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Home / Companies / M&M  posts robust Q1  sales,  but profit misses estimates
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Mahindra and Mahindra Ltd (M&M) posted a 67% rise in quarterly net profit as it benefited from record sales of sport-utility vehicles and tractors in the domestic market.

Profit at the maker of Scorpio-N and XUV700 SUVs surged to 1,430 crore in the three months ended June. The figure, however, lagged the 1,540 crore estimate in a Bloomberg survey of analysts.

The Mumbai-based automaker sold a record 75,400 SUVs and 112,300 tractors in the quarter. Higher sales boosted its revenue by 67% during the fiscal-first quarter to 19,613 crore.

The company, however, reported operating margin of 11.9%, trailing Bloomberg’s 12.4% estimate, mainly due to the lagging effect of a softening in commodity prices, which, the company said, should reflect in the financial results for the ongoing quarter.

To be sure, the June quarter of last year was witness to severe disruption due to the second wave of covid, which impacted the performance of many corporates, including automakers.

M&M, like its peers, is looking to significantly ramp up production to cater to the growing demand for its passenger vehicles. However, the company suggests that it’s not the semiconductor crisis that’s impeding a ramp-up in demand as much as the process of adding fresh capacity, which involves long lead times.

“We’ve got all our investments going to add capacity, but there are lead times to get things up and running," said Rajesh Jejurikar, executive director, automotive and farm equipment sector, M&M.

He emphasized that the worst of the setbacks the company received on chip supply is behind it.

Geopolitical tensions between China and Taiwan, the world’s largest contract manufacturer of semiconductor chips, are not an immediate threat, according to M&M.

“We have no early signals that we’ll have a disruption coming from Taiwan, but we will have to wait and watch", said Jejurikar.

“A lot of the chips for the auto sector come from various other places as well. Malaysia has a large plant from where we get a lot of our supplies, and there are other countries with semiconductor factories, too. So, we don’t have a very high dependence on Taiwan from a single-source standpoint," said Anish Shah, managing director and chief executive of M&M.

M&M is doubling down on its SUV portfolio by reinforcing its classic brands, such as the Scorpio, and modernizing them for the urban customer. The automaker has received over 100,000 orders for the new Scorpio-N, over five times the production it has planned for the year. While ballooning waiting periods may dissuade some customers from purchases, M&M said that it is not seeing high cancellations, even as it continues to clock healthy bookings for existing product lines like the XUV700. On 15 August, the company will unveil its line-up of Born Electric SUVs and reveal its road map for electrification in India.

“We have said we will deliver 20,000 Scorpio-N units before December. We intend to do that. That’s a pretty good delivery number to put out within the first three months of launch. We’ve set up for 6,000 units a month in capacity for the Scorpio-N right now; there are plans to increase that, but that’s going to take a longer time," said Jejurikar.

“I am hopeful that it won’t negatively impact our orders and sales because of the experience we’ve had with the XUV700. We’ve seen less than 10% cancellations and continue to get new bookings higher than the rate of monthly sales in the region of 9,000-10,000 vehicles, even when customers are quoted a delivery period of about 22 months. So, we don’t expect the pace of growth of orders to slow down because our value proposition is strong," he added.

Jejurikar also said that M&M doesn’t foresee a major overlap between XUV700 and Scorpio-N sales, although he does expect some customers to move on to the Scorpio-N from a waiting-period standpoint.

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