Mumbai: Mahindra and Mahindra Ltd (M&M), India’s largest sports utility vehicle and tractor maker, reported a 7.6% increase in first quarter net profit on increased sales.
Profit, excluding that of subsidiaries, rose to Rs604 crore in the three months ended 30 June from Rs562 crore in the year-ago period, M&M said in a statement. It was in line with the Rs612 crore median of 32 analysts’ estimates compiled by Bloomberg.
Sales increased 30% to Rs6,673 crore in the quarter.
Car and utility vehicle sales in Asia’s third largest economy grew at a much slower pace— 7.5% and 5%, respectively, in the three months ended 30 June, as successive increase in interest rates by the central bank deterred buyers in the country, where three out of four passenger vehicles are bought on credit.
The June quarter sales expansion was in contrast to a year earlier, when car sales zipped ahead with a 25% growth, while utility vehicles gained 33%.
M&M’s utility vehicle sales expanded 15% to 44,407 units in the June quarter, while sales of goods carrier, which include pick-up trucks Maxximo and Gio, jumped 53% to 12,154 units. Tractor sales rose 20% to 57,500 units from a year ago. Mahindra gained an additional 3% share in the tractor market to reach 43% in the quarter.
The company’s other expenses, which typically comprises advertising and sales costs, as a percentage of sales declined to 8.9% from 9.3% a year ago.
Lower other expenses along with an expansion in volume led by tractors helped the company return operating margin of 13.1%, said Vineet Hetamasaria, an analyst at Pinc Research. Hetamasaria expects the operating margin to remain at the same level in the year to 31 March.
Increase in prices of utility vehicles also boosted M&M’s revenue.
Better realization per model, which came on the back of a price hike in utility vehicles and richer product mix—models in the portfolio that offer better realization—also helped the company boost revenue, according to Amit Kasat, an analyst at Standard Chartered Securities (India) Ltd. M&M raised prices of utility vehicles by as much as 4% during the quarter.
“With headline inflation ranging above 9% for much of the past year, the Reserve Bank of India has tightened its policy stance aggressively in recent months leading to a sharp rise in loan rates with inevitable adverse impacts on domestic demand and industrial growth,” M&M said in the statement. “However, as prospects for agricultural and services sector growth remain reasonably robust, our business outlook for the year remains positive but watchful.”
Shares of Mahindra gained 1.7% to close at Rs666 on Monday on the Bombay.