Q1 Results: Weak Sentiment, Liquidity Crunch Hurt M&M’s Performance
Mahindra tractors, manufactured by Mahindra & Mahindra Ltd., sit in a warehouse of the Vijaya Farm Equipments dealership in Tumakuru, Karnataka, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Q1 Results: Weak Sentiment, Liquidity Crunch Hurt M&M’s Performance

Mahindra & Mahindra Ltd.’s profit for the quarter ended June fell missing estimates as India’s automakers are yet to see signs of revival from the worst slowdown in a decade.

M&M’s profit declined 26 percent over a year earlier to Rs 918 crore, according to its exchange filing. That compares with the Bloomberg consensus estimate of Rs 962 crore.

The company also reported an exceptional gain of Rs 1,367.05 crore during the period on the sale of shares of M&M Benefit Trust and buyback gains on transfer of certain long-term investments. Including the one-off gain, the automaker’s profit stood at Rs 2,260 crore compared to Rs 1,257 crore in corresponding quarter.

External factors such as weak sentiments and liquidity crunch impacted the company’s first-quarter performance, Managing Director Pawan Goenka told BloombergQuint. The tractor industry is expected to remain flat, Goenka said even as he refused to provide any outlook for the auto segment amid slowdown. “We will wait for the government to intervene in the sector before giving any outlook.”

Revenue fell 4 percent on a yearly basis to Rs 12,997 crore. Analysts tracked by Bloomberg had pegged the number at Rs 12,685 crore. The financials include numbers of its commercial vehicle unit—Mahindra Vehicle Manufacturers Ltd.

The company sold 1.3 lakh units between April and July, a decline of 6 percent from the year-ago period, according to data compiled by BloombergQuint. Its tractor sales fell 14.1 percent on a yearly basis to 86,350 units during the period.

Also read: Auto Ancillaries, Dealerships Facing More Job Losses Than Automakers, Says M&M’s Pawan Goenka

“The tractor demand in the June quarter remained sluggish and was adversely impacted due to a weak sentiment in the agri economy resulting from the delay in the southwest monsoon, poor spatial distribution in June and weak agricultural incomes impacted by poor price realisation,” M&M said in a statement.

The calculated operating income, or the earnings before interest, taxes, depreciation and amortisation, fell 15 percent year-on-year to Rs 1,819.6 crore—the consensus estimate was Rs 1,721 crore. Operating margin contracted 180 basis points to 14 percent during the period—analysts had forecast 13.6 percent.

“The company was able to improve margin on a sequential basis. Lower commodity costs will be a tailwind for operating margin,Goenka said in the interview.

Shares of the maker of XUV500 sports utility vehicle fell as much as 2.8 percent after the results were announced even as benchmark Nifty 50 traded largely unchanged.

Watch the interview here:

Also read: Anand Mahindra Sounds Alarm As Auto Gloom Deepens, Pitches For Tax Cut Or Cess Rollback

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