Mahindra and Mahindra’s (M&M) net profit after exceptional items for the third quarter ended December 31, 2021 increased nearly 2.5 times year-on-year to 1,353 crore beating the Street estimates. The profit increase is primarily due to absence of impairments this quarter, which is a result of its capital allocation actions to streamline its loss making subsidiaries. The company’s consolidated revenue from operations increased 8% y-o-y to15,239 crore in line with Bloomberg consensus estimates, driven by growth in the automotive business. At auto level, the revenue was up a strong 16% y-o-y for the quarter. The company recorded healthy booking pipeline and buoyant demand for its products with over 1.55 lakh open bookings recorded during the quarter, out of which more than 70,000 were for XUV7OO.

Global shortage of semi-conductors and ECUs impacted production and sales for yet another quarter and the company reported production loss of 20,000 units for the October-December period. However, supplies in the third quarter improved sequentially.

Anish Shah, managing director & CEO, M&M, said, “Supply chain headwinds have been there but they have eased considerably as compared to what we saw in the Covid times. What we see is not a 100% improvement as yet, but it should improve over the next few months.”

The total vehicles sold declined 2% y-o-y to 1.18 lakh units, while the tractors saw a fall of 9% y-o-y to 91,769 units. Rajesh Jejurikar, executive director, M&M, said that though the volumes were under pressure, the company was still able to report its second highest ever quarter three volumes.

Commodity inflation and shortage of semi-conductors impacted operating income. The earnings before interest tax depreciation and amortisation (Ebitda) declined 24% y-o-y to Rs 1,806 crore during the quarter, while the operating margins declined a sharp 510 basis points to 11.8%. Manoj Bhat, group chief financial officer, M&M said, “Going forward we have articulated some margin improvement measures. With the commodity costs stabilising at least that gives us room to implement those measures.”

However, the long waiting periods for car deliveries will continue for sometime, though the situation is improving. Veejay Nakra, chief executive officer (automotive division), M&M said that with the the short to medium terms actions taken so far, the company has moved to over 85% production capacity. Nakra said that given the semiconductor issue outlook for the remaining two months of the quarter, he does not anticipate any production loss in the fourth quarter.

However, he added that the issues related to semiconductor shortages will continue for the next 6-9 months, though things have improved and will continue to improve. “From a normalcy perspective to meet all the demand and bookings that are in place, it will take 6-9 months,” he said.

He added that the waiting period for successful models like XUV700 and Thar is about six months, which he said is a norm across all brands and will take some time to bring down across industry.

M&M recorded strong auto export volume with a 58.3% growth y-o-y. Farm Equipment Sector (FES) tractors market share in Q3FY22 was at 39.4% up 1.4% y-o-y. Farm subsidiaries recorded sixth consecutive quarter of positive PBIT and highest ever quarterly billing for EV 3 wheelers, up 170.2% y-o-y.