tripled to Rs 719 crore.
The company also spent Rs 26.5 crore in the quarter on account of amortisation of employee stock options granted in earlier years, as compared to Rs 1 crore in the corresponding quarter last year.
“The growth in the profit of the company despite the relentless increase in material costs is due to good volume performance by both vehicles and tractors and tight control on expenses,” a company statement said.
M&M's passenger car, commercial vehicle and two-wheeler sales volumes in the quarter registered a 21 per cent growth in the domestic market, while tractors sales grew by 14 per cent to 1.33 lakh units.
On an outlook for the rest of the fiscal, the statement said, “The global macro environment has deteriorated significantly in the last six months…. India is no exception in this regard. However, as prospects for agricultural and services sector growth remain reasonably robust, our business outlook for the year remains positive but watchful.”
M&M shares at BSE were up 1.68 per cent at Rs 666 on Monday.
Speaking to shareholders at the company's Annual General Meeting on Monday, Mr Keshub Mahindra, Chairman, M&M, said that both its two-wheeler business and the electric vehicle joint venture with Reva are long-term investments and will take time to show returns.
The current market cap of M&M is over $10 billion.
“(Under the Reva joint venture) we will attempt to look at alternative sources such as electric vehicles and fuel cells – we can't expect returns fast,” he said.
“As for Ssangyong, the sales have increased 45 per cent in the first seven months after the acquisition (of a majority stake). We have great hope for the future and will launch more products.”
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