M&M Q3 profit surges 228% sequentially

Mahindra & Mahindra on Friday posted a consolidated net profit of ₹530.86 crore for the third quarter ended December 2020, a 228.19 per cent increase compared to the ₹161.75 crore posted in the preceding quarter.

The net revenue for Q3 FY21 stood at ₹14,056.54 crore, a 21.27 per cent increase to the ₹11,590.32 crore posted in Q2 FY21.

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

On a year-on-year basis, the consolidated net profit for the December 2020 quarter per cent increased 39.6 per cent against ₹380.19 crore in Q3 FY20. The net revenue during Q3 FY20 was ₹12,120.28 crore, marking a 15.97 per cent increase this year.

“The demand, both for the automotive and the tractor segment, remains very buoyant in this quarter as it was in the last quarter. Clearly, we don’t see any sign of the demand slowing down in the next couple of quarters,” said Pawan Goenka, MD and CEO of M&M, speaking to reporters about the Q3 results.

Goenka identified a semiconductor shortage and a rise in commodity prices as two big concerns of the automobile industry. Talking about the shortage in semiconductors, he said: “This is something that we’re very perplexed with, and something where the end is not clearly known — as to when this fall will go away.”

The semiconductors shortage is expected to be normalised by June-July, said Rajesh Jejurikar, Executive Director - Automotive & Farm Equipment Sector, M&M. If the rise in commodity prices does not come under control, M&M may have to resort to another price hike by the first quarter of the next financial year, he said. It had already implemented a price increase in January owing to the rise in commodity prices.

There would be a significant focus on electric vehicles going forward, the company said.

During the quarter, capital allocation actions were targeted at loss-making subsidiaries and these actions have made a significant contribution to the financial performance, the company said in a regulatory filing. “They include turnaround of businesses, restructuring to achieve profitability and exit from multiple businesses,” it said.

Tractors on fast lane

“Demand for auto continues to be strong. The UV business grew 11 per cent though production was lower than demand due to ECU and steel shortage.” said M&M.

The domestic tractor volume was 97,420, the highest ever quarterly volume. Growth momentum for the tractor industry was supported by positive sentiments in rural parts of the country, the company said, adding that it is expected that demand will remain robust during the coming quarter, too.

This quarter also marked the highest ever quarterly profit before tax and ROCE for the company’s farm segment, driven by a 400 bps YoY increase in margins.

For the auto segment, with many key indicators showing positive momentum, calendar year 2021 has started with strong momentum, M&M noted.

“However, some significant challenges do exist, especially on the supply side and commodity prices,” it added.