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On a standalone basis, M&M’s profit growth shrunk on the back of high raw material prices and rising input costs. Analysts, on an average, expected net profit of Rs 680 crore for M&M in January-March 2011. M&M stock fell 5.34 per cent on the BSE to close at Rs 664.60 as soon as the utility vehicle and tractor manufacturer reported a sharp drop in profit growth.
Total income of the firm rose by 27.78 per cent to Rs 6,778.17 crore, as compared to the previous year period.
Operating profit margins of M&M on a standalone basis declined to 13.78 per cent in the fourth quarter 2010-11 as compared to 15.94 per cent for the same period in Q4 2009-10.
“M&M sees pressure on operating margins as the company is not able to pass on higher raw material costs to its customers. With both input costs and interest rates rising, the current economic environment is quite clearly challenging,” Bharat Doshi, group CEO of the company said.
Prices of steel, rubber and other materials may gain two percentage points more this financial year after gaining as much as seven per cent in the previous 12 months, Pawan Goenka, president – automotive and farm equipment sector, M&M said. “There may be a small dip in margin on a year-on-year basis largely because of the commodity prices,” said Mahantesh Sabarad, Fortune Equity Brokers India, who rates Mahindra shares “hold.” “Commodity prices are a big challenge they have to work with,” he said.
On standalone basis, net profit of the company grew by 27.5 per cent to Rs 2,662.1 crore for the financial year ended March 31, 2011.
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