Goenka: input costs have been a dampener

Goenka: input costs have been a dampener
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First Published: Mon, Jan 25 2010. 10 11 PM IST

Road ahead: Pawan Goenka, president (automotive segment) at Mahindra & Mahindra, is watching out for the Budget. Ashesh Shah / Mint
Road ahead: Pawan Goenka, president (automotive segment) at Mahindra & Mahindra, is watching out for the Budget. Ashesh Shah / Mint
Updated: Mon, Jan 25 2010. 10 11 PM IST
Mumbai: Automotive manufacturer Mahindra and Mahindra Ltd (M&M) has declared a 276% jump in its net profit to Rs413.7 crore for the three months ended 31 December, as against an adjusted net profit of Rs110 crore on a year-on-year basis. Pawan Goenka, president of the automotive sector and member of the group management board, spoke in an interview about how the company achieved these figures as well as the firms plans for the future. Edited excerpts:
You have got excellent results. How have you made it happen?
The biggest contribution is in terms of sales figures that we have. Tractors and automotives have brought in very good sales figures.
Compared to last (fiscal) year’s third quarter, they are fantastically good because last (fiscal) year’s third quarter was a bad quarter for both the industries. Even otherwise, if you compare the third quarters of the last five-six years, this is the best we have had.
Road ahead: Pawan Goenka, president (automotive segment) at Mahindra & Mahindra, is watching out for the Budget. Ashesh Shah / Mint
We have had good industry growth. On top of that, Mahindra in the automotive and tractor (segment) has had a slight increase in market share compared to what we had in the third quarter of last year.
So, the first thing is the way the volumes have grown. Second, profitability compared to last year has grown in all regards. We have a very good profitability margin in the third quarter.
Commodity prices, which have grown about 3-3.5%, have been a bit of a dampener. In the last six months, we have been able to pass a little bit of it, (but) not all of it. Therefore, you would see some reduction in profitability compared to the second quarter, but a significant improvement compared to the third quarter last year.
Your operating margin, or the proportion of your revenue that is left after paying for wages, raw materials and other uncertain costs of production, has come down to 15% from 18%. Do you think you will be able to sustain at this level, or is it likely to come down from here?
If you compare to the second quarter last year, there was an element of octroi (levy) refund, which was at one time a small element of about Rs80-90 crore. It contributed to the profit margin in the second quarter and that figure was not in the third quarter. So about half of the reduction has happened because of that, which is in a way an extraordinary item that we had. There is a loss because of raw material prices.
It depends on what happens in the fourth quarter in terms of raw material prices. There is some pressure on (some) commodities, but some other commodities are doing okay. So I won’t expect significant increase in raw material prices in the fourth quarter.
The interest rates also should behave reasonably well.
The only uncertainty is in terms of volumes, depending on what happens with the stimulus package that will be announced in the Budget. That is the only uncertainty that I have seen. Otherwise we should manage reasonably well.
You are awaiting regulatory approval for your vehicles in the US. How soon do you think you can launch there?
We would expect to get them approved by the end of this fiscal. As soon as the approval is in our hand, we will start production.
cnbctv18@livemint.com
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First Published: Mon, Jan 25 2010. 10 11 PM IST