Mahindra & Mahindra on Friday posted a 97 per cent year-on-year drop in its consolidated net profit to ₹67.79 crore during the first quarter of this financial year, severely affected by the Covid-19 pandemic. It had posted a consolidated net profit of ₹2,259.74 crore in the year-ago period.

The net revenue during the June quarter stood at ₹5,589.43 crore, a 56.35 per cent fall year-on-year. It had posted a net revenue of ₹12,805.47 crore during the same quarter last year. The Group’s operations and financial results for the quarter ended June 30, 2020 have been adversely impacted by the outbreak of Covid-19 pandemic and the consequent lockdown announced by the government, M&M said in a regulatory filing.

The results include the combined earnings of M&M and Mahindra Vehicle Manufacturers (MVML), a subsidiary of the company.

“The quarter has gone better than what most of us had expected about the middle of the quarter, given that we had a lockdown for almost six weeks. The demand has been surprisingly robust, and the production ramp-up also has happened better than we thought it would be. The demand robustness is coming from rural sentiments - that is very positive given the rabi crop, given the monsoon and the reservoir level... In spite of a very quick ramp up of products, most of us could not meet the demand. Going forward, the supply will be the primary concern that we have,” said Pawan Goenka, Managing Director, M&M, addressing reporters post the result announcement.

“The unprecedented shock induced by Covid-19 is the worst that India has seen in the post-independence period. This is the first instance of a simultaneous demand and supply shock – making it different from the previous crisis,” M&M said.

Sales down

During the June quarter, the company sold 27,565 vehicles, marking a 78 per cent decline compared to FY20’s June quarter, when it sold 1,23,690 vehicles.

It sold 64,140 tractors during the quarter, a 22 per cent decline compared to the year-ago period, when it sold 82,013 tractors.

Also read: Covid-19 crisis has given us an opportunity to reboot our thinking: Anand Mahindra

M&M exported 3,109 vehicles and tractors during the quarter, a 72 per cent fall compared to the corresponding quarter last year, when it sold 10,923 vehicles and tractors.

In Q1 F2021, the Indian auto industry (excluding two-wheelers) reported a de-growth of 81.5 per cent over the previous year, the company said. After the first-ever zero sales in April, the industry is finding its way back, it added. “The company’s key brands which have a strong rural bias saw good demand in June. However, low pipeline inventory coupled with the challenges of ramping up production due to supply chain issues affected the company’s sales,” it said.

The timely relaxation of the lockdown for the agricultural sector along with positive rural sentiment led to good sales numbers for tractors during the quarter despite the supply chain issues, showing a positive growth rate in May and June 2020, said M&M.

M&M continues its strong focus on cost management to improve its financial performance in these testing times, it said. Its timely decision to raise funds along with good cash generation in the quarter has strengthened the company’s cash position, it added.

As for the company’s outlook, it said that a combination of lower incomes and heightened uncertainty is expected to drag consumer spending and business investment in F2021. “It is now a foregone conclusion that the economy is set to contract during the year – the first time in 41 years,” said M&M.

Overall, the agriculture sector and rural economy remain buoyant, supported by healthy rural spending by the government although there are some concerns around a fall in remittance incomes, it said.

At the board meeting held on Friday, the company also approved the appointment of Nisaba Godrej as an Additional Director (Independent and Non-Executive) on the board of directors of the company, with effect from August 8. He is to hold office up to the date of the AGM of the company to be held thereafter and subject to the approval of the members at the said AGM, to hold office as an Independent Director for a term of five consecutive years commencing from August 8, 2020 to 7 August, 2025.

It also approved the appointment of Muthiah Murugappan as an Additional Director (Independent and Non-Executive) on the board of directors of the company, with effect from August 8, to hold office up to the date of the AGM of the company to be held thereafter. This is subject to the approval of the members at the said AGM, to hold office as an Independent Director for a term of five consecutive years commencing from August 8, 2020 to August 7, 2025.

Related Topics
comment COMMENT NOW