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