The gross revenues and other income of Mahindra & Mahindra Ltd. for the year ended March 31, 2008, is Rs. 13,238 crores against Rs. 11,558 crores the previous year, a growth of 14.5 per cent. The net profit for the year after considering exceptional items, prior-period adjustments and taxation is Rs. 1,103.4 crores (Rs. 1,068.4 crores), which represents an increase of 3.3 per cent. The company maintained a double-digit operating margin despite a very challenging economic environment in which tractor demand decelerated, sharp increases in input costs brought margins under pressure and an appreciating rupee eroded export profitability.
M&M’s domestic UV sales volumes grew a very healthy 16.4 per cent, against the industry growth of 5.1 per cent. The company strengthened its domination of the domestic UV sub-segment by increasing its market share to 51.5 per cent over the previous year’s 46.6 per cent.
The success of the refreshed Bolero and the new VLX variant of Scorpio helped the company grow its volumes. Bolero brand sales crossed the milestone of 50,000+ vehicles sold in a year, the first vehicle ever to achieve this other than compact cars. Bolero also continued to be India’s largest selling UV for the third year in a row.
M&M’s pick-ups volume registered a growth of 17 per cent in spite of an industry decline of four per cent. As a result, the company’s market share jumped to 76.9 per cent from the previous year’s 63.2 per cent. This was mainly on account of the continued success of the small pick-up, the Maxi Truck.
In the 0.5 T load segment of the three-wheeler market, the company has now acquired a sizeable market share of 19.3 per cent with the Alfa three-wheeler selling 21,564 units. This is a growth of 10.3 per cent over the previous year, in a scenario where the industry volumes declined by 18.6 per cent.
In its overseas operations, M&M launched its vehicles sales in Australia, Chile and Sudan during the year, which also witnessed the launch of CKD operations abroad with the opening of CKD assembly plants in Egypt and Brazil. These initiatives resulted in export volumes growing by 54 per cent to 12,359 vehicles from 8,021 vehicles exported last year.
Farm Equipment Sector
During the year, domestic tractor industry sales were 302,241 units against 318,328 units sold the previous year, a decline of 5.1 per cent. High interest rates and more stringent lending norms were behind the fall in sales. The company sold 90,509 tractors against 95,006 tractors the previous year, a decline of 4.7 per cent. In the process, it celebrated its 25th consecutive year of market leadership by maintaining its full year domestic market share at 29.9 per cent.
Exports for the entire year registered a growth of 13.4 per cent, with 8,533 tractors exported as compared to 7,525 units the previous year.
The engine business registered a growth of 32.2 per cent, with Mahindra Powerol selling 31,922 engines against 24,141 engines sold the previous year. Gross revenue for the Mahindra Powerol business was Rs. 553 crores, marking a substantial growth of 72.2 per cent.
During the year, the group acquired Punjab Tractors Ltd. and increased its stake in Mahindra Forgings, both of which thus became subsidiaries of the company. As on March 31, 2008, the group comprised 84 subsidiaries, four joint ventures and 10 associates.
During the year, the major group companies like Tech Mahindra, Mahindra Finance, Mahindra Holidays and Mahindra Lifespaces have significantly improved performance over the previous year. The performance of the Tech Mahindra Group with a 32 per cent growth in revenues and over 170 per cent increase in profits, and that of Mahindra Holidays with a 56 per cent revenue growth and a 93 per cent profit growth, deserve special mention.
Outlook
With domestic economic environment deteriorating in recent months and the US and European economies slowing down, the year 2009 is clearly going to be a challenging one. Inflation under the influence of galloping oil and steel prices is currently hovering close to eight per cent and is expected to remain high over the next several months. Monetary policy, as a consequence, is likely to remain restrictive and interest rates high.
The weakening rupee will, undoubtedly, help shore up external demand but it will, at the same time, make the task of managing inflation and the current account deficit that much harder.
M&M hopes to cope with these challenges with its continued focus on cost control, process efficiencies and product innovations that exceed customer expectations.
