Mahindra & Mahindra posted a 67 per cent rise in net profit at ₹1,257 crore for the quarter ended June 30 compared with net profit of ₹752 crore for the same period of the previous year, riding on robust sales and cost cutting measures.
M&M’s revenues, including other income for the quarter, stood at ₹13,551 crore (₹11,006 crore).
The total domestic automotive volume of the company grew 16.2 per cent. Heavy commercial vehicle volume grew 123.4 per cent, resulting in a market share of 5.7 per cent, the Mumbai-based company said.
Meeting challenges
“Last quarter we had cautioned against four possible derailers for our growth. First was the monsoon, which went well. Second was the hike in interest rates, which we anticipated to be within 50 basis points and therefore that’s nothing to be worried about. Third, growing commodity prices, which went up significantly but our cost reduction measures combined with slight price increases helped contain that. Lastly, the fuel price increase also did not have an impact on our Q1 results,” said Pawan Goenka, Managing Director at M&M.
M&M exported 9,360 vehicles during the first quarter, a growth of over 100 per cent over the corresponding period a year ago. Its domestic tractor sales grew 18.8 per cent and the farm equipment segment’s revenue crossed the ₹5,000-crore during the first quarter.
For Q1, the Indian automotive industry (excluding two wheelers) grew 28.4 percent with passenger vehicles growing by 19.9 percent and the commercial vehicle industry growing by 51.5 percent. The domestic tractor industry witnessed a growth of 23.4 percent.
“The demand for both automobiles and tractors was driven by positive sentiment in the economy (both urban and rural) due to a third consecutive year of a normal monsoon, sustained investment in road and infra projects and availability of affordable finance,” M&M said.
Goenka pointed out that the sharp increase in automotive numbers are due to the low base effect caused by the impact of GST and transition to BS-IV norms last year. “In Q1 F2018 the industry volumes for passenger vehicles was on the lower side due to the slowdown in demand preceding the implementation of GST in July 2017 and commercial vehicle volumes being adversely impacted due to supply constraints arising from implementation of BS-IV norms,” the company said.
US tariff hike
On the future outlook, the company said the recently announced and anticipated tariff hike by the US and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions. “These could pose risks to global recovery and investments,” the company noted.
For the farm sector the company predicted good growth given the normal monsoon. “A normal monsoon, with a satisfactory temporal and spatial distribution, combined with the recently approved higher MSP for kharif crops should help support rural consumption further,” the company said.