Mahindra and Mahindra on Monday reported a marginal drop in its July-September quarter net

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profit at Rs 737.4 crore, down 2.7 per cent from a year ago, on the back of high raw material costs and foreign exchange loss in the quarter.

The company’s revenue was up 33.2 per cent from a year ago to Rs 8,198.7 crore.

The company said in a release that in July-September, 2011, it suffered a net loss of Rs 32 crore on account of the rupee depreciation against the US dollar towards the end of the quarter and the consequent revaluation of its external commercial borrowings repayable largely in 2016.

Excluding the impact of exchange differences profit after tax for July-September, 2011, is Rs 759 crore, which is at par with the corresponding quarter previous year. The company said that it could maintain its profits despite the relentless increase in raw material costs due to a good volume performance by both vehicles and tractors in a difficult market and a tight control on expenses.

However, going forward M&M warned that faced with a steadily deteriorating global macro environment, volatile capital flows, exchange rates and continued policy and regulatory uncertainty, business confidence has weakened considerably this year. The company said its economic outlook for the current year is cautious.