Demand for new models is high, tractors gain market share not at the expense of margin, management says
Mahindra & Mahindra (M&M) delivered strong first quarter earnings, led by the tractor business which recorded its highest market share in the past 8 quarters. The company reported first-quarter profit on Friday before markets closed, as demand for the Indian maker’s passenger vehicles and tractors improved.
Regarding losses incurred during the quarter, Dr Anish Shah, Managing Director and CEO of M&M, said in an interview with CNBC-TV18 that most of them relate to write-downs already made.
“This was a residue from past investments that we made, so don’t expect much for the future,” he said.
M&M has seen strong demand for its new products.
“The Thar continues to be at a very high demand level, the XUV300 is at 5,000-6,000 bookings per month, the Bolero Neo has come out very strong. On top of that, our old power brands continue to do very well. Behave, so we’re seeing strong demand right now in all segments, including the pickup truck segment, ”Shah said.
The automotive business is however facing pressure on margins due to the rise in the cost of raw materials. However, its market share in tractors is up 260 basis points this quarter.
“It didn’t come at the expense of profitability because we kept our prices high. We have also taken three price hikes in the past year and have been able to maintain our margins, obviously a bit affected by commodity price inflation, but overall the farm business has registered its best results in the first quarter with a PBIT of Rs 1,081 crore, ”said the CEO.
The company says its restructuring exercise is over and that it has promised investors that fiscal discipline will be maintained.
“If the companies in categories A or B do not meet the standards, in terms of the milestones that we have set for them, we will consider putting them in group C. So it is an exercise in progress, that says what I ‘m saying. I would also add is our category A and B companies have performed very well, ”explained Shah.
Supply chain issues are starting to ease, but the company says it will take a little longer to get back to normal.
“Right now, it’s mainly the flea problem and it’s a global flea problem. So Malaysia was stuck for a while, it had an issue with one of the major semiconductor suppliers in Malaysia, and it impacted the auto industry around the world. Our team was actually able to handle this very well to find alternative supplies for this. But it takes some time to put in place alternative solutions. This is a changing scenario where a particular product is impacted one day, another the other day, due to the global fluidity that we are currently seeing. So once that calms down, we’ll be in much better shape. “
For a full management commentary, watch the video.
(Edited by : Abhishek Jha)