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Mahindra and Mahindra's 44 per cent standalone profit growth in the fourth quarter is not as robust as it appears. There was an exceptional item of Rs 108 crore arising from reversal of provision for impairment of fixed assets. Adjusted for this, net profits have grown only 26 per cent.
Further, net profits have received a leg-up from a tax saving of Rs 148 crore. This came from carrying forward unabsorbed tax losses of the newly merged entity Mahindra Automotive Distributor Pvt Ltd — which handles the Verito business — with M&M.
Other than these two adjustments, the financial performance is revealed by the ‘Profit before tax and exceptional item' figure. This number has dropped to Rs 794 crore from Rs 808 crore last year. Weak operational performance, coupled with higher interest costs, is the reason for the decline.
Despite net sales growth of 39 per cent to Rs 9,241 crore, operating profits grew by just 11 per cent to Rs 968 crore. One reason for this is high input costs. Raw material as a percentage of sales was at 78 per cent in the latest quarter, compared with 73 per cent last year. Further, although utility vehicles sold well, tractors faced a tough quarter.
One-off events help Sun Pharma
Sun Pharma has reported a 59 per cent revenue growth and 85 per cent profit growth in the March 2012 quarter. The company's strong performance is thanks to the rupee's depreciation and one-off events.
Changes in the company's distribution system, details of which are not clear, helped growth in the domestic formulations business. Second, the stupendous 83 per cent growth in the US was driven by cancer medicine Lipidox (equivalent of J&J's Doxil) sales and impressive performance by Taro. Sun was granted a temporary permit to sell Lipidox in the US, because of reduced supply from J&J.
Though J&J hopes to resume full supply by the end of this calendar, Sun's ability to continue selling Lipidox is subject to validation of individual drug batches by the US Food and Drug Administration.
Taro posted 35 per cent growth in revenue and an 87 per cent growth in net profits. This was largely facilitated by price increases in specific products during the quarter. In the management's view, the pace of growth may not be sustainable in the forthcoming quarters. The management has put out an 18-20 per cent sales growth guidance for this fiscal.
JLR drives growth for Tata Motors
Tata Motors' consolidated sales growth of 44 per cent in the fourth quarter was helped by a strong 51 per cent growth in revenues at Jaguar Land Rover (JLR). JLR volumes grew by 48 per cent year-on-year to about 98,000 units. Volumes were helped by a richer product mix, thanks to the Range Rover Evoque and the new Jaguar XF 2.2 L Diesel, and a favourable geographical mix, with China showing robust demand.
Higher volumes and cost control efforts helped the Indian operations record a 60-basis-point increase in operating margins to 9.5 per cent. This, coupled with factors such as lower raw material to sales proportion for JLR vehicles and greater pricing power enjoyed by Land Rover vehicles (which constitute 80 per cent of total JLR volumes), helped consolidated operating margins inch up to 14.1 per cent, from about 13.8 per cent last year. Consolidated profits grew a whopping 136 per cent to Rs 6,234 crore. This number has, however, got a boost from the recognition of deferred tax assets amounting to £217 million (about Rs 1,767 crore) at JLR.
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