M&M stand-alone net profit jumps 25% in Sep quarter, announces 1:1 bonus issue

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Mumbai: Utility vehicle and farm equipment maker Mahindra and Mahindra Ltd (M&M) on Friday reported a 25% increase in stand-alone net profit for the quarter ended September, beating Street estimates, benefiting from a richer product mix and festive demand.

Profit rose to Rs1,331.57 crore from Rs1,067.03 crore a year earlier. Net sales of the company, maker of the Scorpio and XUV5OO, increased 6.4% to Rs12,182.07 crore from Rs11,446.14 crore in the year-ago quarter, as a near-normal monsoon also spurred demand.

To be sure, the revenue figures are not comparable to previous quarters owing to the accounting treatment of excise duty under the goods and service tax regime, which was implemented from 1 July, the company said.

According to PTI, the board of directors at a meeting on Friday recommended issue of bonus shares in the ratio of 1:1, which is one bonus share of Rs5 each for every fully paid-up share of Rs5 held.

The company will be seeking shareholders’ approval through a postal ballot, it added.

M&M had been expected to post a stand-alone net profit of Rs1,118 crore on net sales of Rs12,358 crore, based on a Bloomberg poll of 15 analysts.

Revenue from the automotive sector was flat, and that from the farm equipment segment rose 21.4%. The automotive segment makes up about 65% of the company’s revenue and farm equipment contributes to 32%.

The Ebitda (earnings before interest, tax, depreciation and amortization) margin, a measure of operating profitability, at the consolidated level rose 190 basis points to 16%. A basis point is 0.01%.

The margins were “aided by a richer product mix, among other factors”, group chief financial officer V.S. Parthasarathy told a press conference.

The margin received a boost from tractor sales, said analysts.

Domestic tractor sales in the quarter grew 33.1% to 76,984 units, as the near-normal monsoon buoyed demand, said managing director Pawan Goenka.

The company has “passed on the entire input cost increase in the automotive segment to customers since 1 April and always managed to maintain margins”, he said.

Price increases on tractors will be passed on to buyers in this quarter, added Goenka.

This would lead to a robust margin outlook, said Bharat Gianani, an analyst at securities house Sharekhan Ltd.

Total domestic sales in the automotive sector rose 5.8% to 129,754 units from a year ago.

Within the automotive segment, the company posted a 17.7% increase in utility vehicles sales to 61,516 units although its market share has been on a steady decline since 2012-13. It lost its No.1 position in the segment to Maruti Suzuki India Ltd in July.

Sales of domestic commercial vehicles rose 16.8% to 50,527 units from 43,242 units in the year-ago quarter.

Going ahead, the company is confident about retaining market share in the utility vehicle segment since refreshes of the TUV3OO and KUV1OO have received a good response, said Goenka.

“Mahindra has a robust tractor pipeline and plans to launch two to three automotive refreshes in as many months to drive volumes. The U321 (a multipurpose vehicle) and the S201 (a compact sport utility vehicle) launches are not far either,” he added.

Goenka estimates automotive industry growth for fiscal year 2018 at 12-14%, up from 10-12%, based on industry growth for the year so far.

M&M’s shares closed at Rs1,393.40 apiece on BSE, up 2.34%, while the benchmark Sensex closed at 33,314.56 points, a gain of 0.19%.