M&M withdraws bid for US postal trucks, Q1 FY2021 profit plunges 97% to Rs 68 crore

Mahindra & Mahindra’s North American business unit, Mahindra Automotive North America (MANA) has seen some revision of investment plans by its parent. M&M says MANA will not pursue the bid to supply delivery vehicles to United States Postal Service (USPS).

MANA was one of the four shortlisted bidders for the project four years ago. Winning the bid would have required M&M to invest around $500 million (over Rs 3,700 crore) in MANA.

“Some investments” made already are being written off. The decision to withdraw from the bid is part of the Group’s efforts to take measures that enhance its financial sustainability. “MANA business itself right now has cloud with regard to the FCA litigation. That’s a business that, once that cloud clears, will have a better view in terms of what is the roadmap for it, and is part of our overall evaluation,” says Anish Shah, deputy MD and Group CFO, M&M.

MANA has been involved in a litigation filed by Fiat Chrysler Automobiles, over alleged design infringement. It is to be noted that M&M is conducting a detailed analysis throughout this year, of all its businesses to take calls regarding continuation of some of its businesses. The three key parameters of evaluating the future of all Group businesses are EPS, ROE and cash flow levels. 

Q1 FY2021 profit plunges 97% to Rs 68 crore
Mahindra & Mahindra (M&M) reported a sharp fall in its net profit for the quarter ended June, 2020. In a pandemic-hit industry, the tractor and UV major reported net profit of Rs 68 crore in Q1, a 97 percent drop on a year on year basis. Revenue during the period stood at Rs 5,589 crore, a 56 percent fall year on year.

The performance could have been worse if the tractor industry hadn’t provided support with strong demand. Though challenging, overall Dr Pawan Goenka, MD, M&M said, “Q1 has been better than what was expected till the middle of the quarter.”

The timely relaxation of the lockdown for the agricultural sector along with positive rural sentiment led to good sales numbers for tractors during the quarter despite the supply chain issues, showing a positive growth rates in May and June 2020,  the company said in a press statement. 

According to the company, a combination of lower incomes and heightened uncertainty, due to the Covid-19 pandemic, is expected to drag consumer spending and business investment in the current financial year. It is now a foregone conclusion that the economy is set to contract during the year – the first time in 41 years. However, the agriculture sector and rural economy remain buoyant, supported by healthy rural spending by the government although there are some concerns around a fall in remittance incomes, says M&M.