M&M Q2 net profit rises 25%, announces 1:1 bonus issue
MUMBAI: Utility vehicle and farm equipment maker Mahindra and Mahindra Ltd (M&M) on Friday reported a 25% increase in standalone net profit for the quarter ended September, beating Street estimates, benefiting from a richer product mix and festive demand.
Profit rose to ₹1,331.57 crore from ₹1,067.03 crore a year earlier. Net sales of the company, maker of the Scorpio and XUV5OO, increased 6.4% to ₹12,182.07 crore from ₹11,446.14 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 July 1, 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 ₹5 each for every fully paid-up share of ₹5 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 ₹1,118 crore on net sales of ₹12,358 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 amortisation) 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 firm 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.
PTI contributed to this story.