ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Weathering the Automobile Recession

Weathering the Automobile Recession Hansavivek MAIUNDRA AND MAHINDRA has achieved higher production and sales of jeeps, commercial vehicles and tractors during 1982-83. There is increase in turnover from Rs 269.08 crore to Rs 314.01 crore, but gross profit is lower at Rs 22.63 crore against Rs 23.73 crore in previous year, reflecting a mar- ked contraction of margins. This outcome has followed because of company maintained selling prices throughout the year, while costs continued to rise. Interest cost alone rose from Rs 8.99 crore to Rs 13.36 crore owing to large expenditure incurred on schemes for expansion and modernisation of facilities. Arising from increase in assets, depreciation has also claimed more, but there is a saving in tax liability and net profit has turned out to be higher at Rs 13.52 crore than previous year's Rs 11.18 crore. Equity dividend has been maintained at 20 per cent and is covered 5.82 times as against 4.85 times. Automotive division produced 32.077 The Week's Companies vehicles and sold 32,301 against 27,928 and 28,153, respectively, in 1981-82, Sales of spare parts, inclusive of petrol and diesel engines, were also higher. In spite of recessionary trends in industry, company was able to increase its share of light commercial vehicle market from 35.6 per cent to 41.5 per cent owing to greater availability and acceptance of Peugeot engines. Igatpuri engine factory achieved 60 per cent indigenisation and expects to reach 100 per cent by 1985. Tractor division produced and sold 11,901 and 12,507 units as against 11,751 and 11,064 units, respectively, in previous year. Tractor market showed an improvement due to partial relaxation in credit policy of RBI resulting in availability of bank loans to a greater extent to farmers to purchase tractors. Sales of spare parts. kits, attachments and implements were also higher. Tractor division commenced commercial production of 50 HP tractor, designed and developed by com pany. Total foreign exchange earnings from exports of vehicles, tractors, spare parts, merchant and deemed exports amounted to Rs 29.73 crore. Despite severe crisis, which steel industry is facing all over world, operations of steel division yielded some profit. Sales of instrumentation division were lower due to continued recession in user industries. Order intake of hydraulic regulators (in phased manufacture under new collaboration with Comp Air of UK) was also adversely affected due to current recession in steel industry. Machine tool division executed orders of Rs 3.85 crore compared to Rs 4.02 crore in previous year. Reluctance of user industries to acquire new capital equipment affected order book. Several new lines of representation, par icularly from Japan, have been added and order book is being rebuilt to required level. Company's ongoing programme for modernisation and expansion of facilities in automotive and tractor divisions involving a capial outlay of Rs 75.78 crore is in an advanced stage of completion. It is expected to be completed during current year. To (Rs Lakh)

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