Economic revival is the need of the hour, says M&M’s Dr Pawan Goenka

At the press meeting held on May 30 to discuss Mahindra & Mahindra’s (M&M) 2013-14 results, the focus was clearly on how an improvement in the Indian economy is vital for the auto sector to get back onto its feet after a year that is described as the worst in living memory.

Dr Pawan Goenka, executive director and president (auto and farm sector), M&M, said that unlike in 2009 when the auto sector itself was in need of revival, this time around he reiterated that good products are available and that affordability/EMIs are good. What is needed is a revival of the economy, he emphasised.

This, Dr Goenka, said will come if the government gives good policy directions in the upcoming Budget and in the months ahead. A definite movement towards the passage of the Goods & Services Tax (GST) would hugely improve industry sentiments, he added.

He also hoped the Modi government will continue the excise duty cuts that were passed in the February interim Budget and also make a positive announcement on electric vehicles which have been impacted by non-availability of a government subsidy.

He also discounted the likely impact of the El Nino weather phenomenon, saying that the auto sector is capable of handling such a situation for a year but the scene would become a challenge only if it continues beyond that.
Commenting on M&M’s performance, Dr Goenka said the company has not changed its industry outlook for both passenger vehicles and tractors, saying these sectors would likely grow between 8-10 percent this fiscal.

In 2013-13, the company’s pick-up market showed a consistent gain and is now at 70 percent market share while the UV segment saw a 4-5 percent dip. While the company has lost share in the overall UV segment, it hopes to have bigger play in the smaller, monocoque-based UV segment with the launch of two vehicles in 2015. This sector has been leveraged by the likes of the Renault Duster and clearly M&M is keen to get its own share of the pie.

In farm equipment, M&M’s growth was ahead of industry growth in each quarter. The overall domestic tractor sector in Q4 grew 12 percent to 138,567 units as against 123,767 units in the year-earlier quarter while M&M’s share was 52,732 units, up 14 percent over 46,107 units in Q4 of the previous year. M&M’s FES is also looking at new areas in the agri-business including dairy and pulses.

This year’s Q4 and overall results take into account the financials of Mahindra Trucks & Buses which, following the exit of Navistar of the US, is now a part of M&M’s consolidated results. On a standalone basis, the gross revenues and other income for M&M for Q4 was Rs 11,764.7 crore as against Rs 11,365.8 crore in the earlier quarter. Net profits were Rs 896.9 crore as against Rs 889.2 crore in the year-earlier quarter, up under one percent. Excluding the merger, net profits for Q4 are Rs 904.8 crore.

M&M’s Q4 results were affected by the fact that M&M had to make excise duty refunds on dealer stocks following the excise duty cut, which it shared with its dealers. Dr Goenka did not say what percent was shared except that the total amount at stake was Rs 130 crore. This is a one-time payment.

Consolidated net profits for M&M and Mahindra Vehicle Manufacturers Ltd in 2013-14 were seven percent up at Rs 3,905.1 crore as against Rs 3,634.4 crore in the year-earlier quarter.

Speaking of trends, M&M said that rural demand will continue to be a growth driver, going forward. One reason for this is that reservoir levels in the country going into the 2014 monsoon season are at their highest levels.