Mahindra's Strong Tractor Sales Offset Weak SUV Demand
Vehicle manufacturer Mahindra and Mahindra Ltd posted a better than expected fourth-quarter profit as rising tractor sales outweighed declining demand for its passenger vehicles.
The world's largest tractor maker by volume benefited from strong rains last year that helped boost rural incomes. India still relies on monsoon rains to irrigate more than half of its farmland.
Shares in Mahindra soared 5 percent on Friday to close at a record high of Rs 1,235.50 in a flat Mumbai market.
Indian companies are hoping for an economic turnaround after Narendra Modi won a thumping election victory this month with a pledge to boost growth and create jobs.
"Overall our current outlook is tinged with optimism as we await the economic policies of the new government," the company said in a statement on Friday.
Mahindra's net profit for January to March, its fiscal fourth quarter, rose marginally to Rs 897 crore ($152 million) from Rs 889 crore a year earlier. Net sales rose 4.7 percent to Rs 10838 crore.
Analysts had expected a profit of Rs 812 crore, according to Thomson Reuters data. Profit for the quarter was bolstered by a one-time tax write-back of Rs 214 crore.
Analysts have warned that tractor and utility vehicle sales growth could soften in the year ending in March 2015 if an El Nino weather phenomenon develops as indicated by the U.N. weather agency and disrupts the monsoon.
Sales of Mahindra's tractors in the domestic market rose 22 percent in the full fiscal year, while sales of its passenger vehicles, which include SUVs, fell 18 percent, hit by high interest rates and fuel costs in a sluggish economy.
Increased competition from companies such as Ford Motor Co. and Renault SA has hurt Mahindra, whose market share of utility vehicles fell to 42 percent in 2013-14 from nearly 48 percent a year earlier.
The flagship company of the $17 billion Mahindra Group hopes to recoup its market share in 2015 when it expects to launch two compact SUVs. Mahindra also controls South Korean carmaker Ssangyong Motor Co Ltd.
($1 = 59.0150 rupees)
Copyright: Thomson Reuters 2014