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Mahindra & Mahindra net up 15%

May 30, 2000

Tractor and Utility giant Mahindra & Mahindra (M & M) has reported a net profit of Rs 2,635 m for FY2000 which represents a growth of 15.3% YoY over FY99's net of Rs 2,286 m. FY2000's net includes Rs 36 m as profit on transfer of business of a division.

(Rs m)FY1999FY2000Change
Sales 41,170 43,424 5.5%
Other Income 1,080 1,336 23.7%
Expenditure 36,811 38,644 5.0%
Operating Profit (EBDIT) 4,359 4,781 9.7%
Operating Profit Margin (%)10.6%11.0% 
Interest 1,519 1,414 -6.9%
Depreciation 1,120 1,233 10.1%
Profit before Tax 2,801 3,469 23.9%
Other Adjustments - 36
Tax 515 870 68.9%
Profit after Tax/(Loss) 2,286 2,635 15.3%
Net profit margin (%)5.6%6.1% 
Earnings per share 22.11 23.857.8%

The company's sales grew by 5.5% from Rs 41.2 bn in FY99 to Rs 43.4 bn in FY2000. This was due to an improvement in sales of utility vehicles and tractors. M & M's utility vehicles grew by 9.6% as compared to the industry growth rate of 7.4%. This helped the company improve its market share in this segment from 57% in FY99 to 58.2% in FY2000.

In the tractors division the company sold 70,571 tractors in FY2000 as compared to 69,362 tractors sold in FY99, a growth of 1.7% YoY. This was higher than the industry growth of 1.2% in FY2000 and M & M continued to have the highest market share in this segment.

The reasons for the improved performance of the company in both the segments can be attributed to buoyant economic conditions and successful introduction of new products in both segments during the year.

During the year M & M's Foreign Currency Convertible Bonds (FCCBs) were converted and redeemed. As a result the company was able to reduce its interest costs and improve its debt to equity ratio during the year.

FY2001, has not started on a very good note due to drought conditions prevailing in Gujarat and Rajasthan. This has led to slack demand for tractors in the current year. However normal monsoons could result in a pick over the next couple of months. On the utility vehicles front demand has been slack in the current year due to unified sales tax rates in states hence leading to higher prices of vehicles.

On the whole the results are in line with market expectations. Going forward the success of the company's new models, its market leadership, the potential of its software investments and its venture Mahindra British Telecom in which the company has a 60% stake are positive for the company.

M & M at the current price of Rs 228 it is trading at a price to earnings multiple of 9.6x FY2000 earnings.

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