Mahindra & Mahindra (M&M) reported 88% decline in net profit to Rs 162 crore in Q2 FY21 from Rs 1355 crore in Q2 FY20.
The results include the combined earnings of M&M and Mahindra Vehicle Manufacturers (MVML), which is a manufacturing unit of M&M.
M&M's profit before tax in Q2 September 2020 stood at Rs 587 crore, down by 67% from Rs 1758 crore in Q2 September 2019.
Revenues rose by 6% year-on-year (YoY) to Rs 11,590 crore during the quarter.
The company incurred an exceptional expenditure of Rs 1,149.46 crore in Q2 September 2020 towards impairment provision for certain long-term investments.
"The exceptional items on account of impairments have led to a drop in the profit after tax in the current quarter as compared to the corresponding quarter in the previous year," M&M said in a statement.
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While total vehicle sales declined by 21% to 87,332 units, tractor sales jumped by 31% to 89,597 units in Q2 FY21 over Q2 FY20. Total exports (vehicles and tractors) during the September quarter tumbled 33% YoY to 7,103 units.
The company said that in Q2 FY21, the Indian auto industry including 2-wheeler was just 1% lower that the comparative quarter in the previous year. It is after six quarters that the industry had shown a flat performance with the passenger vehicle (PV) industry growing 17% after eight consecutive quarters of de-growth.
The growth was driven by good demand especially in semi-urban and rural parts of the country, pent up demand, preference for personal mobility, new launches and availability of affordable finance. As a result of positive outlook in the rural and agri sectors, the Pick-Up segment after six quarters of reduction has shown positive momentum, with a growth of 6.2% over previous year with volumes almost at the pre-COVID levels of F2020.
"With the overall economy yet to gain momentum and with excess capacity in the transportation ecosystem, the MHCV goods industry volumes stand at just 23,936 units, which is a de-growth of 40.5% over previous year. With partial reopening up of the economy in the months of May and June, and then subsequent relaxations allowed in the reopening phases, the economy at large is adapting to operating and living in a post-COVID era. The auto industry ecosystem including suppliers and dealers was quick to bounce back and operations now are near normal despite some isolated pockets of supply side constraints that still remain.
In Q2 F2021, the Indian tractor industry reported a growth of 41.4% which is the highest ever Q2 quarter growth for tractor industry. Timely relaxation of the COVID lockdown restrictions for the Agricultural sector supported by healthy reservoir levels, good increase in MSP for Kharif crops and important reforms in the agri sector announced by the government focused on improving the state of agriculture in India in the mid to long term have helped tractor demand to bounce back after April 2020. On the back of these positive factors, it is expected that tractor demand will remain robust during the upcoming festive season," M&M said.
On the outlook front, the auto maker said that with government spending and rural demand anchoring economic activity, manufacturing and some categories of services have gradually recovered in Q2.
It further said: "Proactive steps from the RBI have kept domestic financial conditions easy and system liquidity in surplus. Kharif sowing and the recent Agricultural Reforms portend well for the rural economy. However, the turnaround in urban demand may continue to lag especially the contact-intensive services sectors. Manufacturing capacity utilisation is expected to recover in Q3 and activity to gain some traction from Q4 onwards. However, capex and exports are likely to remain subdued.
As economies reopened and released constraints on spending, overall activity normalized faster than anticipated. However, several countries are seeing a second wave and have re-imposed local lockdowns which may hurt economic activity."
Mahindra & Mahindra's business is diversified across farm equipment, auto and automotive components, real estate, hospitality, information technology, defence and aerospace and financial services.
The scrip rose 0.62% to Rs 620.20 on the BSE. It traded in the range of 610.65 and 627.40 so far during the day.
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