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 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.
According to Rajesh Jejurikar, executive director, auto and farm sector, M&M, based on dealer feedback, the firm is expecting demand for tractors to rebound from June with gradual easing of lockdown across states.
“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.”