Mahindra & Mahindra Shares Q3 Results

It was a strong quarter for M&M at a consolidated levels. Despite pressures on the core auto and agricultural machinery business, the surprising outperformer in the quarter was the financial services arm. There was clear traction at an operating level, although the sharp rise in net profits was more due to exceptional items. Overall, it was a healthy quarter for the M&M group, largely supported by the financial services business.

Here is a gist.

Let us start off with the top line of the M&M group. For the Dec-21 quarter, Mahindra & Mahindra reported 9.10% growth in revenues at Rs.23,594 crore. During the December 2021 quarter, the automotive business saw strong traction and grew 15.21% YoY at Rs.9,958 crore. This growth in sales was quite unlike other auto players in India, where were under pressure. On a sequential basis, revenues were up by 9.90%, which is strong momentum.

During the Dec-21 quarter, the niche farm equipment business saw sales growth of 2.3% at Rs.6,970 crore despite an erratic monsoon and very dubious growth in rural income levels. Revenues from financial services business were flat with slight negative bias in the quarter. The XUV 700 model saw 100,000 plus bookings in 4 months while auto export volumes increased by 58.3%. Q3 saw tractor market share at a record 39.4% of the Indian market.

Now, let us turn to the operating performance of Mahindra & Mahindra. For the Dec-21 quarter, operating profits were up by an impressive 68.54% at Rs.2,625 crore, largely driven by a turnaround in the asset quality of the financial services business. During the quarter, the operating margins of M&M as a whole stood at above the 11% mark despite the clear risk of commodity inflation and microchips shortages plaguing the sector.

There was solid traction in the operating performance of M&M Financial Services and the real estate business. While financial services gained from asset quality, the realty business gained from a sharp spike in residential and commercial demand in the quarter. Operating margins improved sharply from 7.20% in the Dec-20 quarter to 11.12% in the Dec-21 quarter. However, on a sequential basis, net margins were lower due to higher base.

Let us finally turn to the bottom line. For the Dec-21 quarter the net profits were higher by 182.15% at Rs.2,625 crore on a YoY basis. This is largely on the back of exceptional losses in the Dec-20 quarter, which boosted the spike in profits due to an artificially low base. The company booked losses of over Rs.998 crore in the Dec-20 quarter as a one-time hit towards the discontinued business of SsangYong Motors.

To a large extent, the boost to the net profit was due to the magnified growth effect that made profits look sharply higher. In the absence of this discontinued operations, the growth in PAT would have been approximately equal to the operating profit growth YoY. PAT margins improved from 3.26% in Dec-20 quarter to 8.42% in the Dec-21 quarter. However, the PAT margins were lower by 56 bps on a sequential basis.