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M&M Q4 Results: One-Time Impairment Amounts To Rs 3,255-Crore Loss

Mahindra & Mahindra posted a loss of Rs 3,225 crore in the March quarter on the back revenue that fell 35% to Rs 9,005 crore.

The Mahindra & Mahindra Ltd. Funster electric vehicle (EV) sits on display at the Auto Expo 2020 in Noida, Uttar Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)
The Mahindra & Mahindra Ltd. Funster electric vehicle (EV) sits on display at the Auto Expo 2020 in Noida, Uttar Pradesh. (Photographer: Prashanth Vishwanathan/Bloomberg)

Mahindra & Mahindra Ltd. suffered loss in the quarter ended March on account of a one-time impairment.

The company’s net loss stood at Rs 3,255 crore compared with a profit of Rs 969 crore in the year-ago period, according to an exchange filing Friday. Consensus of analysts tracked by Bloomberg had forecast a profit of Rs 462 crore. The financials include the numbers of its commercial vehicle unit, Mahindra Vehicle Manufacturers Ltd.

The automaker reported a one-time impairment of Rs 3,577.64 crore. The exceptional item pertains to provisioning for certain long-term investments. The impairment, according to the exchange filing, was recognised based on the performance of certain subsidiaries, associates, joint ventures and due to the Covid-19 pandemic. A write-down of investments in Ssangyong and some other international subsidiaries, too, hurt the bottom line.

M&M’s sales volume slumped 36% over the year-ago period to 1,51,713 units during the three months ended March. That hurt the company’s revenue, which fell 35% to Rs 9,005 crore. Analysts had pegged the top line at Rs 11,799 crore.

Indian automakers have been trying to push sales since Diwali in 2018. First, an upfront insurance costs, coupled with a broader consumption, hurt sales. While deep discounts helped cushion sales a bit during the festival season last year, disruptions due to the stricter BS-VI emission norms dented demand. Then the nationwide coronavirus lockdown stalled operations for companies and shuttered dealerships.

M&M’s earnings before interest, tax, depreciation and amortisation fell 34% year-on-year to Rs 1,227.45 crore in the quarter ended March. Its Ebitda margin remained flat at 13.6%, against the estimated 8%.

The company’s operating income, according to the filing, was mainly affected by lower industry volumes in automotive and tractor segments, transition to BS-VI norms and the abrupt lockdown due to the coronavirus outbreak.

M&M also announced that it will participate in a Rs 3,500-crore rights issue of its listed subsidiary, Mahindra & Mahindra Financial Services Ltd. Besides, the board has enhanced the limit of fundraising to Rs 7,500 crore from Rs 5,000 crore.

Outlook

Even as restrictions are lifted gradually, there will be a ramp up in production, supply chain and distribution from June, M&M said in the exchange filing. While the overall services and manufacturing sectors are likely to see a slower recovery, the agriculture/farm equipment sector will be relatively less impacted, aided by a record Rabi production, higher government procurement, timely announcement of higher MSPs and outlook of a normal monsoon.

“One can expect a quicker recovery in rural India, as is evident from tractor sales of the company in May. The urban segment may take longer to come back to normalcy,” the filing said. “While the outlook is heavily contingent upon the intensity, duration and spread of the pandemic, a smooth normalisation and efficacy of policy measures will be the key to any recovery in FY21.”

Concall Highlights

  • M&M plus Ford JV — there’s a lot of work happening on product development. There has been progress so far on specific products and aggregates. JV start date is delayed due to the shutdown.
  • Rural opportunity is really strong. Seeing very strong demand here.
  • More than 90% of tractor dealers have started.
  • Short term is about managing cash and margins.
  • Digital transformation will be an important part of the future. We had 1.65 lakh visitors in the short-term tenure on the digital platform.
  • Almost 80% of the impairment is driven by Ssangyong. We have decided not to infuse any fresh capital into Ssangyong

After fluctuating between gains and losses post the quarterly results announcement, shares of Mahindra and Mahindra are now trading 7% higher at Rs 507.35 apiece.