Mahindra & Mahindra (M&M) shares experienced a significant boost, jumping 7.8% to Rs 3,539.25, as brokerages identified the automaker as a major beneficiary of India's recent Goods and Services Tax (GST) overhaul. The GST Council's decision to restructure the tax system has sparked optimism in the auto sector, particularly for M&M's diverse vehicle portfolio.

GST Restructuring Details

The GST Council has implemented a simplified tax structure, featuring two main slabs:

• 5% and 18% for most goods
• 40% levy for luxury goods

This restructuring has notable implications for the automotive industry:

• Small petrol, hybrid, LPG, and CNG cars under 1,200cc will now face an 18% GST rate, down from the previous 28%
• Larger SUVs will be taxed at 40%, a reduction from the earlier 43-50% range
• Tractor GST has been reduced from 12% to 5%

Impact on Mahindra & Mahindra

Brokerages have highlighted several positive outcomes for M&M:

1. SUV Tax Cuts: Jefferies pointed out the surprise win for M&M in the form of SUV tax reductions.

2. Portfolio Shift: Emkay Global noted that nearly two-thirds of M&M's portfolio will shift to the 40% rate from 50%, with the remainder moving to 18% from 28%.

3. Potential Demand Boost: Brokerages expect these changes could stimulate auto demand by 5-10% across various categories.

Market Response

The positive outlook for M&M and the auto sector as a whole was reflected in the market:

• M&M shares surged by 7.8% to Rs 3,539.25
• The Nifty Auto index gained nearly 4% on the news

Company Update

In a recent disclosure to stock exchanges, Mahindra & Mahindra reported its participation in the Ashwamedh – Elara India Dialogue in Mumbai. The company engaged with various funds and investors in one-on-one and group meetings, sharing a presentation previously made available. M&M emphasized that no unpublished price-sensitive information was shared during the conference.

The GST restructuring, coupled with M&M's strong market position and diverse vehicle portfolio, has created a positive sentiment among investors. As the auto industry adapts to these tax changes, all eyes will be on how manufacturers like Mahindra & Mahindra capitalize on the potential increase in demand across various vehicle categories.

Mahindra & Mahindra Ltd. (M&M), a leading Indian automotive and farm equipment manufacturer, has reported a mixed sales performance for August, with significant growth in its tractor segment but a slight decline in automotive sales.

Tractor Segment Surges

M&M's Farm Equipment Business witnessed robust growth in August. The company sold 26,201 tractors in the domestic market, marking an impressive 28% year-on-year increase from 20,518 units in August of the previous year. Total tractor sales, including exports, reached 28,117 units, surpassing market estimates of 21,400 units and showing a substantial 28% growth compared to the 21,917 units sold in the same period last year.

Veejay Nakra, President of the Farm Equipment Business at M&M, attributed this strong performance to favorable agricultural conditions. He stated, "The above-normal monsoon and improved reservoir levels augur well not only for Kharif crops but also for the upcoming Rabi season in October." Nakra also noted that continued government support through financing schemes for farmers could potentially drive tractor demand during the upcoming festive season.

Automotive Segment Faces Challenges

In contrast to the tractor segment's success, M&M's automotive division experienced a slight decline in sales. The company reported total auto sales of 75,901 units in August, compared to 76,755 units in the same month last year. Despite the marginal decrease, this figure exceeded market expectations of 72,300 units.

Nalinikanth Gollagunta, CEO of M&M's Automotive Division, explained the sales dynamics: "August witnessed relatively robust demand in the SUV segment amidst anticipated GST rate changes. This month, Mahindra reported 7.4% YoY growth in PV Vahan registrations." He added that the company consciously decided to reduce wholesale billing to minimize dealer inventory in anticipation of potential GST changes.

Segment-wise Performance

Looking Ahead

M&M executives expressed optimism about the upcoming festive season, particularly if the anticipated GST rationalization materializes. The company views this as a potential demand driver for both its automotive and farm equipment segments.

However, Nakra cautioned about potential risks to Kharif harvests due to the IMD's forecast of surplus rainfall in September, emphasizing the need for careful management of these conditions.

As Mahindra & Mahindra navigates through these mixed market conditions, the company remains focused on leveraging its strong position in both the tractor and SUV markets to drive growth in the coming months.