M&M’s Q3 net profit dips 14% YoY as tractor sales weigh

Homegrown automaker Mahindra & Mahindra today reported a 14% decline in the net profit for the quarter ended December 2015 to Rs 808 crore, as higher revenues from the automotive business were offset by the weak performance of the tractor business.

In the third quarter, Mahindra & Mahindra along with its wholly-owned arm Mahindra Vehicle Manufacturers Ltd (MVML) sold 58,660 utility vehicles while tractor sales stood at 59,883 units in the domestic market, the company said.  

“The tractor market remained subdued with a de-growth of 1.5% in the current quarter on account of lower kharif output and a lower Rabi sowing than last year which impacted the income and the sentiments of the farming community,” the company said in a release.

Another factor resulting in lower profits this time around was a higher base courtesy an exceptional gain of Rs 299 crore resulting from the fair valuation of the shares received by M&M against its holdings in Mahindra Engineering Services Limited (MESL) resulting from the merger of MESL with Tech Mahindra in the quarter last year.

Nevertheless, net sales for India’s largest tractor and utility vehicle maker in the quarter rose to Rs 10,900.39 crore from Rs 9,310 crore a year earlier.

The company said, "With the macro policy environment now turning more supportive and El Nino conditions, along with its adverse impacts on agricultural output and incomes, set to dissipate, domestic consumer demand is likely to gain strength in the coming quarters."

Speaking at the results press conference Dr Pawan Goenka, executive director at Mahindra & Mahindra said that going forward the tractor business would continue to be under pressure given the weak monsoon last year and the company will end the financial year with around 10% decline in tractor sales.

However, he reiterated that the automotive business would continue to show a solid performance given the good demand seen for the company’s recently launched KUV100 and TUV300 utility vehicles.

He revealed the KUV100 has received 18,000 bookings so far since its launch and that the car now has a waiting period of nearly three months.