Mahindra & Mahindra analyst meet update

Mahindra & Mahindra ( M & M) is a dominant player in the UV market (58.2% market share in FY2000) and the tractor market (27.4% market share in FY2000). The strategy of introducing new products, and increasing retail sales paid off and the company was able to increase its market share in both segments in FY2000 as a result. The following are the main points of M & M's analyst meet:

1. M & M's utility vehicles (UV) grew by 10% in FY2000, as against the industry growth rate of 7%. This has resulted in M & M's market share to go up from 57% in FY99 to 58.2% in FY2000. In the Light Commercial Vehicle (LCV) segment M & M's market share went up from 10.2% in FY99 to 11.7% in FY2000.

2. In the current year during April, UV sales were down 1%. M & M's sales during this period fell by 15.5% to 4,417. The reasons for this fall are drought conditions, unified sales tax rates and low business sentiment.

3. The company expects the UV industry to grow by 10%-12% in FY2001, however M & M would grow at a lower rate. The company will continue its strategy to introduce new models in FY2001 as they did in the previous year. In FY2000 the new UV models introduced during the year accounted for 45% of the UV sales in FY2000. The company is expected to launch "Bolero" to compete with Toyota Qualis and Deluxe Sumo by next month.

4. In the tractor segment, M & M's sales grew by 1.7% YoY as against the industry growth rate of 1.2% YoY. M & M had a market share of 27.4% in FY2000. The company managed this by reduction in dealer inventories, shifted focus to retail sales and its number of stockists doubled to 90 during the year. In the 35 HP tractor segment which accounts for 55% of the tractor market, M & M was able to gain a 1.3% increase in its market share. The company will be introducing new models in this segment during the year to counter competition.

5. Given the recent drought conditions, the company expects the tractor industry to grow by 2%-3% in FY2001, this is however expected to pick upto 5%-7% in FY2002.

6. The company has in the past year redeemed and converted the FCCB's it was holding, had this not been done on time it could have resulted in a loss of over Rs 800 m due to the depreciation in the rupee.

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 250 is trading at a price to earnings multiple of 10.5x FY2000 earnings.