M&M profit soars 20% as car sales offset sluggish tractor biz

Mahindra & Mahindra, India’s biggest utility vehicle manufacturer, posted a better-than-expected 20 percent rise in quarterly profit as strong demand for its sporty cars offset sluggish sales at its key tractor business, boosting its shares.

Profit for the fiscal first quarter rose to Rs 726 crore, Mahindra said, as revenue jumped 40 percent to Rs 9248 crore.

Analysts, on average, had expected profit of Rs625 crore on revenue of Rs 9045 crore.

[caption id=“attachment_410898” align=“alignleft” width=“380”]  Mahindra’s passenger car sales have outpaced local rivals such as Maruti Suzuki and Tata Motors thanks to huge demand for its new XUV 500 SUV[/caption]

Mahindra, the world’s largest tractor maker, accounts for 40 percent of the tractor market in India, where sales are under pressure as economic growth cools and a poor monsoon and a looming drought slash demand.

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“The drought-like conditions prevailing in several (Indian) states today has only added to the risks facing domestic companies,” the company said in a statement. “Our near term outlook on the economy is cautious and watchful.”

Mahindra, the flagship of the $14.4 billion Mahindra Group, and the owner of South Korean car maker Ssangyong Motor said profit growth was due to a 32 percent increase in passenger vehicle sales over the same period last year.

Shares in the automaker, valued at around $7.5 billion by the market, extended gains to 4.0 percent after the results. The stock was up 3.8 percent.

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Mahindra’s passenger car sales have outpaced local rivals such as Maruti Suzuki and Tata Motors thanks to huge demand for its new XUV 500 SUV and its all-diesel line-up, a fuel that is far cheaper than petrol in India due to state subsidies.

Sales of its tractors, including exports, fell 1 percent during the three months ended in June from a year earlier.

India said last week that it would suffer its first drought in three years as monsoon rains fail to meet average amounts, dealing a blow to Asia’s third-largest economy, where more than half the farmland lacks irrigation.

Reuters