Mahindra & Mahindra’s FY2016 Q1 PAT down 3 percent

Mahindra & Mahindra (standalone) posted net profit of Rs 852 crore during the April-June 2015 quarter, a 3 percent drop from Rs 882 crore during the corresponding quarter of the previous year.

The gross revenues and other income of Mahindra & Mahindra for the quarter stood at Rs 10,629 crore as against Rs 10,863 crore in the corresponding quarter of the previous year.

The consolidated gross revenue and other income of the Group for the quarter ended 30^th June 2015 is Rs 19,816 crore (US$ 3.2 billion) as against Rs 19,831 crore (US$ 3.2 billion) in the corresponding quarter of the previous year. The consolidated profit after tax after minority interest for the current quarter is Rs 778 crore (US$ 125.8 million) as compared to Rs 962 crore (US$ 155.5 million) in the corresponding quarter of the previous year. The net Profit After Tax after minority interest for the current quarter is Rs 778 crore as against Rs 814 crore (after adjusting for one-time gains) in the corresponding quarter of the previous year.

The first quarter saw the passenger vehicle market grow 8%, driven by growth in the car segment. The UV segment, where M&M is most focused on, continued to be under pressure and de-grew by 0.6%. In the commercial vehicle industry, the LCV segment continues to be in the negative but the MHCV goods segment continued to grow on back of improvement in industrial activity, movement in infrastructure projects and some replacement demand. The tractor industry witnessed a sharp de-growth in Q4 F2015 due to the stress in the agricultural economy caused primarily by crop damage due to unseasonal rains. However, some positivity is seen in the later part of June 2015 with the monsoon setting in on time. 

M&M along with Mahindra Vehicle Manufacturers Limited (which runs the Chakan plant) sold a total of 49,354 utility vehicles in Q1, maintained its leadership position with a market share of 38.5%. In May 2015, the company launched the refreshed XUV500 and a month later rolled out the all-new small commercial vehicle, the Jeeto. The Jeeto is the first ever product in its category with a modular range of 8 mini-trucks to cater to the varied needs of customers in the sub-1-tonne load segments of mini-truck, micro-truck and 3-wheelers.

In Q1 F2016, the domestic tractor industry de-grew 16.4%. With sales of 59348 tractors in the domestic market, the Combined Entity maintained its market leadership with a market share of 41.5%. The Combined Entity exported 8449 vehicles and 3208 tractors, a growth of 29% and 24% respectively over the corresponding quarter in the previous year.

Outlook

As for the coming quarters, M&M’s outlook is positive. The Indian economy is gradually gaining momentum, stalled projects are coming back online while new project announcements have picked up pace in the last couple of quarters. Capex trends, as a result, are far healthier today than they were a year ago, which bodes well for future growth. While consumer demand remains weak, the better than expected rainfall received in the monsoon season thus far, provides room for optimism on this front as well.

On the other hand, M&M says there are some downside risks still. Despite the consolidation in its macro factors, the economy remains vulnerable to potential surges in global financial market volatility and weaker global growth. Domestic risks stemming from overstretched corporate and bank balance sheets and the slowing pace of structural reforms, are also a source of some concern. The company, however, maintains that its balance sheet remains healthy and well buffered.

Also read: Interview with Pravin Shah, president and chief executive, automotive, Mahindra & Mahindra.