M&M reports Rs 3,255 crore loss in Q4FY20 on one-time impairment provisions

Mahindra & Mahindra's sales for the quarter were down 47 per cent on a YoY basis to 86,351 units
Mahindra & Mahindra reported consolidated loss of Rs 3,255 crore for the March quarter of 2019-20 (Q4FY20) , which the company attributed to "impairment provision for certain long-term investments". The company's revenue also declined 35 per cent on a year-on-year (YoY) basis to Rs 9,004.72 crore from Rs 13,807.88 crore reported in the corresponding quarter last year. the Board has recommended a dividend of Rs 2.35 per share of face value Rs 5.

Analysts at Axis Capital had expected M&M to report profit of Rs 480 crore for the quarter while revenue was pegged at Rs 8,660 crore.

The company said profit after tax (PAT) was primarily impacted due to write down of investment in Ssangyong and some other international subsidiaries. It said it was re-examining the business outlook of other International subsidiaries, "in view of the current environment, to decide on future capital allocation".

Operating performance

 
The company reported earnings before interest, tax, depreciation, and ammortisation (Ebitda) at Rs 1,227.4 crore. Ebitda margin came in at 13.6 per cent for the quarter as compared to 13.5 per cent reported in Q4FY19. Operating profits, the company said, were affected due to the lower industry volumes in both automotive and tractor segments, transition to BS VI norms and the abrupt lockdown due to the Covid-19 pandemic.

Mahindra & Mahindra sold 86,351 units during the quarter, down 47 per cent on a YoY basis. It sold 57,164 tractors while exports (vehicle and tractors) declined 57 per cent to 5,783 units. Its market share for tractors increased 1 per cent and auto light commercial vehicle (LCV) less than 3.5 ton share increased 1.2 per cent, while auto passenger vehicle (PV) share decreased by 0.8 per cent.

"The industry was adversely impacted in March because of the nationwide lockdown due to Covid-19 outbreak. Even in such challenging circumstances the Company grew its market share in the less than 3.5 ton Commercial Vehicles (CV) by 3.5 per cent to 48.1 per cent as compared to the corresponding quarter previous year. The company also increased its market share in the domestic tractor market to 39.1 per cent in Q4FY20, a growth of 3.7 per cent over corresponding quarter previous year, and continued to maintain its operating margin," M&M said in a press release.

Outlook

The company expects a gradual recovery in the second half of the fiscal once lockdown restrictions ease, and the economy adapts to operating and living in a post-Covid era.

"There will be a ramp up in production, supply chain and distribution from June onwards, which will aid economic activity. While the overall services and manufacturing sectors are likely to see a slower recovery, the agriculture/farm equipment sector will be relatively less impacted. One can expect a quicker recovery in rural India, the urban segment may take longer to come back to normalcy," the company said, adding that the outlook was heavily contingent upon the intensity, duration and spread of the pandemic, a smooth normalisation and efficacy of policy measures.

"M&M delivered a strong performance in 4QFY20 on the back of better traction from its farm equipment segment, despite subdued performance of auto business. Going forward, we expect the company to benefit from tractor business as it is linked to the agri sector. Moreover, healthy Rabi crop and higher MSP would support the industry in FY21. We remain positive on M&M," said Mitul Shah, vice-president for research at Reliance Securities.

Stock reaction

The counter rose as much as 3.94 per cent to Rs 493.15 on the BSE after the result announcement and was trading 3.2 per cent higher at 2:38 PM.


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