Shares of this large-cap automobile company fell around 8 percent in Wednesday’s trading session after the company reduced the prices of its sports utility vehicle XUV 700 by Rs 2 lakh.
Price Movemnet:
With a market capitalization of Rs. 3,37,550 crores, the shares of Mahindra & Mahindra Ltd started Wednesday’s trading session on a flatter note at Rs. 2,930 compared to its previous close of Rs. 2,925.50. During the trading session, the shares hit a low of Rs. 2,697.90, losing around 8 percent and are currently trading at Rs. 2,737 apiece.
What Happened:
Such a bearish movement in the share price was observed after the company cut the prices of its Sports Utility Vehicle (SUV), on an ex-showroom basis the XUV700 by 10 percent from Rs. 21.5 lahks to Rs. 19.5 lakhs.
The new pricing was been introduced ahead of the XUV700’s third anniversary and will be effective for a limited period of four months starting July 10.
The company stated that, “The Mahindra XUV700’s fully-loaded AX7 range now starting at 19.49 Lakh will enable more people to experience its unmatched driving experience with cutting-edge premium features.”
Along with M&M, Tata Motors has also implemented price cuts on its SUVs, the Harrier and Safari, effective until July 31. The price of the Harrier has been cut to Rs. 15 lakh from Rs. 15.5 lakh, while the price of the Safari has been cut from Rs. 16.2 lakh earlier to Rs.15.5 lakh.
The XUV700 became Mahindra’s fastest car to reach sales of more than 1.5 lakh units within 30 months of launch.
What went wrong:
According to reports, analysts interpret these price reductions by major players as indicative of weakened demand in the segment.
They attribute this trend to reduced inquiries and postponed vehicle purchases, exacerbated by extreme heat waves affecting consumer behaviour. Moreover, extreme heat also resulted in 15 percent less walk-ins at dealerships.
Axis Capital one of well-known brokers highlighted that, as per our calculations, the announced price cuts imply an EBITDA impact of around Rs 300-350 mn/month, even after assuming that this is the new normal going ahead (unlikely, in our view), the annual impact would be around Rs 3.6-4 bn – this equates to around 2-3% of our overall EBITDA estimate for the company.
However, the brokerage firm feels that the company might benefit from a potential increase in volume post the price cuts as the management believes that the overall XUV700 volume could increase to 8,000 units per month.
Financials:
Looking at the company’s financial statements, the revenue increased marginally by 0.4 percent from Rs. 35,299 crores during the December quarter to Rs. 35,452 crores in the March quarter. In addition, the net profits increased by 5 percent from Rs. 2,977 crores to Rs. 3,125 crores during the same period.
Recent update:
The Indian carmaker recorded a sales number of 40,022 units for its domestic passenger vehicle market in June 2024, a 22.8 percent growth in sales from June last year, which stood at 32,588 units.
As compared to the numbers from May 2024, the Mahindra monthly sales in June 2024 dropped by 7.4 percent from 43,218 units.
Company Profile:
Headquartered in Mumbai, Mahindra & Mahindra was incorporated in 1945. The company is one of the most diversified automobile companies in India with a presence across 2-wheelers, 3-wheelers, PVs, CVs, tractors and earthmovers.
Written By Vaibhav Patil
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