Mahindra reports PAT of Rs 740 crore for FY2020, down 86%

Domestic SUV and tractor major, Mahindra & Mahindra has announced the financial results for Q4 FY2020 and for the full year FY2019-20.  The company reported the revenue for M&M and MVML came at Rs 44,866 crore in FY2020, down 15 percent, while PAT came in at Rs 740 crore, down 86 percent YoY, the results were impacted due to various factor including transition to BS VI norms, SsangYong, and Covid-19 impact among others.

For Q4 FY2020, the revenue came at Rs 9,005 crore, down 35 percent YoY, while PAT was 323 crore, lower by 70 percent year-on-year. The company says the results were affected due to the lower industry volumes in both automotive and tractor segments, transition to BS VI and the abrupt lockdown due to the Covid-19 situation. In terms of sales performance, Mahindra says its market share for tractors increased 1 percent and the LCV segment upto 3.5-tonne share increased 1.2 percent, while passenger vehicle share decreased by 0.8 percent.

The company reported the PAT after EI was primarily impacted due to write down of investment in SsangYong and some other international subsidiaries. It says as announced earlier Mahindra Board had decided not to infuse any fresh capital into SsangYong and is re-examining the business outlook of other International subsidiaries, in view of the current environment, to decide on future capital allocation.

The OEM says the automotive industry performance for Q4 F2020 was a reversal in trend compared with from Q3 FY 2020, when some green shoots were seen in the economy and the consumer sentiment. In the last quarter, the Indian automotive industry (excluding two-wheers) posted a decline of 28.6 percent. This decline was driven by the continued slowdown in economy, the transition to BS VI from April 1, 2020 and concerns over the Covid-19 outbreak and ensuing lockdown for seven days in March 2020. The commercial vehicle segment posted a reduction of 48.3 percent, with the HCV goods industry posting a decline of 66.4 percent.

Even in such challenging circumstances Mahindra says it grew its market share in the less than 3.5-ton CV by 3.5 percent to 48.1 percent as compared to the corresponding quarter previous year. In Q4 FY2020, the domestic tractor industry witnessed a decline of 9 percent with sales of 146,313 tractors, against 160,836 tractors sold during the same period last year. After the continued slowdown in Q1 and Q2 FY2020, the tractor industry saw some green shoots from December 2019 onwards, with good growth in January and February of 5 percent and 21 percent respectively. The industry growth in December 2019 to February 2020 was a result of good Rabi outlook, supported by increased government spend in rural, along with better liquidity conditions in the market leading to improved sentiments in the agri and rural economy. Similar momentum was expected in March 2020. However, the industry was adversely impacted in March because of the nationwide lockdown

due to Covid-19 outbreak. The OEM says it increased its market share in the domestic tractor market to 39.1 percent in Q4 FY2020 a growth of 3.7 percent over corresponding quarter previous year and continued to maintain its operating margin.

SsangYong weighs heavy on Mahindra’s performance
The company says the consolidated results of the group have been significantly impacted by losses in SsangYong and other international subsidiaries.

In terms of future outlook, the company says the lockdowns to contain the spread of the coronavirus have curtailed both supply and demand. Added to this, a combination of lower incomes and heightened uncertainty has added to the drag on consumer spending and business investment.

To mitigate the economic impact of Coronavirus the Indian government has announced a Rs 20 lakh crore package comprising fiscal, monetary and regulatory measures, which should help put a floor under growth. The OEM says the package enables more credit, guarantees and forbearances along with a medium-term reforms push.

Importantly, the government has also begun allowing a gradual but cautious reopening of the economy, which should help business and economic activity improve going forward. As restrictions ease, and the economy at large, adapts to operating and living in a post-Covid era, it is expected that there will be a gradual recovery in the second half of the fiscal.

Furthermore, even as restrictions are gradually lifted in phases, there will be a ramp up in production, supply chain and distribution from June onwards, which will aid economic activity. While the overall services and manufacturing sectors are likely to see a slower recovery, the agriculture/farm equipment sector will be relatively less impacted, aided by several positive factors such as record rabi production, higher government procurement, timely announcement of higher MSPs and outlook of a normal monsoon. One can expect a quicker recovery in rural India, as is evident from tractor sales of the company in the month of May. The urban segment may take longer to come back to normalcy.

Having said that, Mahindra says while the outlook is heavily contingent upon the intensity, duration and spread of the pandemic, a smooth normalisation and efficacy of policy measures will be the key to any recovery in FY2021.