Write-offs weigh on M&M profit despite strong revenue

Mahindra and Mahindra (M&M)'s profit before exceptional items stood at ₹1,002 crore compared with just ₹323 crore a year earlier, with tractor sales reporting robust growth in the rural market.

ahindra and Mahindra (M&M) reported a consolidated net profit of ₹163 crore for the quarter ended March, following its decision to write-off ₹849.5 crore for key long-term investments, especially in foreign subsidiaries. It had reported a loss of ₹3,255 crore in the year-ago quarter.

The firm saw an 18% rise in passenger vehicle sales. (Reuters)

The manufacturer’s profit before exceptional items stood at ₹1,002 crore compared with just ₹323 crore a year earlier, with tractor sales reporting robust growth in the rural market. Commercial and passenger vehicle sales showed gradual improvement despite supply chain bottlenecks.

Operating revenue rose by 48.11% to ₹13,338 crore on the back of 18% increase in passenger and commercial vehicle sales at 106,333 units, and 58% growth in dispatches of tractors and other farm equipment comprising 93,044 units.

Due to the robust increase in vehicle sales, the firm managed to beat a Bloomberg estimate of ₹12,931.7 crore, but net profit was well short of the estimated ₹1,202.2 crore, even before deduction of the impairment.

Operating profit, or earnings before interest, tax, depreciation and amortization (Ebitda), during the quarter jumped by 60% to ₹1,960 crore on the back of a robust increase in the top line and cost-cutting measures adopted by the company.

“In auto, we might have to wait before demand comes back. Our conviction is that we will witness a strong comeback once the economy opens up,” said Jejurikar. “The semiconductor issue has impacted certain models. The supply side issues are expected to continue due to localized lockdowns.”