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Mahindra 1st-Quarter Net Tops Forecast With 40% Jump

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MUMBAI (Dow Jones)--Mahindra & Mahindra Ltd. (500520.BY), India's biggest sport-utility-vehicle maker by sales, Wednesday posted a better-than-expected 40% rise in its quarterly net profit as it gained from robust demand for its vehicles and higher interest income.

Net profit for the fiscal first quarter ended June 30 rose to INR5.62 billion from INR4.01 billion a year earlier. That beat the INR5.11 billion average of estimates in a Dow Jones Newswires poll of 14 analysts.

Sales rose 21% to INR51.24 billion from INR42.29 billion last year.

Mahindra's numbers mirror the growth in the Indian automotive industry, which has been on a fast recovery mode since the middle of 2009. Easier borrowing rates and the launch of new models have bolstered demand and led car and utility-vehicle sales to grow at a brisk pace.

Mahindra said its earnings received a boost from "higher volumes, focused cost control (and) prudent financial management resulting in lower interest expenses." It also benefited from higher tractor sales at its unit, Punjab Tractors Ltd. (500344.BY).

Mahindra said it sold 53,948 utility vehicles in the just-ended quarter, up 11% from the year-earlier period.

The company, which is also India's biggest tractor-maker by sales, sold 47,916 tractors during the quarter, up 14% from a year earlier.

Mahindra reported an interest income of INR227 million during the quarter against an interest pay-out of INR59.5 million a year earlier, it said without elaborating.

The company's operating margin improved to 15.03% in the past quarter from 14.35% a year earlier.

It spent INR32.53 billion on buying raw materials such as steel, aluminum and rubber, 22% more than the year-earlier period. Total expenditure grew 20% to INR44.82 billion.

 
Parts Shortage, New Launches

 
Mahindra's president for automotive and farm equipment sector, Pawan Goenka, said the company continues to face shortages of auto parts and that the constraints weren't expected to ease before the end of the current quarter.

The company may start importing engine castings and tires from the October-December quarter to make up for the shortfall in local supply, he said.

Indian auto-part makers had withheld investments as a result of the economic slowdown in late 2008 and early 2009. That has led to a mismatch between demand and supply of parts.

Mahindra had earlier this month said it produced 5% fewer vehicles during April-June due to a shortage of auto parts such as castings for transmissions, tires and fuel injectors for diesel engines.

Goenka also said the company is expected to complete the buyout of partner Renault SA's (RNO.FR) 49% stake in their joint venture to produce the mid-size sedan Logan by end of August.

Mahindra in April agreed to buy Renault's stake from the joint venture and continue making and selling the Logan on its own.

Mahindra plans to launch several variants of its multi-purpose vehicle Xylo and light truck Maxximo in the next 12 months, Goenka said, adding that it also plans to launch a motorcycle model in the current fiscal year.

Mahindra started making two-wheelers after acquiring the assets of Kinetic Motor Co. (505190.BY) for INR1.10 billion in July 2008.

 
Ssangyong Bid

 
Mahindra said it will decide on bidding for South Korea's Ssangyong Motor Co. (003620.SE) closer to the Aug. 10 deadline to submit bids. The company has sought more details from Ssangyong Motor before taking a final decision on bidding for the cash-strapped South Korean automobile maker.

The Indian auto maker is one of the six companies qualified worldwide to bid for Ssangyong Motor.

Mahindra has said it is interested in bidding for Ssangyong as the product mix of the two companies is similar.

Shares of Mahindra pared initial gains and closed 0.7% up at INR643.95 on the Bombay Stock Exchange, outperforming the benchmark Sensitive Index, which fell 0.7%.

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