Tata Motors, M&M profit up on strong sales

delhi Updated: May 31, 2016 11:41 IST

MUMBAI: Two of India’s top automakers on Monday announced robust increase in sales and margins on the back of strong demand, signalling an economic revival, and building expectations ahead of the scheduled announcement of GDP growth figures for 2015-16 on Tuesday.

Mahindra & Mahindra, India’s largest utility vehicle maker, reported a 6% rise in net profit to Rs 583.73 crore during the January-March quarter of 2015-16, against Rs 550.56 crore in the same period last year, driven by a strong demand for new launches.

Tata Motors saw its profit grow three-fold to Rs 5,177 crore, from Rs 1,716.50 crore a year-ago, on the back of a rise in margins as sales of luxury cars and trucks jumped. The profit numbers were aided by a one-time insurance claim of Rs 555 crore.

The numbers point to the beginning of a revival in manufacturing — automobiles account for 7.1% of the overall GDP, while yet displaying unclear signs of a rural thrust as tractor margins, one of the mainstays at M&M, fell.

“A strong 27% growth in medium and heavy truck sales helped boost operating margins by 530 basis points to 8.1% in the India business,” Tata Motors chief financial officer C Ramakrishnan told reporters at a conference after the results announcement. Tata Motors, which has benefitted from the acquisition of UK’s Jaguar and Land Rover (JLR), said retail sales of luxury cars rose 28% during the fourth quarter. This is a vast improvement for the Tata group, which has been grappling with the adverse impact from Tata Steel’s 2007 acquisition of UK’s Corus.

Sales of Mahindra’s tractors, widely used in agriculture, grew 7.9% during the quarter, a healthy change after five consecutive quarters of de-growth, mainly due to a higher rabi production and lower industry base. The company is expecting a pick-up in demand across segments in 2016-17, the first full year for some of the new launches in the utility and commercial vehicle segments. A good monsoon is also expected to boost tractor sales. M&M expects the overall tractor industry to grow 10% this year.

“We will have the full-year benefit of the product launches we have had... In tractors we have products across smaller as well as larger horsepower tractors…We have everything in place, including capacity; if demand improves further we can produce more,” said VS Parthasarathy, group chief financial officer.

Automakers, including M&M, which were heavily dependent on diesel engines earlier, were hurt by the ban on diesel vehicles of over 2,000cc in Delhi. While concerns remain, M&M has taken steps towards mitigating loss in volume by introducing sub-2,000cc diesel engines for Scorpio and XUV500, and is also developing petrol variants of popular SUVs.

First Published: May 31, 2016 11:41 IST