Amidst concerns about rural growth, M&M’s PAT up 5.7 percent

Concerns about India’s rural economy where a poor kharif crop has affected farming incomes set a context to Mahindra & Mahindra’s Q3 results announced today.

In his opening remarks, Dr Pawan Goenka, executive director, M&M’s automotive and farm division, said he expected the stress in farming incomes to continue for 3-6 months; some improvement in the overall situation can be expected only after the monsoons and the Q3 and Q4 thereafter, he added.

Describing the quarter as mixed, Dr Goenka (seen above with M&M's chief financial officer V S Parthasarathy) said while the overall optimism of the Indian economy continues, industry-wide UV growth fell 6.1 percent in Q3, and delayed monsoons impacted the tractor sector with the segment de-growing by 21 percent in Q3, the biggest quarter decline since 2005.   

In terms of the results, M&M and its wholly-owned Mahindra Vehicle Manufacturers earned gross revenues of Rs 10,087 crore in the quarter as against Rs 11,286 crore in the year-earlier quarter. The net profit after tax (PAT) grew 5.7 percent to Rs 967 crore from Rs 914 crore in the year-earlier period.

The above results include a gain of Rs 299 crore resulting from the merger of Mahindra Engineering Services, an M&M subsidiary with Tech Mahindra. On account of the merger, M&M received shares in Tech Mahindra in lieu of its holdings in Mahindra Engineering. During the quarter, M&M has also tried to focus on dealer and plant inventories to keep finance costs down.

Seven new products coming up

On the product front, Dr Goenka said the company plans to bring in seven new products in the next fiscal which will include one introduction in every quarter be it a new product, variant or refresh. As is known, two compact UVs are on the anvil in the next fiscal year. With these products, Dr Goenka said the company hopes to increase its market share in UVs from 37 percent at present to just over 40 percent.

Overall, Dr Goenka said he expects the turnaround in the automotive segment to take place much faster than in the tractors segment. Elaborating on some other highlights of the Q3, Dr Goenka said the  company’s volumes for its pick-up were the highest ever and so too for the Scorpio, volumes of which in Q3 were the highest in three years.

With regard to the upcoming Union Budget, which is the Modi government’s first full-fledged Budget, Dr Goenka said that key decisions would be regarding GST and infrastructure spend. Commenting on electric vehicles, he said the company is working on a European variant of its E2o and is hopes to do pilot runs of the electric Verito in April.