Lower festival demand fails to slow XUV, Thar maker

The Thar and XUV 700 SUV maker gave fewer discounts than its peers during the festival period around November, which usually sees the highest automotive sales in India, its top management told media Friday. The company also hiked prices for two of its popular models—XUV 3X0 and XUV 700—at the beginning of the quarter, further securing its margins.

“We did not have to discount too much through the festival season and post that, as well, because a large part of our portfolio is on a very strong demand pipeline," said Rajesh Jejurikar, executive director & CEO (Auto and Farm Sector), M&M Ltd.

Also Read: M&M Q3 result: Profit jumps 20% YoY to ₹3,181 crore; revenue rises 18%

M&M reported a 15.4% Ebitda margin during the quarter on a standalone basis, which includes its core automotive and farm equipment business. The company reported an Ebitda margin of 14.2% in the corresponding quarter last year and 18.2% during the preceding quarter. Ebitda is a popular performance metric that stands for earnings before interest, tax, depreciation and amortization.

Slowing demand

Carmakers’ margins suffered during the third fiscal quarter ending 31 December due to slowing demand and a pile-up of cars at showrooms, forcing them to offer discounts.

Tata Motors reported an Ebitda margin of 13.7% for its consolidated business during the period under review, which was 60 basis points lower year-on-year. One basis point is 0.01%.

Market leaders Maruti Suzuki and Hyundai Motor India reported Q3 Ebitda margins of 11.6% and 11.3%, respectively, which were 10 and 130 basis points lower on-year.

M&M’s standalone revenue grew 20% year-on-year to ₹30,964 crore during the period under review. Profit rose 19% to ₹2,964 crore. Ebitda, at ₹4,810 crore, was 32% more year-on-year.

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The company sold over 245,000 vehicles, including SUVs, trucks and three-wheelers, and 120,000 tractors during the quarter, both numbers nearly a fifth more year-on-year.

“Mahindra & Mahindra Ltd. reported strong financial results for the quarter, with profitability metrics surpassing market expectations," said Sagar Shetty, research analyst at StoxBox. “Margins were healthy, boosted by the farm equipment segment and strong demand for the XUV 3X0 and five-door Thar."

M&M shares closed 1.7% higher at ₹3,193 on the National Stock Exchange on Friday, compared to a 0.2% dip in the benchmark index Nifty 50. The earnings were disclosed during trading hours.

Consolidated financials

At ₹23,391 crore, the automotive department accounted for nearly three-fifths of the company’s consolidated revenue. The farm equipment business brought in ₹9,537 crore in revenues. The rest came from other services businesses, including listed companies Tech Mahindra and Mahindra & Mahindra Financial Services Ltd.

The company reported a consolidated top line of ₹41,470 crore, which was 17% more year-on-year. Consolidated profit grew by a fifth to ₹3,181 crore.

Future outlook

Jejurikar said the company has a long waiting period for its five-door Thar and XUV 3X0 models, adding that they were working on increasing the production of these vehicles. The XUV 3X0 has also found consumer acceptance in South Africa, where about 700 units are sold every month, accounting for half of M&M’s total sales volume in the country.

The company sits in a sweet spot where it can benefit from several market trends. These include the ever-strong consumer preference for SUVs and added consumer spending as the government rationalizes direct tax for the salaried class from April.

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StoxBox's Shetty said the rural demand for farm equipment was also optimistic, and demand is expected to pick up as the sowing season draws to a close.

"As Mahindra & Mahindra leverages these trends and capitalizes on the growing interest in sustainable vehicles, it is poised to drive revenue growth and maintain profitability in the coming quarters," he said.