Mahindra and Mahindra’s double digit volume growth in auto and farm equipment segments in the quarter ended March 2016, did not carry through to the bottom line.
Although launches such as the TUV 300 and KUV 100 brought in good volumes, their lower price points partly contributed to a fall in average realisation per vehicle and in the dip in auto segment margins as against the March 2015 quarter.
The auto segment brought in three-fourths of the ₹10,801-crore revenue recorded in this quarter.
Not much support from input costs was also available for the company.
Triggered by higher proportion of traded goods, raw material costs as a proportion of sales inched up to 75.6 per cent now against the 73 per cent recorded a year ago.
Despite these pressures, operating margins managed to come in 20 basis points higher at 9.7 per cent. The farm equipment segment contributed to the expansion, recording margins of 12.9 per cent in the quarter against 11. 2 per cent a year ago.
Adjusted net profits grew by 12.4 per cent to ₹578 crore, thanks to higher other income and lower finance costs.
M&M would fire on all cylinders in fiscal 2016-17, if tractor sales gain further traction.
Tractor sales picked up in the current quarter with volumes expanding about 19 per cent over the three months ended March 2015, thanks to a low base and good rabi production.
But 2015-16 as a whole, saw tractor sale volumes shrink by 9 per cent over the previous year.
The monsoon and crop production this year will be key variables that will determine growth in this segment.