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Coronavirus impact: Mahindra reports production loss of 87,000 vehicles, 30,000 tractors in Q1 FY21

On sales outlook, M&M expects tractor demand to show good improvement due to several positive factors such as record Rabi production, higher government procurement, announcement of higher MSPs and chances of a normal monsoon aiding a good Kharif crop

Chitranjan Kumar | June 3, 2020 | Updated 15:44 IST
Coronavirus impact: Mahindra reports production loss of 87,000 vehicles, 30,000 tractors in Q1 FY21
For March, M&M estimated loss of around 23,400 vehicles and 14,700 tractors

Auto major Mahindra & Mahindra (M&M) on Wednesday said it estimates production loss of 87,000 vehicles and 30,000 tractors in first quarter of current fiscal (April-June period) due to suspension of manufacturing operations amid coronavirus-led lockdown. The estimated loss for March was around 23,400 vehicles and 14,700 tractors, M&M said in an exchange filing.

All the manufacturing facilities and offices of the company were shut down entirely during lockdown period of almost 40 days from March 25 to May 3, 2020, it said.

Besides manufacturing loss, the auto major's revenue and profitability was also impacted due to suspension of operations in wake of coronavirus outbreak. The profitability of the company for the quarter and financial year ended March 31, 2020 was definitely impacted by coronavirus-led crisis, but the detail of the same is yet to be ascertained, it said.

"In the last 2 months, the company's operations have been impacted due to very low to insignificant sales during the first three weeks of lockdown and committed costs being incurred. The revenue and profitability will also be impacted in line with the fall in volumes," M&M said in a filing to the Bombay Stock Exchange.

On sales outlook, the company expects tractor demand to show good improvement due to several positive factors such as record Rabi production, higher government procurement, announcement of higher MSPs and chances of a normal monsoon aiding a good Kharif crop.

Also Read: Coronavirus impact: M&M registers 79% decline in sales in May

"The company's auto sales traditionally come from both rural and urban segments... expect quicker recovery in rural India while urban segment will take little longer time to come back to normalcy," the automaker added.

Mahindra said that its supply chain was disrupted in view of lockdown in March and April, 2020. However, the situation had improved gradually with central and states relaxing lockdown norms.

The company further stated that in lockdown phase 2 some relaxations were given for essential commodities, while sale of tractors started through dealerships from April 14, 2020. With further relaxations during lockdown phase 3 and 4, tractors and automotive manufacturing units and suppliers received approvals and commenced production gradually with safety protocols.

Also Read: Car sales register steep decline in May, tractors lead road to recovery

"Automotive dealerships also started operations from phase 3 gradually in Green and Orange zones. 75 per cent of our dealerships are open now," the auto major said in the filing.

In lockdown phase 5, which came into force from June 1, the company has been given additional relaxations, which will help it to ramp up the production, supply chain and distribution.

On liquidity position, the company said that its cash position is good and has enough unused credit lines to meet short term liquidity needs. It has successfully issued around Rs 1,000 crore of Commercial Papers and Rs 2,000 crore of NCDs during April, 2020 at extremely attractive rates to shore up liquidity, M&M added.

On capital and financial resources, M&M said its equity capital structure remains unchanged, while it has adequate capital and financial resources to run its business. The company has taken steps to ensure adequacy of financial resources, it added.

"There is no impact on internal financial controls due to the COVID-19 situation," it said.

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