M&M Q2 FY27: SUVs Power a 25% Profit Jump; Tractors and Auto Margins the Soft Spots

Consolidated PAT up 25% at ₹4,588 crore, volumes up 26%. Auto did most of the work. Farm revenue fell 6% and standalone Auto PBIT margin is down to 7.7%.

Headline numbers first. Consolidated income from operations was ₹57,553 crore for Q2 FY27, up 25% YoY, and PAT after non-controlling interest grew by the same 25% to ₹4,588 crore. Almost all of the growth is Auto: 26% more vehicles sold and a 39% jump in consolidated segment revenue. Farm Equipment went backwards – revenue -6%, segment profit -14%.

The standalone print is weaker than the consolidated one suggests. Revenue grew 26% to ₹44,282 crore, but EBITDA moved up only 4% (₹6,718 crore). PAT rose 13% to ₹5,102 crore. Don’t read too much into the gap between standalone and consolidated PAT, though – the standalone figure includes subsidiary dividends and investment income, which get knocked out on consolidation. The number we’d focus on is the core margin, ex investment income: 11.65% this quarter vs 14.55% in Q2 FY26. That’s close to 290 bps lost in a year.

Auto did the heavy lifting, Farm didn’t

331,000 vehicles in the quarter, counting Last Mile Mobility and Mahindra Electric Automobile. Of that, 183,000 were UVs, and M&M says its SUV revenue market share is now 24.3%. On a consolidated basis Auto revenue came to ₹37,756 crore (+39%) and segment result to ₹3,319 crore (+31%). Auto’s contribution to consolidated PAT – ₹2,388 crore – was up 55%. 

So demand isn’t the problem. Costs are. Standalone Auto PBIT was ₹2,614 crore, 15% higher, yet margin fell 120 bps to 7.7%. If you take out the electric-SUV contract manufacturing arrangement, it’s 9.1%. The consolidated segment margin tells a slightly kinder story: 8.8% against 9.3% last year, and up about 110 bps from Q1. We look at both because the consolidated number picks up businesses and arrangements that sit outside the core vehicle operation.

Raw materials hurt. M&M had already raised prices in July (an average 2.7% on SUVs, 2% on CVs, as per Reuters), and clearly that hasn’t been enough to cover the cost increase. More price hikes or a better mix would help. The risk is demand – how far can M&M push before buyers push back? 

CONSOLIDATED SEGMENT PERFORMANCE

*Services = Financial Services plus Industrial Businesses & Consumer Services. Segment result is after share of profit/loss of associates and JVs. PBIT margins are our calculation, using the company’s reported segment revenue and result.

Farm: weak Q2, H1 holds up better

Tractors were the drag this quarter. Consolidated Farm revenue fell to ₹9,572 crore from ₹10,225 crore; segment result dropped to ₹1,376 crore from ₹1,608 crore. Standalone volumes were 116,027 tractors (-5.6% YoY) and PBIT margin shrank 300 bps to 16.8%. The company blamed festive timing, which is plausible – H1 volumes are actually up 6.6% at 274,068 units. What bothers us is that H1 Farm segment result is still down 2.5% despite those volumes. That points to margin pressure, not just a timing shift. 

Services: the other profit engine

Services picked up some of the slack. Revenue for the segment was ₹11,821 crore (+18%) and result ₹1,998 crore (+27%). Within that, Mahindra Finance grew AUM 15% with gross Stage 3 at 3.42%; M&M’s share of its profit was up 61%. Tech Mahindra’s EBIT margin rose 260 bps to 14.8% and its PAT contribution grew 33%. These businesses don’t really follow the vehicle cycle. That’s useful – it means group earnings aren’t riding only on Auto and Farm.

Cash flow: look through the finance book

Consolidated operating cash flow turned negative in H1 FY27 – an outflow of ₹673 crore versus a ₹1,203 crore inflow a year earlier. Before that rings alarm bells: ₹13,482 crore went into financial-services receivables. In other words, Mahindra Finance’s loan book grew (AUM +15%) and needed funding. You can’t judge that the way you’d judge cash conversion at a carmaker. Still, a receivables build of that size is worth tracking, along with asset quality and the cost of funds.

The standalone business looks fine on cash. OCF was ₹10,246 crore in H1, up from ₹7,804 crore. Ex-Financial Services, debt-equity is down to 0.03x (0.05x a year ago). The outflow, then, is a finance-book story; the parent is throwing off cash and has barely any debt.

Valuation and the stock’s reaction

Pre-results, the stock was at ₹3,076.30 (12:42 PM IST, 5 November) – about ₹3.82 lakh crore in market cap and 20.7x trailing P/E. By 1:37 PM it was trading at ₹3,128.90, up 5.6%, according to The Economic Times. Looks like the market latched on to the 25% PAT growth and the Auto volumes.

Twenty-odd times trailing earnings isn’t a cheap multiple for a manufacturer, so growth was already priced in. Q2 does support that on the top line – SUVs are selling and Services is adding to profit. Margins are where we’d hold back. Standalone EBITDA up 4%, Auto PBIT margin still lower than last year, Farm profitability slipping. For the stock to re-rate from here, the volume growth needs to show up in operating profit and not stop at revenue.

What to watch next quarter

Strong quarter for the group, uneven underneath. Auto demand is good and Services is contributing more; Farm has slowed and input costs are still eating into vehicle margins. We’ll be listening for commentary on commodity costs, pricing, the tractor outlook and Mahindra Finance’s funding needs at the analyst meet (4:00–5:30 PM, 5 November). The key question for us is whether this margin squeeze is a one-quarter thing or something that lingers.

Disclaimer: This article is analytical commentary for informational purposes and is not personalised investment advice.