Mahindra and Mahindra’s (M&M) stock has declined by 25 per cent in the past six months amid concerns over the impact ot rising interest rates or its auto business and pressure on margins owing to rising inputs costs. Keen competition has also snatched away pricing power from the company. However, like HDFC, the company also offers intrinsic values due to its stakes in subsidiaries such as Tech Mahindra, Mahindra Holidays, Mahindra Finance, and Mahindra Life Spaces.
These subsidiaries contribute about half of its consolidated revenues and profit before tax (as on March 2008) and are likely to grow at a brisk pace. In its core business, analysts expect a moderate growth but are cautiously optimistic. While new launches such as Ingenio in its utility vehicles and new variants in the passenger cars (Logan) and thrust on the exports growth (though the launch of Scorpio in US and Chile) will support its auto business, an increased focus on the rural economy benefitting from the waiver of farm loans and rising rural disposable incomes should help push up demand for tractors. M & M is the market leader in tractor with 30 percent share and a leader in the utility segment with a command over half the market. The company plans to invest Rs7,500- 8000 crore in medium and heavy commercial vehicles and the new SUV over the next three years. US based investment banker Goldmand Sachs recently picked up a 3.7 per cent stake in the company and infused about Rs. 700 crore. The stock is not a favourite with analysts right now but seems to offer deep value.
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