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Wednesday, August 01, 2001



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M&M cuts loss in first quarter

Our Bureau

MUMBAI, July 31

MAHINDRA & Mahindra Ltd (M&M) today announced a net loss of Rs 29.62 crore for the first quarter ended June 30, 2001, as against the Rs 34.28-crore profit after tax of the previous corresponding period.

Net sales/income from operations dipped by 19.16 per cent to Rs 685.87 crore (Rs 848.49 crore). Production of utility vehicles (UVs) dropped by 6.61 per cent to 15,316 units (16,400 units) while their sales fell by 12.54 per cent to 13,606 units (15,557 units), Mr Keshub Mahindra, Chairman, M&M, said at the company's AGM.

First quarter tractor production declined by 39.75 per cent to 10,279 units (17,060 units), their sales slipping by 34.78 per cent to 12,909 units (19,792 units).

A separate official statement cited tractor market share as 27.7 per cent and that of UVs as 45.42 per cent. First quarter light commercial vehicle (LCV) sales was 1,087 units (1,904 units).

``There were some positive trends in the month of June. I am still hopeful that if nothing untoward happens, we should have a reasonable year,'' Mr Mahindra said, declining however to qualify expectation with numbers.

By end-June 848 workers had opted for VRS in M&M's Farm Equipment Sector (FES), 1,415 taking it in the Automotive Division as at end-July. The exercise is worth Rs 145 crore, going up to about Rs 165-170 crore if gratuity and leave encashment are also in cluded.

M&M has given up plans to acquire the Zetor tractor facility in Czech Republic. But it has kept open the option of marketing these tractors, on lines similar to what it already does with tractors sourced from Korea. There are no plans at present for a tr actor assembly line in the US.

``We will have an IPO when market conditions improve,'' Mr Mahindra said on Mahindra British Telecom (MBT). International Finance Corporations (IFC) has a 2.5 per cent equity stake in M&M. The company has high hopes on business potential linked to the op ening up of defence production to the private sector.

``We are not considering any share buyback,'' he said.

# M&M's results exceeded analysts' estimation, few projecting a first quarter loss for the company, most pegging pre-AGM numbers to a drastic reduction in profit.

Besides loss of sales volume, M&M took a 37.94 per cent cut in other income largely due to delayed receipt of dividends, a 60.63 per cent rise in interest and a 15.01 per cent rise in depreciation. The latter ascribed to fresh investments (like paint sho p) incurred on Project Scorpio to develop a new UV platform, slated for debut later this year.

The company's total debt at last fiscal's close was Rs 1,100 crore, fresh borrowings in the first quarter being attributed to refinancing needs. No market-related downturn in treasury earnings contributed to the dip in other income, Mr Bharat Doshi, Exec utive Director, M&M, said, when asked.

Notwithstanding poor agricultural growth over the last two years, the seemingly sudden onset of loss at M&M, happened courtesy the just ended quarter being the worst so far in sales. `` In the previous quarters, despite difficulties we were able to get v olumes,'' he said. As sales decline coincided with productivity improvement, M&M went in for production cut including reduced working week with pay for its workers.

Despite M&M's belief that its cost-cutting (VRS should give wage savings of Rs 4.2 crore / month) and enhanced systemic efficiency will improve break-even in the days ahead (second quarter could benefit from less pipeline tractor stocks), equity analysts concur, the company will be in a bear grip for some time. ``New products, hoped to turn around fortunes, will themselves take time to gain customer acceptance,'' one of them said.

Pic.: Mr Keshub Mahindra, Chairman, Mahindra and Mahindra, and Mr Anand Mahindra, Managing Director, at the company's AGM in Mumbai on Tuesday.

Picture by Paul Noronha

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54 pc fall in M&M net

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