Automaker Mahindra and Mahindra (M&M) reported a better-than-expected second-quarter profit, driven by strong demand for its passenger vehicles and farm equipment.
The auto major reported a net profit of Rs 2,090 crore, up 46 percent from Rs 1,433 crore a year earlier. Total vehicles sold soared 75 percent over the last year to 174,098 units, while it had open bookings for more than 260,000 SUVs.
In an exclusive conversation with CNBC-TV18, Rajesh Jejurikar, Executive Director-Auto and Farm Sectors at Mahindra & Mahindra, shared his views on the company's second quarter results.
"Our demand continues to be very strong and robust for our products. We've done very well in the SUV space where we have over the last few quarters been number one in terms of the SUV revenue market share," Jejurikar said. "We've gained the year-to-date (YTD) October market share of 0.8 percent."
The company is strong in demand and also strong in profit growth. The ED said that looking at the quarter sequentially from FY22Q4, FY23Q1, and FY23Q2, the margins have continued to grow across them. "Which is a function of multiple things including some softening that we are seening the commodity cycle."
However, the quarter under review didn't have the last leg of commodity inflation in the tractor business because it is a reasonably high-margin segment.
"Every time there's a commodity increase, we are in our attempt to pass on the cost increase," he said. The company, however, is unable to pass on the increase in terms of margins on the pricing, which affects the overall margins, as per the numerator and denominator effect.
This leads to a loss of margin because they were cut short while increasing the price when the commodity prices soared, he explained.
For the tractor business, despite gaining market share last year, the company expects a growth of 5 percent for FY23. This is because last year, the base price was low, leading to high margins. However, now looking at the festive season and market, the company expects a growth of 5 - 6.5 percent by the end of this year.
Speaking on the crisis of semi-conductor shortage, he said that the worst phase is behind now. But, "semi-conductors will be closely tracked and managed over the next few quarters."
The company is going to increase their SUV capacities significantly. They had a capacity manufacturing of 29,000 SUVs per month `between January and March of 2022. They expect to grow up to 39,000 SUVs per month between January and March of 2023. And for the same period of 2024, they have aimed to make it 49,000 SUVs per month.
"We have already allocated the capital to make this happen," the ED claimed. The company refreshed and relaunched Scorpio, and it "has got tremendous momentum".
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