Tractor and utility vehicle (UV) manufacturer, Mahindra & Mahindra (M&M), today posted a net profit of Rs 413 crore for the quarter ended December 31, 2009. This was an increase of 849 per cent, aided by the low profit base of Rs 43 crore in the same quarter of the previous financial year.
Despite the high jump in the bottom line, it was still below market expectations. Industry analysts had expected the net profit to be in the range of Rs 450 crore to Rs 490 crore. As a result, the stock of the company saw the biggest drop among the 30 Sensex scrips, losing 5.24 per cent before settling at Rs 1,072.35 at close of Monday’s trade on the BSE.
Sales rose 53 per cent to Rs 4,478 crore against Rs 2,865 crore reported for the corresponding quarter in the previous financial year. UVs like Xylo, Scorpio and Bolero saw a volume growth of 73 per cent at 50,602 units against 29,184 units. This rise was also aided by the poor sales in the earlier corresponding period, when demand for new vehicles across the entire spectrum took a hit following the financial meltdown.
Although India experienced one of its worst monsoons in decades, sales of tractors hit an all-time high in the country at over 98,000 units, recording an increase of 37 per cent. M&M, whose share of the domestic tractor segment stands at 41 per cent, posted a growth of 38 per cent in sales at 41,074 units.
Raises prices
M&M also stated it had raised prices of all its products, including tractors, from the first week of this month. The hike is the result of a corresponding rise in commodity prices. While UV prices have been raised by 1-2 per cent, tractor prices have been increased by Rs 5,000-6,000.
M&M President (Farm Equipment Sector) Anjani Kumar Choudhari said: “If raw material prices continue to increase, we may have to look at another round of price hike before the year-end.” He added: “We are expecting some lag in demand in the first quarter of the next financial year, depending on the monsoon. However, there is a far greater money supply in the rural market and we should see an overall growth of 15-16 per cent in the current year.”
M&M signalled caution on the possible withdrawal of the government-sponsored stimulus package. Company President (Automotive Sector) Pawan Goenka said: “Volumes could get impacted by the constant rise in commodity prices. But there will be an even greater impact of sales if the stimulus is withdrawn. We will pass it on to the consumers.”
The company also announced a stock split today, following a decision taken by its board.
