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M&M Q3 results update

M&M Q3 results update

Last updated: 06 Feb, 2021 | 12:58 pm

M&M Q3 results update

  • Profit hit by one-time item: M&M has reported a 40% rise in net profit to Rs 531 crore in Q3FY21, missing street estimates. Analysts had earlier anticipated a net profit of about 1,410 crore. The bottomline was hit due a one-time loss on impairment of assets of subsidiaries. The company reported an exceptional item worth Rs 1,213.98 crore, relating to impairment provisions for certain long-term assets and other exposures.
  • Revenue rises: M&M's revenues rose 16% on-year to Rs 14,056 crore, largely in-line with street estimates. This was mainly aided by robust tractor sales. 
  • Supply chain issues drag sales: The company continues to grapple with supply-side issues. Shortage of semiconductors impacted availability of Electric Control Units (ECUs), due to a high dependence on one supplier. The overall sales were down 7% on-year to 1.15 lakh units. Sales of its passenger cars rose 8.6% year-on-year to 53,016 units in the third quarter. The commercial vehicles segment remains under pressure. 
  • Uncertainty over subsidiary's sale: M&M's subsidiary SsangYong had filed for bankruptcy in South Korea. The company had filed an application to start the rehabilitation proceedings with the Seoul Bankruptcy court under the Debtor Rehabilitation and Bankruptcy Act of South Korea. As per the current assessment of the status, it now appears unlikely that this deal will be concluded under ARS (Autonomous Rehabilitation Support Programme), M&M said. Ssangyong is now preparing and plans to submit a pre-packaged rehabilitation plan.

Higher tractor sales has helped M&M to post a good set of operational numbers in the quarter. The exceptional items on account of impairments have led to a drop in the profit after tax in the current quarter. 

Growth momentum for the tractor industry was supported by positive sentiment in rural parts of the country, specifically the agri economy driven by good monsoon, record kharif production, good rabi sowing and continued high Central Government spending in Agriculture and Rural Development. The company expected tractor demand to remain strong in the upcoming quarters as well. For Auto, with many key indicators showing positive momentum, calendar year 2021 has started with strong momentum. However, some significant challenges do exist especially on the supply side and commodity prices, according to the company.

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