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Mahindra and Mahindra was the top Nifty loser on Wednesday — the company’s stock price fell 5.28 per cent — as analysts believe that the company will be most affected by the Supreme Court ban on registration of diesel cars above 2000 cc in Delhi from January to March 2016.
There is lack of clarity whether cars can be registered in adjoining areas such as Gurgaon, Faridabad and so on.
The Supreme Court’s ban on diesel vehicles comes at a time when Mahindra and Mahindra’s automotive volumes had started recovering from October and grew more than 20 per cent year-on-year in the last two consecutive months.
According to Mihir Jhaveri, Director – Institutional Research, Religare Capital Markets, the entire M&M portfolio namely Bolero, Scorpio, XUV 500, Thar and Xylo would be impacted as 98-99 per cent of these models’ sales were from above 2000cc engine models in FY-15.
However, the flipside is that Delhi accounts for two per cent of M&M’s passenger vehicles sales.
Bharat Gianani, analyst at Angel Broking, pointed out that Delhi contributes about seven per cent of the overall passenger vehicle sales and the contribution of diesel vehicles is about 2-3 per cent of the overall industry volumes, which would further limit the impact of the ban.
Other listed players such as Maruti Suzuki and Tata Motors are unlikely to be impacted much as of now as the ban is restricted to Delhi and on vehicles above 2000 cc segment.
“Maruti hardly has any product above the 2,000-cc segment and financial performance of Tata Motors largely are driven by Jaguar Land Rover, which is a global player,” said Gianani of Angel Broking.
Additionally, diesel cars form only around 20 per cent of Maruti’s overall sales volumes, an analyst pointed out.
The impact of Supreme Court ban will be seen more on passenger vehicles than commercial vehicles. The court order on banning diesel commercial vehicles registered prior to 2005 from plying on roads in Delhi and doubling of environment compensation charge (ECC) for commercial vehicles entering Delhi is unlikely to pinch commercial vehicles manufacturers much.
M&M’s other businesses are also facing hiccups. Tractor sales recently saw a year-on-year jump of 42 per cent in November, but year to date sales are still down 14 per cent.
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