Mahindra's profit up 26% to Rs 1,779 crore in Q2 FY2019

Robust commercial vehicle sales along with demand for its tractors helps buffer sales slowdown for Mahindra passenger vehicles.

By Nilesh Wadhwa calendar 14 Nov 2018 Views icon5405 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Mahindra's profit up 26% to Rs 1,779 crore in Q2 FY2019

Mahindra & Mahindra today reported its Q2 FY2019 (M&M + MVML) revenue of Rs 13,638 crore, up 8 percent YoY, and PAT at Rs 1,779 crore (+26%). The spurt in profit in Q2 FY2019 could be attributed to robust performance from the CV segment. The company sold a total of 141,163 vehicles (+9%) across segments compared to 129,754 vehicles in the same period last year.

M&M says in Q2 FY 2019, the Indian auto industry (excluding two-wheelers) saw growth moderate at 4.8 percent. This it says was due to a high base in Q2 FY 2018, shift of the festive season to Q3 FY 2019 and partial slowing down of demand for passenger vehicles especially in urban India.

In Q2 FY2019, the overall Indian PV industry reported de-growth of 3.6 percent, while the UV segment saw sales decline by 8.1 percent. The CV goods industry though reported robust growth of 29.8 percent, with the LCV < 3.5T goods segment growing 31.3 percent and the M&HCV goods segment by 29.5 percent.

According to M&M, demand in the LCV < 3.5T segment was driven by strong rural demand coming from the agricultural sector and sustained efforts for rural development coupled with affordable finance. M&HCV segment growth was driven by sustained investment in road, infra projects and an uptick in IIP (Index of Industrial Production).

In Q2, the total domestic automotive volume for the company grew by 8.8 percent and the HCV volume with sales of 3,078 trucks grew by 48.1 percent. It exported 9,244 vehicles during the current quarter, witnessing a growth of 18.9 percent YoY.

Tractor sales slow down
The domestic tractor industry witnessed a decline of 2.6 percent in Q2 FY 2019 on account of shift in festive season to Q3 FY 2019. This, M&M says, also resulted in the company’s domestic tractor sales also declining by 5.2 percent in Q2 FY 2019. Mahindra expects, with the healthy reservoir levels, progress on rabi sowing and increase in minimum support prices of rabi crops, the growth momentum to pick up in the coming months.

Growth outlook
Reserve Bank of India's (RBIs) estimates the real GDP growth to improve from 6.7 percent in 2017-18 to 7.4 percent in 2018-19. The rising gross fixed capital formation, driven by the government’s focus on the road sector and affordable housing along with higher private spending helped buoyed growth so far. The monsoon was marked by an overall deficit of 9 percent but distribution of precipitation remained conducive along with higher water reservoir levels. Therefore, the first advance estimates of production of kharif crops for 2018-19 have placed food grains production being 0.6 per cent higher than last year’s level.

M&M estimates that going forward, growth will be a function of evolving liquidity conditions as well as private and government spending. Among global factors, crude oil price behaviour and US-China trade policy maneuvering will be the key factors to watch out for. 

Dr Pawan Goenka, MD, Mahindra & Mahindra, said: "High fuel prices and uncertainty of regulatory environment were the key reasons for subdued demand for cars. It will be difficult to achieve double- digit growth. However, demand for UVs will improve with the launch of the S201 and Alturas (November 24) in the near term."

He further estimates that for the fiscal 2019, the PV industry will see growth averaging 7 percent. For the tractor industry he expects the growth in the range of 12 to 14 percent, with a "bias towards 12 percent."

On the performance of the recently launched Marazzo, the company claims that it has thus far received over 13,000 bookings. Speaking on the launch plan for new electric vehicles, Dr Goenka confirmed that Mahindra plans to launch the electric KUV in mid-2019 and the S201 EV in the first or second quarter of 2020.

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