STOCK OF THE WEEK - MAHINDRA & MAHINDRA
COMPANY BACKGROUND
o Founded in 1945 as a steel trading company, M&M entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, they've diversified into many new businesses in order to
o better meet the needs of our customers.
o M&M follows a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies.
o This principle has led their growth into a US $15.9 billion multinational group with more than 155,000 employees in over 100 countries across the globe.
RATIONALE
o M&M increased prices by around 3% over its UV portfolio after the govt announced an additional SUV tax in the FY14 Budget. With only the Quanto and the Verito outside the ambit of the SUV definition, the PV segment demand deteriorated in April. Mgmt has noted in press (Source: Economic Times) that the additional 3% tax burden will be significantly detrimental to the SUV segment. Mgmt's outlook is that of cautious optimism, with hopes of a positive impact from a possible interest rate cut by the RBI.
o Mgmt has noted that the company could look into launching new variants / models that do not attract the additional tax i.e. lower than 1.5 liter engines, smaller than 4m in length and reducing the ground clearance to below 170mm.
o Festival timing helps tractor volumes rise around38% YoY - With major festivals of Gudi Parwa and Navratras falling in April this year vs in March last year, April volumes for the tractor segment were robust. We think there could be a build-up of inventory on expectations of a strong monsoon and we should have more clarity over end May /early June.
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