What explains the sharp growth in profits of Mahindra & Mahindra in the Dec-21 quarter?

Broadly, the profits of M&M in the Dec-21 quarter were boosted by the better operating performance of the financial services business and the exceptional gains that led to the boost to net profits. Despite pressures in auto and agricultural machinery, the surprise package was financial services arm. Overall, it was a healthy quarter for the M&M group, largely supported by the financial services business. Here is a summary of numbers.

For Dec-21 quarter, Mahindra & Mahindra reported 9.1% higher group revenues at Rs.23,594 crore. Automotive business saw strong 15.21% yoy growth in sales at Rs.9,958 crore. The niche farm equipment business saw sales growing by 2.3% at Rs.6,970 crore in Q3, despite erratic monsoons and weak rural incomes. Revenues from financial services business were flat. Auto export volumes increased 58.3% even as M&M achieved Q3 saw tractor market share at a record 39.4%. XUV 700 saw over 1 lakh bookings.

For Dec-21 quarter, operating profits were up 68.5% at Rs.2,625 crore. This is thanks to the turnaround in the asset quality of the financial services business. Overall operating margins were above 11% despite commodity inflation. Both Financial Services and real estate business showed great traction. Financial services gained from asset quality revival and realty business benefited from improved residential demand. Operating margins improved from 7.20% in Dec-20 quarter to 11.12% in Dec-21 quarter.

Net profits were higher by a whopping 182% at Rs.2,625 crore in Dec-21 quarter. This was due to exceptional write-off of Rs.998 crore in Dec-20 quarter on account of discontinuation of SsangYong Motors operations. This magnified the profit growth in the quarter. Without this discontinued operations impact, PAT would have been approximately stable. PAT margins improved from 3.26% in Dec-20 quarter to 8.42% in Dec-21 quarter. However, sequential net profit margins were lower by 56 bps.