Mahindra & Mahindra’s net profit surged 98 percent year-on-year (YOY) in the first quarter of FY24 on the back of a rich product mix and upbeat sales of sports utility vehicles, exceeding analysts’ expectations.
Standalone profit climbed to Rs 2,774 crore in the three months ended June from Rs 1,404 crore a year earlier. Revenue from operations increased 23 percent to Rs 24,368 crore, the Mumbai-based auto manufacturer said in a statement on August 4.
According to a poll of five brokerages, profit was expected to be Rs 1,865 crore, up 27 percent from a year ago. Revenue was estimated to be 20 percent higher at Rs 23,457 crore.
Analysts said an increase in the average selling price and softening commodity prices aided Mahindra & Mahindra’s robust performance.
Other income rose to Rs 658 crore from Rs 140 crore in the year-ago quarter. Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 46.5 per cent to Rs 3,547 crore, while the EBITDA margin improved to 14.6 percent from 12.2 percent.
“During Q1, our businesses across auto, farm and services delivered a strong performance,” Anish Shah, managing director of M&M, said in the statement. “Auto led the way by strengthening its market leadership position and doubling its operating profit.”
The M&M stock fell 0.2 percent to Rs 1,465.05 at the close on the BSE.
SUV leader
Automotive sales at the maker of the Thar, Bolero and XUV range of vehicles rose 21 percent to 186,000 units, the highest ever for the first quarter. The business recorded an increase in EBIT margin to 7.5 percent from 5.3 percent.
However, tractor sales fell 3 percent to 114,293 units. The company's farm equipment segment margin improved to 17.5 percent from 15.9 percent.
“In SUVs, we continue to be leaders in revenue market share for the sixth consecutive quarter with SUV volume crossing the 100,000 milestone. In the tractor business, we have achieved 42.9 percent market share, the highest since Q2 of FY20,” said Rajesh Jejurikar, executive director of the auto and farm sector.
The company’s electric three-wheeler business continued its market leadership with a 65.5 percent share, he said.
M&M business divisions include automobiles, farm, financial services and consumer services.
“Our consolidated results reflect the robust performance of our multiple businesses,” said Manoj Bhat, group chief financial officer. “We have also realised the benefits of value creation through our capital allocation actions. Our market leadership position in our automotive and farm businesses have helped us realise operating margin benefits.”
M&M recently acquired a 3.53 percent stake for Rs 417 crore and said it may increase it to 9.9 percent.
The company said it does not expect to invest more in private sector lender RBL Bank unless it sees “compelling strategic value" at some point in the future.
Shah said the RBL Bank investment did not mean that the company’s capital allocation discipline has changed. In a presentation, M&M said the investment was based on a long-term view of 7-10 years.
The Indian automaker said that it made the investment with a view to understand more of the financial services and banking business and not with any objective of foraying into the banking sector.
“The primary purpose is to understand banking, which will enable us to enhance the value of our financial services business. We saw an opportunity with an attractive valuation at less than 1x P/B for a very solid bank with a strong management team. We will explore potential for synergies as well," M&M said.
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