COR­PO­RATE SCORE­CARD M&M Hits DeMo Bump, Q3 Net Profit Falls 5.7%

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

Mumbai: Dragged down by dou­ble digit de­cline in util­ity ve­hi­cle space as a di­rect fall­out of de­mon­eti­sa­tion, Mahin­dra & Mahin­dra (M&M), the maker of ve­hi­cles such as Scorpio and Bolero, saw net profit for the De­cem­ber quar­ter drop 5.7%, miss­ing Street es­ti­mates. M&M posted a net profit of ₹ 801crore for Q3 of FY17 against ₹ 849 crore for the same pe­riod the year ago. The num­bers stated here are com­bined for M&M and Mahin­dra Ve­hi­cle Man­u­fac­tur­ers (MVML).

Con­solidated net sales for M&M was flat at ₹ 10,587 crore and de­spite pos­i­tive mo­men­tum for trac­tors, fall­ing re­al­i­sa­tion in UVs hit the EBIDTA mar­gins which slipped marginally to 13.7% in Q3 of FY17. Re­view­ing Q3 earn­ings, Pawan Goenka, MD of M&M said de­mon­eti­sa­tion did have an im­pact on Novem­ber and De­cem­ber num­bers but the sit­u­a­tion is back to nor­mal for pas­sen­ger ve­hi­cle and the growth mo­men­tum in trac­tor segment con­tin­ues. Goenka ex­pects the next quar­ter to be busi­ness as usual. The mi­nor hob­ble in Novem­ber-De­cem­ber sales will have an im­pact on growth fore­casts of some of the seg­ments.

“We have re­vised the trac­tor in­dus­try growth from 20% to 16% for FY17. Pas­sen­ger ve­hi­cle, how­ever, should be back to dou­ble digit growth,” said Goenka. Both whole­sale and re­tail sales in Jan­uary were strong, he added. The au­to­mo­tive sec­tor de­clined 8.3% in Q3 of FY17 with sales of 1.12 lakh units, whereas farm equip­ment con­tin­ued to out­per­form grow­ing 22% with com­pany sit­ting on its high­est ever mar­ket share of 44% in the do­mes­tic mar­ket. The com­pany on Fri­day an­nounced ₹ 1,500 crore in­vest­ment in its Nashik and Igat­puri fa­cil­i­ties in Ma­ha­rash­tra to pre­pare for the in­tro­duc­tion of new project ‘U321’. The in­vest­ment in the Nashik plant will be for man­u­fac­tur­ing ve­hi­cles, while Igat­puri plant will be for mak­ing and sup­ply of en­gines. The project will qual­ify as Ul­tra Mega Project.

The U321 project is cur­rently de­vel­oped out of Mahin­dra’s North Amer­i­can tech­ni­cal cen­tre. It is a premium mul­ti­pur­pose ve­hi­cle which will take on the Toy­ota In­nova when launched in sec­ond half of FY18. The project will play a very im­por­tant role in ac­cel­er­at­ing sales mo­men­tum for Mahin­dra in FY18, with vol­umes un­der pres­sure due to in­tense com­pe­ti­tion.

The util­ity ve­hi­cles space has been grow­ing in strong dou­ble dig­its but Mahin­dra has reg­is­tered a low sin­gle digit growth de­spite in­tro­duc­tion of new launches like KUV and TUV.

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