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Asia300

Mahindra profit beats estimates on India pick-up truck demand

Exceptional gain from investments also boosted net income

Mahindra’s passenger vehicle sales volumes grew 6.1% in the third quarter.   © Reuters

MUMBAI (NewsRise) -- Mahindra & Mahindra, India's second-biggest maker of sport-utility vehicles, posted a surprise 12% rise in third-quarter net profit, aided by an exceptional gain and a surge in demand for its pick-up trucks.

The maker of Scorpio and Bolero SUVs reported a net income of 12.16 billion rupees ($189 million) for the quarter ended in December, compared with 10.81 billion rupees a year earlier, the company said in a statement. Analysts were expecting a net profit of 9.89 billion rupees, according to a Reuters poll.

The latest quarter had an exceptional gain of 3.86 billion rupees on account of profit on sale of certain long-term investments in units. The year-earlier quarter also had a gain of 3.64 billion rupees. Total sales fell 2.2% to 115.78 billion rupees.

Mahindra's passenger vehicle sales volumes grew 6.1% in the quarter, while the positive rural sentiment and ease of availability of finance fuelled growth of more than 29% in smaller commercial vehicles, it said.

Mahindra had been grappling with slowing sales and shrinking market share amid fewer vehicle launches and rising competition in the SUV segment as it lost market share to Maruti Suzuki India, Fiat Chrysler's Jeep brand, and Ford Motor. Sales of industrywide SUVs expanded 30% in the year ended in March.

The company had a modest 5% gain in SUV sales between April and January to 188,345 vehicles.

Meanwhile, rising cost of inputs such as copper, steel, aluminum, and lead remain a major challenge to operating profits of Indian auto makers. Last month, market leader Maruti Suzuki reported a weaker-than-expected quarterly net profit.

In a separate statement, Mahindra said it is selling a 22% stake in joint venture Mahindra Sanyo Special Steel to Japanese partner Sanyo Special Steel for 1.46 billion rupees. After the deal, Mahindra's share in the venture will come down to 29% from 51%, it said.

Mahindra shares lost 0.5% in Mumbai trading on Friday before the earnings were released, while the benchmark S&P BSE Sensex closed 1.2% lower.

--Dhanya Ann Thoppil

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