 "M&M Q2FY25 results: PAT up 35% at Rs 3,171 crore on strong auto sales")
Driven by booming auto sales and market-share gains, Mahindra and Mahindra (M&M) posted a 35 per cent year-on-year (Y-o-Y) rise in profit after tax (PAT) for the second quarter of FY25, reaching Rs 3,171 crore.
Revenue grew 10 per cent to Rs 37,924 crore, propelled by strong performance in the auto and farm divisions.
For the first half of FY25, M&M recorded a PAT of Rs 6,453 crore, up 10 per cent, with revenue at Rs 75,141 crore, also up 10 per cent.
The automotive major attributed its performance to the auto and farm divisions, which delivered 23 per cent profit growth. The assets under management of the company’s financial services grew 20 per cent, and Tech Mahindra improved its earnings before interest and tax (EBIT) by 490 basis points (bps) in its BFSI segment.
M&M is gearing up to launch its electric-vehicle (EV) lineup on November 26. Currently, dealer inventories remain under 30 days as production capacity expands.
Its stock was down to Rs 2, 900 on Thursday.
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Anish Shah, managing director and chief executive officer, M&M, said, “Our businesses have delivered a solid operating performance this quarter. Auto and farm continued to strengthen market leadership by gaining market share and expanding margins.”
M&M Financial Services Ltd (MMFSL) GS3 remained under 4 per cent (at 3.8 per cent) with structural improvements. Our long-term focus remains on restoring past profitability, he added.
The auto division achieved its highest ever quarterly volumes at 231,000 units, up 9 per cent, with a record 136,000 utility vehicles sold.
The production capacity of sport utility vehicles (SUVs) increased 10 per cent since FY24, now reaching 54,000 units per month.
Rajesh Jejurikar, executive director and CEO, auto and farm sector, said the capacity would be expanded by another 10,000 units per month in the coming quarters.
The auto sector’s consolidated PAT was at Rs 1,423 crore, up 40 per cent Y-o-Y, while revenue increased by 15 per cent to Rs 21,755 crore. This growth was driven by positive responses to launches and market-share gains.
The market share of SUVs by value rose by 190 basis points (bps) to 21.9 per cent, with SUV volumes up 18 per cent in Q2 and 21 per cent year-to-date through September. In the under-3.5-tonne light commercial vehicle (LCV) segment, market share grew by 260 bps to 52.3 per cent. Tractor market share increased to 42.5 per cent, up 90 bps, and M&M remains the market leader in electric three-wheelers, with a 43.6 per cent share.
The H2FY25 outlook for tractors is positive, with the industry expected to grow in double digits, Jejurikar said. “In our tractor business, we achieved our highest ever Q2 market share at 42.5 per cent, with standalone margins up by 150 bps Y-o-Y,” he added. Farm machinery revenue was Rs 253 crore, up 14 per cent. Consolidated farm revenue decreased by 2 per cent to Rs 8,194 crore, with consolidated PAT holding steady at Rs 800 crore, affected by macro headwinds in international farm markets.
Jejurikar noted the US tractor market declined over the past two-three years, with tractors under 100 horsepower shrinking from over 300,000 to about 130,000. In inflation-hit Turkey, M&M is now focusing on the harvester segment in farm machinery.
Volume growth in the auto sector contributed to improved margins, noted Amarjyoti Barua, group chief financial officer. “Volume growth gives us cost leverage. While price reductions have been strategically applied in certain models, Y-o-Y prices are up. Moreover, commodity price inflation is mostly benign,” Barua said.
M&M’s services sector also performed well. Its assets under management rose by 20 per cent, with PAT up by 57 per cent. Tech Mahindra EBIT margins improved by 490 bps, with PAT rising 2.5 times. Mahindra Lifespaces reported residential pre-sales of Rs 397 crore, down 13 per cent, while Club Mahindra’s income was Rs 371 crore, up 12 per cent. Mahindra Logistics’ revenue was Rs 1,521 crore, up 11 per cent.
The services sector’s consolidated revenue rose 12 per cent to Rs 9,010 crore, with consolidated PAT up 1.8 times to Rs 947 crore.
Tractor industry likely to grow 13-15% in H2FY25
The tractor industry’s growth in the first half of the financial year was flat at around 0.6-0.7 per cent, but it is expected to rebound in H2FY25 with 13-15 per cent growth. M&M, which had initially projected 5 per cent growth for FY25, now anticipates 6-6.8 per cent growth for the full year. Rajesh Jejurikar, executive director and chief executive officer (auto and farm sector), M&M, said that “green shoots” are visible in the tractor industry with surplus rainfall of 8 per cent and strong reservoir levels at 87 per cent. Growth in kharif output is evident from the significant pickup in mandi arrivals in the second half of October, Jejurikar noted. Additionally, there has been a rise in the minimum support price (MSP) of key rabi crops, such as wheat and mustard, by 5-7 per cent year-on-year. Furthermore, government spending on rural development saw significant growth in August-September 2024, which is expected to continue in H2FY25.