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Mahindra Net Income Beats Estimates After SUV Sales Increase

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May 31 (Bloomberg) -- Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles, reported profit that beat analyst estimates as rising demand for SUVs boosted sales. The shares rose to a record.

Net income, excluding units, increased to 8.89 billion rupees ($158 million) in the three months ended March from 8.74 billion rupees, the Mumbai-based company said yesterday. That surpassed the 7.6 billion-rupee median of 39 analysts’ estimates compiled by Bloomberg. Sales of utility vehicles and tractors rose to 103.5 billion rupees from 92.4 billion rupees.

Chairman Anand Mahindra is counting on sustained demand for SUVs to boost sales after industrywide utility vehicle sales surged 52 percent, compared with a 2.2 percent increase in passenger vehicles, in the year ended March. Mahindra’s range of SUVs, from 579,000 rupees to 2.07 million rupees, helped it post the biggest jump in volumes among India’s top five automakers in the period. It forecasts growth in the segment will continue to outpace passenger cars.

“Mahindra will gain from higher utility vehicle sales as well as a decrease in raw material costs,” Mitul Shah, an analyst at Karvy Stock Broking Ltd. in Mumbai, said before the earnings announcement. “Elections are coming up next year, so there will be an increase in demand for utility vehicles, as well as an increase in rural spending will drive demand for tractors.”

Shares Surge

Mahindra, which is also India’s largest maker of tractors, rose 4.5 percent, the most since January 2012, to 1,004.65 rupees in Mumbai trading yesterday. The stock was the biggest gainer on the benchmark S&P BSE Sensex, which rose 0.3 percent.

India’s national elections are due next year, after the current government completes its five-year term. There is expectation the government may offer some more incentives to people living in villages before the elections, Shah said.

“We expect the Indian economy to stage a mild, consumption-led recovery in fiscal 2014,” the company said in the statement. “Subject to a normal monsoon, as forecast by the Indian Meteorological Department, agricultural growth is likely to see considerable improvement in fiscal 2014, leading to a steady moderation in inflation and a bounce back in rural incomes, and consumer demand.”

India’s statistics office has estimated the nation’s economy expanded 5 percent in the year ended March, the weakest pace in a decade. The office will give its next estimate tomorrow.

Mahindra, which started making sports utility vehicles with the Willys Jeep in 1945, has spent 12 billion rupees in the past four years to introduce the Xylo and the XUV500. The growth in demand for SUVs over the past few years has attracted a number of overseas companies from Toyota Motor Corp. to Renault SA to unveil models in the segment.

“SUVs grew a lot last year as the industry caught up with the global trend,” Pawan Goenka, president automotive and farm equipment at Mahindra, said yesterday. “I expect another two years of higher growth than passenger cars before SUV sales grow in line with passenger cars.”

-- With assistance from Abhishek Shanker in Mumbai. Editors: Suresh Seshadri, Arijit Ghosh

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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