Low sales, GST rollout impacted margins
Mahindra & Mahindra Limited (M & M) and MVML have said that in the first quarter of FY18, low sales of automobiles in net profits, mainly utility vehicles and once, under the impact of Goods and Services Tax (GST) 20% Has declined. 144 crores
For the first quarter ended June 30, 2017, M & M and Mahindra Vehicle Manufacturers Limited (MVM) declared net profit of Rs. 766 crores as against Rs. 955 crores in the year-ago period.
During the quarter, M & M and MVM’s total income increased 3% to Rs 12,540 crore from Rs 12,160 crore
Automobile sales declined by 3.8% during the quarter, while tractor sales grew by 13.2%. Facing issues affecting all its export market, its vehicle export business except Bangladesh, the company said.
Due to GST infections, the automobile industry has been affected because the sale of vehicle has come down in anticipation of the price reduction in buyers. There were taxation problems too
“There is a provision to support the dealers in relation to payment of duty to ensure minimum impact to the customer due to non-availability of input credit for some taxes paid due to tractors free of excise duty. Lying with goods, Rs. 144 crores, “VS Parthasarathi, chief financial officer of the group, M & M said.
“So, at a PBT level, we have taken a hit of Rs 144 crore and at the PAT level, the hit of Rs 91 crore,” he said.
Bharat Gyanani, a research analyst at Sharekhan, said that the operating results were expected because the margins were influenced by the high value of raw material and dealer compensation related to GST.
“Higher depreciation and taxation net profit declined two points,” he said.
Mr. Gianni said, “On the move, the new launch in the utility vehicle and light commercial vehicle segment should resume the volume.”
Dr. Pawan Goenka, Managing Director, M & M said, “The first quarter was an important event due to BS III restrictions and GST transition.”
“Our tractor division performed well. The business of light commercial and heavy commercial vehicles was good, however, we have lost market share in UV,” he said.