The maker of the Thar and XUV 300 SUVs on Friday reported a 48% increase in revenue for the fiscal fourth quarter, but profit remained muted as the company took exceptional charges on account of bankrupt Korean subsidiary SsangYong and other long-term investments. But the restructuring of the organisation by exiting unviable businesses and “rightsizing” operations will allow the SUV and tractor maker to channel more investments to its focus areas.
Of the Rs 17,000 crore, Rs 6,000 crore will be allocated to the automotive business, Rs 3,000 crore to the farm equipment business and Rs 3,000 crore to electric vehicles. The balance Rs 5,000 crore is for equity investment into other group companies. The 12,000 crore sans equity investment will mainly go into development of new products and capacity expansion.
“We do want a high market share where we play. If you look at the authentic SUV space of refined and rugged SUVs, we want to have a high market share,” managing director Anish Shah told ET.
The Thar is already successful, the XUV 700 is coming in next and then the next-gen Scorpio, he said, adding: “If we see very strong performance with XUV 700, then we are very well poised to increase our market share.”
Over the next five years, the company plans to deploy money into more than five dozen products across utility vehicles (9), small commercial vehicles and pickup trucks (14 products), tractors (37 products) and two all-new electric vehicles.
In the SUV space, apart from the XUV 700, there are new generations of Scorpio, Bolero, a 5-door Thar, XUV 300, and the W620 and V201 projects which are under conceptualisation. As for the farm equipment business, the K2 platform will be the base for over three dozen products.
A lot of investments for the automotive business in platforms, paint shops, engines and transmissions have already been made. Now the company is actively focusing on electric vehicles.
ONE-OFFS WEIGH ON PROFIT
Mahindra reported a net profit of Rs Rs 163 crore for the fourth quarter ended March 31, after taking exceptional charges of almost Rs 840 crore. Of the charges, Rs 440 crore was on account of SsangYong Motor as the company didn’t go through a pre-packaged bankruptcy resolution plan in Korea as had earlier expected. A year earlier, Mahindra had posted a Rs 3,255 crore loss.
The combined revenue of Mahindra and its fully-owned manufacturing arm Mahindra Vehicle Manufacturers rose to Rs 13,338 crore from Rs 9,005 crore a year earlier, when the transition to BS-VI emission standards and Covid-19 disruptions had hurt sales.
Earnings before interest, tax, depreciation and amortisation rose 60% to Rs 1,960 crore, while Ebitda margin expanded over a percentage point to 14.7%.
“The company has had a very strong operating performance in a very tough year for both auto and farm businesses which faced rising cost and supply chain issues. The capital allocation plan announced last year has delivered outstanding results and there is a robust cash generation,” Shah said.
Mahindra expects demand to bounce back swiftly for tractors in June. For the automotive business, it may take a month longer, with a hope of a strong second half of fiscal 2022, it said.
For the financial year FY21, it reported a profit of Rs 923 crore, up 25% on-year. Revenue declined by 1% to Rs 44,574 crore.
“While M&M is expected to face some volume pressure owing to the competitive environment in the domestic utility vehicles space, we believe new products and stronger presence in rural markets would drive its overall volume and profitability,” said Mitul Shah, head of research at Reliance Securities.
