M&M net triples to Rs 703 cr on higher sales, easy funding

FALL IN INPUT PRICES ALSO HELPED CO POST HIGHEST-EVER QUARTERLY PROFIT MAHINDRA & Mahindra (M&M), the country's biggest tractor maker, posted its highest-ever quarterly net profit selling more utility vehicles, Scorpio, and tractors on easy funding from banks even as the company and investors fear a possible slowdown in rural demand due to poor monsoons and a dent in profitability on rising commodity prices.      The Mumbai-based company, which also benefited from stake sale in a unit, said net profit for the September quarter nearly tripled to Rs 703 crore from Rs 247 crore a year earlier. Total revenues rose 36% to Rs 4,557 crore, against Rs 3,354 crore.      "The country experienced its severest drought in the recent history. The adverse impact, which is likely on agricultural output and incomes and demand for non-agri goods and services, is a source of some concern," the company said in a statement. Shares of M&M surged 3.9% to Rs 927.75 on BSE on a day when the Sensex tumbled 1.4% to 16,052.72.      Indian auto makers have  been reporting strong sales for the September quarter as banks turned more liberal in lending at nearly record low interest rates for car and motorcycle purchases after remaining cautious for a few quarters in the wake of credit crisis last year. But the demand may slow as the rural population, where a vast majority depend on agriculture for income, suffers the worst rainfall in more than 25 years and that interest may begin to climb.      M&M that sells the popular Scorpio and the recently-launched Xylo utility vehicles said sale of those vehicles advanced 44% in the quarter to 55,280 units and that of tractors gained 27% to 93,105 units.      The fall in commodity prices such as steel also contributed to the higher profits and improved its returns ratio. The operating margin improved to 18.24% from 5.91% in the same quarter a year earlier. Raw material costs as a percentage of revenue fell to 64% from 70.6% a year earlier, said Bharat Doshi, ED-finance and group CFO at M&M.      "Going forward, the volume growth may see some impact due to poor monsoons. Margins will also be under pressure as commodity prices are rising," said, Vaishali Jajoo, an analyst at Angel Broking. Total expenditure as a percentage of net sales during the September quarter fell to 85.5% from 97.5% a year ago. The net profit in the quarter was also helped by a post-tax gain of Rs 70 crore from the sale of stake in Mahindra Holidays and Resorts, in an offer for sale along with an IPO, the company said in a statement. But the good times may not last long since commodity prices are surging again, thanks to extraordinary printing of money by central banks to bring the world out of the worst-ever recession since the Great Depression in the 1930s.      The company expects raw materials costs to rise 4-5% in the next few months, which could put pressure on its profit margins. The company plans to invest as much as Rs 7,000 crore in the next three years, including a Rs 2,500-crore investment in its Chakan unit in Maharashtra, Rs 2,500 crore in new product development and a Rs 1,000 crore to boost its utility vehicles division.      On launching utility vehicles in the US, M&M said the plant, products and the distribution channel are in place in the US as it readies to launch in by December this year.  Mahindra & Mahindra  Rs 4,557 cr  Total revenues in the September quarter  Rs 927.75  M&M stock closing on BSE on Thursday