RBI rate hike: See what gung-ho Mahindra and Mahindra MD, Pawan Goenka says

Robust sales across segments helped homegrown auto major Mahindra and Mahindra (M&M) post a 67% jump in its net profit at Rs 1,257 crore for the quarter ended June 30, 201. The company had reported a net profit of Rs 752 crore in the same period last year. Revenues and other income stood at Rs 13,551 crore, compared with Rs 11,006 crore in the year-ago period.

On the future outlook, the company said a normal monsoon, with a satisfactory temporal and spatial distribution, combined with the recently approved higher minimum support price for kharif crops, should help support rural consumption further.

“In the farm equipment sector, industry performance has been beyond expectations. But I want to caution that the second quarter of the industry will see a flat growth because Diwali this time is coming late, and therefore, the sales peak will be in October and November and not in September.

“Other than that, we don’t see any hiccups in terms of demand. The monsoon appears to be now back on track therefore, our business and industry should do well,” said Pawan Goenka, managing director, Mahindra & Mahindra.

The company said global growth backdrop has remained buoyant so far. However, the recently announced and anticipated tariff hike by the US and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions, which could pose risks to global recovery and investments.

The total domestic automotive volume of the Anand Mahindra-promoted company grew 16.2%.

The heavy commercial vehicle volume grew 123.4%, resulting in a market share of 5.7%, the Mumbai-based company said.

M&M exported 9,360 vehicles during the June quarter, a growth of 100.2% over the year-ago quarter.

Its domestic tractor sales grew 18.8% and the farm equipment segment’s revenue crossed the Rs 5,000-crore mark during the quarter.

When it comes to auto business, the industry has performed quite well, Goenka said, adding given how the industry has performed in the first quarter, it is expected to grow in the 12-14% range, against the earlier projections of 9-11%.

Goenka said that all vehicle models except one or two low-volume ones will be able to meet the new safety norms, which are to come into effect in a phased manner.

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When it comes to BS-VI, Goenka said since it involves a lot of investment, the company may decide to discontinue some of the low-volumes models beyond March 31, 2020.

On Reserve Bank of India rate hikes, he said that he does not see the recent two successive hikes as a big dampener for auto sales in the September quarter. “Even one more rate hike, as being anticipated, is unlikely to impact the industry,” he said.

Goenka said that it would have been better if the new axle capacity norms were to be implemented from April 2020 as the industry is now occupied in meeting the BS-VI norms.

He also said that the company is planning to invest in the second phase of the Chakan facility.