Mahindra's Q2 Profit Drops By 27% For FY2020

One of India's largest conglomerates, Mahindra & Mahindra reported a 26.5 per cent drop in quarterly net profit for the period between July and September during FY2019-20. The drop in profits emerges after the automaker has been struggling to sail through the market slowdown that has limited the sales for its SUVs, cars, trucks and commercial vehicles since the beginning of the year. The Scorpio manufacturer reported a loss of 21 per cent in volumes in domestic sales with 110,824 units sold during Q2 FY2020, as against 141,163 units sold during the same period last fiscal.

The lack of sales has been attributed to a number of factors including the liquidity crunch in the market, higher insurance cost and a lower buying sentiment amidst auto customers during this period. Domestic sales for Mahindra's tractors dropped by six per cent during Q2 this year to 68,359 units from 73,012 units sold between July and September 2018. Exports too dropped by 21 per cent down to 10,540 units from 13,377 units sold last year.

Mahindra witnessed a 24 per cent decline in combined profit after tax (after EI) to Rs. 1355 crore on a 15 per cent decline in revenues to Rs. 10,935 crore in Q2 September 2019 over Q2 September 2018. The company's combined operating margin stood at 14.1 per cent in Q2 FY2020, as against 14.5 per cent in Q2 FY2019. That said, the manufacturer commented that it managed to expand its market share in both passenger vehicle and tractor segments during this period.

Commenting on the industry conditions during the challenging period, Mahindra said in a statement, "The Indian auto industry, in particular, is undergoing a challenging period with all industry segments declining for two consecutive quarters for the first time in the last 15 years."

The auto industry excluding two-wheelers, fell 26.6 per cent on the back of a 28.7 per cent reduction in passenger vehicle segment and 56.4 per cent reduction in the Medium and Heavy Commercial Vehicles (MHCV) segment. The domestic tractor industry also witnessed a fall of 9.8 per cent.

With the industry showing signs of recovery, Mahindra said that Q3 has started on a positive note with good deliveries (retails) both in the automotive as well as tractor segments. The automaker delivered over 13,500 cars in a single day on Dhanteras and recorded positive volumes for October 2019 on the back of a positive festive season. The company aims to carry the same momentum in the final weeks of the calendar year.