M&M Q1 profit down 20% as car sales slowed ahead of GST

Excluding the impact of GST that kicked in from July 1, the company earned a profit of Rs 8.60 bn

Homegrown auto major Mahindra & Mahindra (M&M) today reported 19.79 per cent decline in its standalone profit after tax (PAT) to Rs 765.96 crore for the first quarter of the current financial year as sales were hit by GST transition.

Mahindra & Mahindra Ltd posted an about 20 per cent fall in quarterly profit on Friday, missing estimates, as sales growth in passenger vehicles slowed ahead of the transition to a new nationwide tax.

The company had posted a profit after tax (PAT) of Rs 954.95 crore during April-June period of last financial year.

Excluding the impact of the Goods and Services Tax that kicked in from July 1, the company earned a profit of Rs 8.60 billion. 

Analysts on average had expected a profit of 8.93 billion rupees, according to Thomson Reuters data.

Revenue from operations during the first quarter of 2017 -18 stood at Rs 12,335.56 crore, up 3.29 per cent from Rs 11,942.9 crore the year-ago period, M&M said in a regulatory filing.

The company's vehicle sales were at 1,12,293 units during the first quarter. It sold 81,270 tractor units during the period under review.

Elaborating on the quarterly performance, M&M said the automotive industry was impacted due to impending transition to Goods and Service Tax in the first quarter of 2017-18.

Passenger vehicles sales were adversely impacted in anticipation of a price reduction in the new tax regime and reported a nominal growth of 4.4 per cent, it said.

M&M further said heavy commercial vehicles (goods) segment also showed a decline as a result of pre-buying of BS-III vehicles in Q4 of the previous fiscal.

Moreover, saturation of replacement demand coupled with production constraints of BS-IV models led to sales being the lowest in the previous 13 quarters, it added.

On the tractors front, the company said based on a normal monsoon outlook, industry sales continued to post growth in April and May 2017.

"However, June 2017 witnessed a decline of 1.7 per cent owing to the uncertainty with regard to transition to GST. Overall, the domestic tractor industry witnessed a growth of 8.5 per cent in Q1. The company however outperformed the industry and grew 13.2 per cent," it said.

M&M said it made a provision of Rs 144 crore to support dealers in respect to duty paid for goods lying with them following transition to GST to overcome unavailability of input credit for certain taxes paid, as well as due to tractors being exempt from excise duty in the earlier regime.

Shares of the company were trading at Rs 1,401.15 apiece, down 1.11 per cent, on BSE.