M&M profit drops 20% on GST impact, lags estimates
ROAD AHEAD Company plans to make new launches in utility vehicles segment
Mahindra & Mahindra Ltd reported a 20% drop in fiscal first quarter net profit as volume sales slowed ahead of the transition to the goods and services tax (GST). The numbers lagged estimates.
The June quarter net profit for the maker of Shaktimaan tractors and Scorpio utility vehicles (UV) fell to ₹768 crore compared with ₹961 crore a year earlier. The PAT would have been higher by ₹96 crore but for the impact of GST, it said.
A poll of 16 analysts estimated a net profit of ₹850.90 crore on net sales of ₹11,265.90 crore.
Mahindra’s net sales increased 5.41% to ₹11,094.10 crore, boosted by a 12% jump in the revenue from the farm equipment sector. Revenue from the automotive sector declined 2%. More than one out of three rupees earned by the company came from the farm equipment sector.
During the three months to June, Mahindra’s passenger vehicle sales in the domestic market dropped 6% over a year ago to 55,785 units while tractors sold advanced 13% to 81,178 units. Analysts expect the company’s margins to remain under pressure and the passenger vehicle business to underperform in the medium term.
“None of the new launches by the company in the UV space have done well and there are hardly any new products in the pipeline” said Nitesh Sharma, an analyst at Philip Capital said. Mahindra’s last launches were KUV 100 and TUV 300 YYY.
Mahindra’s heavy commercial vehicle business is now on a growth path and new products have established themselves well; hence, the maximum effort has to go into the UV business where Mahindra has lost significant volumes and marketshare, according to Pawan Goenka, the firm’s managing director.
Starting next month, the company will begin to launch new models and refreshes in the UV segment. The electric vehicles portfolio which is very small now, is likely to grow in a significant manner as the company engages more intensely with cab aggregators and fleet operators for commercial application, said Goenka.
Goenka forecast the tractor market to expand 10-12% in the current fiscal. He expects sales of passenger vehicles to grow at 10-12% and UVs at a faster rate of 13-15%. Rupee/$ (left-hand scale) Forex reserve ($ mn)