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M&M's net slides on dip in sales, other income

NetScribes/Mahesh Shetty

An 8 per cent fall in sales and a 35 per cent dip in other income have caused a 43 per cent drop in Mahindra & Mahindra's net profit for the third quarter ended December 31, 2000.

On Tuesday, the tractor major reported a net profit of Rs 438.08 million, compared to Rs 777.65 million in the previous third quarter. Sales fell - though not as much as expected - to Rs 9.04 billion from Rs 9.83 billion in Q3 2000, while other income for the quarter dipped 35 per cent to Rs 60.45 million.

"We expected an over 50 per cent drop in net profit. The slump in tractors has pulled the company financials down," said an auto analyst at a leading Dutch investment bank.

"The fall this time has been slightly softer than what most of the market was expecting. It is mostly due to the beating M&M is taking on the utility vehicles front and the sluggish offtake in the tractor market," said Avinash Gorakshakar of Emkay Shares and Securitires, a Bombay-based brokerage firm.

During April-November 2000, M&M saw a 10 per cent rise in tractor sales over the previous corresponding period year, while the total segment sales actually fell by 10 per cent. M&M sold 55,330 units during this period, compared to 50,484 units in the same period last year. Escorts sold 28,880 units during the same months, compared to 34,566 units in the previous corresponding period, while Eicher sold 11,818 units against the 11,595 sold in April-November.

On the utility vehicle (UV) front, the company is seeing its worst days yet. In the April-November period this year, while total UV segment sales increased 12 per cent over April-November 1999, M&M's UV sales fell almost 19 per cent.

During these months, M&M sold 35,794 units compared to 43,652 units in the previous comparable period. Long-time competitor Telco sold 19,705 units in April-November 2000 compared to 19,700 units the previous year, while Toyota Kirloskar's Qualis sold 19,400 units during April-November 2000.

Although the company's tractor segment sales have bucked the trend this time, it may not be as lucky in the coming quarter. According to analysts, Gujarat, traditionally a big market for M&M, is expected to see a significant drop in volumes following the disastrous earthquake that hit the region on January 26.

On Tuesday, before the company announced its third-quarter results, the M&M scrip closed at Rs 163.10, up from its previous close of Rs 161.25.

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