MUMBAI (NewsRise) -- Mahindra and Mahindra reported an almost two-fold jump in first-quarter profit on the back of a one-time gain that helped the Indian sport-utility vehicle maker offset the impact of an industrywide slowdown in automobile demand.
The Mumbai-based company's earnings come as the country's automobile sector grapples with slowdown accentuated by a credit crunch and higher cost of ownership of vehicles. India's passenger vehicle market saw the worst quarterly sales contraction in almost two decades in April-June, sparking fears of job losses and factory shutdowns.
Industrywide passenger vehicles sales grew at the slowest pace in five years during the last fiscal year. Changing regulations and moderating domestic economic growth, coupled with distress in the rural markets, cast a pall over the demand for commercial vehicles too.
Mahindra posted a standalone net income of 23.1 billion rupees ($327 million) in the quarter ended in June. Total income of the maker of Scorpio and Bolero SUVs fell 3.9% to 132.42 billion rupees, while expenses shrank 1.7%.
The latest quarter included an exceptional gain of 13.67 billion rupees from the sale of shares by M&M benefit trust and transfer of certain long-term investments, the company said.
Operating earnings at the automotive unit slumped 31%. Mahindra's farm equipment business saw its operating earnings plunge more than 19%. Sales volumes in the automotive unit shrank 5%, while tractor sales declined 15%.
Demand for passenger vehicles continues to be affected by the slowing economy, which along with tight credit conditions and delayed monsoon, impacted consumer sentiment in both urban and rural India, the company said in a statement.
Last month, Maruti Suzuki India, the nation's largest carmaker, saw its first-quarter profit slump more than 27%. According to Reuters, Maruti is firing its temporary workers, whose numbers declined 6% on-year at the end of June. It also cut production by more than 10% in the first six months of this year.
Meanwhile, rival Tata Motors reported wider quarterly losses weighed by the troubles at its British luxury car unit Jaguar Land Rover and the slowdown in the Indian market. However, the company expects market conditions to improve ahead of the festival season that begins this month.
Passenger vehicle sales in India declined 17% in June, according to data from the Society of Indian Automobile Manufacturers.
Given the current challenging global and domestic growth environment, a concerted policy effort will be required to prop sentiment, put a floor under consumption and revive growth, Mahindra said.
On Wednesday, the government said it is in discussions with the automobile industry to address the slowdown that has gripped the sector. The government also agreed to look into the industry's longstanding demand to bring down the Goods and Services Tax rates on automobiles to 18% from 28%, said Rajan Wadhera, president of SIAM.
Shares of Mahindra lost 5.6% in Mumbai trading on Wednesday, while the benchmark S&P BSE Sensex closed 0.8% down.
--Dhanya Ann Thoppil