M&M's net profit up 7.8 per cent in Q2

Mahindra & Mahindra (M&M), India's largest maker of utility vehicles, on Friday reported a 7.8 per cent rise in quarterly net profit, driven by higher sales.

The company announced announce a net profit of Rs776 crore for the second quarter of 2010-11 ended 30 September, a growth of 22 per cent over the same period last year, in spite of a significant rise in input costs. Total income for the quarter was higher by 20 per cent at Rs5,434 crore.

''Despite the increase in material costs, M&M has managed good financial results,'' said Bharat Doshi, chief financial officer, M&M. The operating margin in the quarter fell to 16.47 per cent from 18.24 per cent in the corresponding period last year. This is in sharp contrast to Hero Honda, the country's biggest two-wheeler maker, which reported a 15 per cent slump in net profit despite increased sales, blaming it on higher input costs.

With the auto sector growing at 25 per cent to 30 per cent a year, sales of M&M's tractors and utility vehicles is expected to go up, leading to a positive effect on the topline and bottomline, said Vaishali Jajoo, auto analyst with Mumbai-based Angel Broking.

The automaker's sales of utility vehicles, including Scorpio and Xylo SUVs, rose by 5 per cent to 56,639 units in the current quarter, amounting to a market share of 62 per cent.

Tractor sales during the quarter grew by 10 per cent to 1.02 lakh units. The current quarter also saw a 106 per cent growth at 3,835 units in exports. SAARC nations, South Africa and South America mainly contributed to this growth, the company said in a statement. The Mumbai-based UV major did not comment on its planned entry into the US market.

 On Friday, M&M also received approval from South Korea's anti-trust regulator to buy Ssangyong Motor Co as it seeks to expand its footprint in the overseas market.