Mahindra and Mahindra Ltd, India's biggest SUV manufacturer, beat analysts' estimates with a 22% rise in net second quarter profit as its car sales outperformed the market, but margins were hit by a fall in tractor sales.
Mahindra, the world's biggest tractor maker by volume, said its domestic tractor sales fell 13.8% in the July-September quarter, hit by cooling economic growth and lacklustre monsoon rains, dragging the company's operating margin down to 11.4% from 12% a year ago.
"Tight macroeconomic and political constraints at home and worries about a second global recession have taken a heavy toll on the Indian economy," the company said in a statement. "The current economic situation is quite challenging."
Mahindra said on Thursday net profit for the September quarter was Rs 902 crore, against Rs 737 crore a year earlier.
Net sales rose 33% to Rs 9,659 crore.
Analysts, on average, had expected profit of Rs 840 crore on revenue of Rs 9,572 crore.
Mahindra, which controls South Korean car maker Ssangyong Motor Co Ltd, said revenue from automotive sales jumped 58% in the quarter, as surging demand for SUVs helped the company defy the gloom in India's car market.
The flagship company of the $15.4 billion Mahindra Group, the motor firm builds every other SUV sold in India and accounts for 40% of the country's tractor market.
Shares in the automaker, valued at around $7.5 billion by the market, extended gains to rise as much as 3.1% after the results were released, compared with a flat Mumbai market.
"It was expected that the tractor business would drag down margins on lower volumes," said Jinesh Gandhi, automotive analyst at Motilal Oswal Securities in Mumbai. "But car sales more than made up for it."