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Mahindra quarterly profit falls 11% amid slowing India vehicle demand

Rising costs also damp earnings of SUV maker

Mahindra is the latest Indian automaker to report weak earnings as the nation's automotive industry has been facing declining demand since July amid a slowdown in economic growth   © Reuters

MUMBAI (NewsRise) -- Mahindra and Mahindra, India's second-largest sport-utility vehicle maker, reported a more than 11% decline in third-quarter net income, hurt by slowing demand and rising expenses.

Mumbai-based Mahindra is the latest Indian automaker to report weak earnings as the nation's automotive industry has been facing declining demand since July amid a slowdown in economic growth and tighter credit for vehicle buyers. Industrywide passenger vehicles sales fell 1% in the third quarter as the usual festival demand during October-November was also muted this time, leaving many car makers saddled with inventory.

Further, changing regulations and moderating domestic economic growth amid distress in the rural markets cast a pall over the demand for commercial vehicles. Margins at most Indian automakers slipped during the third quarter as companies sought to offer steep discounts to liquidate stocks.

Maruti Suzuki India, the nation's largest car maker, reported a 17% fall in profit and cautioned that it would struggle to meet double-digit sales growth for this fiscal year. On Friday, Tata Motors' shares plunged as much as 30% to their lowest in eight years in Mumbai trading, a day after the company reported its worst quarterly loss of about 270 billion rupees ($3.78 billion).

Mahindra posted a standalone net income of 10.77 billion rupees in the quarter ended in December. Analysts were expecting a net profit of 10.04 billion rupees, according to Refinitiv data.

Total sales of the maker of Scorpio and Bolero SUVs rose 13% to 130.70 billion rupees, while expenses jumped 15%. The latest quarter had an exceptional charge of 800 million rupees related to provisions for impairment in case the company makes investments.

Operating earnings at Mahindra's automotive business dropped 23% as the company launched new multi-utility vehicle Marazzo and readies for the launch of new SUV XUV300. Earnings at the tractor business grew 5.8%.

Passenger vehicle sales during the festive season were not up to expectation primarily due to softening urban demand, the company said in a statement. The urban sentiment was subdued largely on account of an uncertain economic environment arising from a weaker rupee and high fuel prices, it added.

Still, the industry expects demand to turn around in January-March as the federal government's announcements in the Interim budget offering tax rebates and assured income to farmers could leave more cash in the hands of consumers.

The Federation of Automobile Dealers Associations on Thursday said it expects the government move to bring in "positive customer sentiment as potential customers sitting on the fence will have increased disposable income."

On Friday, India's main automobile industry group the Society of Indian Automobile Manufacturers said the overall automotive sales fell 4.7% in January, while passenger vehicles sales declined 1.9%.

Shares of Mahindra lost 2.6% in Mumbai trading, while the benchmark S&P BSE Sensex closed 1.2% down.

--Dhanya Ann Thoppil

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