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New car launches don’t add speed to Mahindra profitability
Posted on 15th November 2018
Shares of Mahindra and Mahindra Ltd lost 2.3% on the National Stock Exchange after it reported weaker-than-expected numbers for the September quarter (Q2) on Wednesday. Revenue growth was a tepid 6.6%, reflecting muted volumes. But what caught the Street off guard is a sizeable reduction in profitability of the automobile segment.

Margins from automobiles dropped 2.7 percentage points from a year ago. The rise in raw material costs, introductory pricing for the new vehicle and higher promotional expenses were the reasons. This had a bearing on the consolidated entity as well, with margins falling by a higher-than-expected 1.5 percentage points to 14.5%.

Thanks to a non-recurring income and lower tax expense, net profit jumped 26%. But with core earnings trailing estimates, this brought no cheer. With Wednesday’s fall, the stock has lost almost 17% from its June quarter results. During the same period, the Nifty lost 7.6% and indications are the underperformance may not reverse in a hurry.

Weighing on the outlook are muted demand conditions. Tractor sales during the recent festive season were subdued. As a consequence, growth outlook for the segment is now tilted towards the lower end of the 12-14% guidance (versus the higher end earlier).

That said, the recently launched utility vehicle Marazzo is seeing a good response. If not for this new vehicle, Mahindra’s utility vehicle sales would be falling (utility vehicles were up just 1% in October).

But as Bharat Gianani, analyst at Sharekhan Ltd, says, muted demand conditions mean that volume expectations for the industry have come down.

Even so, with Mahindra preparing to launch two new cars (Inferno S201 and Alturas), one in the popular compact SUV segment, volumes should rise, adds Gianani. But the big question is how much of this translates to revenue and profit growth.

The company is yet to fully pass on the recent rise in raw material costs. New product launches mean promotional costs are expected to remain high in the current as well as the next quarter. Unless demand sees noticeable recovery and helps Mahindra spread costs, chances are profitability will remain subdued in the near term, weighing on earnings expectations.

Adding to investors’ concerns is the tight liquidity condition. The firm claims it has not lost any sales due to lack of financing. But reduced risk appetite means interest rates are expected to perk up and it has to be seen how it navigates this. A significant portion of the sales comes from rural areas where availability of finance is crucial.

To conclude, new car launches and steady farm equipment business will aid Mahindra. But much depends on the sales momentum and recovery in profitability.

Related Companies: Mahindra India   

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RBI Governance: Under discussion – Board for further examination of framework
Posted on 15th December 2018
The central board of the Reserve Bank of India (RBI) on Friday discussed its governance framework and decided the matter required further examination, the central bank said in a statement on its website.

According to sources privy to the deliberations, Subhash Chandra Garg, economic affairs secretary, made a presentation at the meeting about how the governance structure for the RBI should be examined.

Microsoft’s bug bounty: How this Kerala-based security engineer won an undisclosed amount
Posted on 15th December 2018
In a huge achievement, a Kerala-based application security engineer has won bug bounty from global tech-giant Microsoft for discovering a series of vulnerabilities that left over 400 million Microsoft users’ accounts open to hacking. Reportedly, these accounts were from Office 365 to Outlook emails.

Sahad NK, who works as a security researcher with cyber security portal, came across multiple vulnerabilities and reported to Microsoft. Sahad, with the help of fellow security researcher Paulos Yibelo, reported the bug to the company in June and were fixed by November end.

ONGC board to consider share buyback on Dec 20
Posted on 15th December 2018
State-owned Oil and Natural Gas Corp (ONGC) Friday said its board will consider buyback of company shares at a meeting on December 20.

This follows Government pushing cash-rich PSUs to use their funds to buy back shares or pay a higher dividend. The Government is looking to bridge budgetary deficit through higher receipts of dividend as well as selling its shares in PSUs in the buyback programmes.

Indian Oil shares rise 3.10% on share buyback
Posted on 15th December 2018
Mumbai: Shares of Indian Oil Corp. Ltd rose over 3% Friday after India’s largest oil firm on Thursday said its board of directors approved the buyback of 29.76 crore equity shares of the company for ₹4,435 crore. The share buyback price represents a 8.6% premium to Indian Oil’s Thursday closing price of ₹137.20 on BSE. On Friday, Indian Oil shares rose 3.10%, or ₹4.25, to ₹141.45 apiece on the BSE while the benchmark Sensex closed flat at 35,962.93 points.

Relief to RCom: Supreme Court tells govt to let it sell spectrum to Reliance Jio, but with a condition
Posted on 15th December 2018
The Supreme Court on Friday asked the department of telecommunications (DoT) to grant a no objection certificate (NoC) to Reliance Communications to trade its spectrum with Reliance Jio Infocomm by Monday on the condition that its subsidiary, Reliance Realty, does not redeem the preferential shares without DoT’s nod.

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