Mahindra & Mahindra Ltd, India’s biggest utility vehicle manufacturer, expects strong demand for its tractors to offset falling sales of its sport utility vehicles as it posted a forecast-beating 29 percent rise in first-quarter profit.
Mahindra’s tractor business has benefited from a higher-than-normal monsoon rain, which bodes well for Indian crops and raised the likelihood of better rural incomes. Tractor sales in its domestic market rose 26 percent in the period.
“In terms of the budget that we had made…we would certainly go beyond our plans in tractors and certainly be below our plans in automotive,” said Pawan Goenka, president, automotive and farm equipment sectors. “So to that extent, yes, there will be some off-setting that will happen.”
The company expects to benefit from growth in the tractor industry, which Goenka said should show double-digit expansion in this fiscal year, up from the 5 to 6 percent growth in the sector that the company had forecast at the beginning of the year.
Analysts expect strong tractor sales to continue over the next few months and compensate for slow vehicle demand, which may see some pick up in the festive season from September.
Rising competition and an increase in excise duty on SUVs are also hitting demand for Mahindra’s rugged-looking vehicles.
Utility vehicles were the one bright spot amid the demand gloom over the last year, but the Society of Indian Automobile Manufacturers said sales of the vehicles dropped last month for the first time in four years.
Mahindra’s profit for the quarter ended in June was 9.38 billion rupees, compared with 7.26 billion rupees a year ago, bolstered by near tripling of dividends received from its subsidiaries.
Revenue rose 7 percent to 99.1 billion rupees, said the company, which owns South Korean car maker Ssangyong.
Analysts, on average, had expected profit of 8.77 billion rupees on revenue of 102.78 billion rupees, according to Thomson Reuters I/B/E/S.
The company joined its bigger rival Tata Motors Ltd (TAMO.NS) in indicating this year would remain tough for Indian automakers, with rising ownership costs and a slowing economy leading to car sales dropping for the ninth consecutive month in July.
“As of now there is no clear sign of turnaround in the (automotive) industry,” said Goenka.
Shares in the automaker, valued at around $9 billion by the market, ended up 1.45 percent, while the Sensex was trading 1.5 percent higher.
Mahindra plans to invest 100 billion rupees over the next three years on research and development and manufacturing plant expansion, its chairman Anand Mahindra told shareholders.
Source : Reuters