Mahindra and Mahindra (M&M) on Wednesday said it estimates production loss of 87,000 vehicles and 30,000 tractors in first quarter of current fiscal on account of suspension of manufacturing operations due to coronavirus-led lockdown.
The revenue and profitability will be impacted in line with the fall in volumes, it added.
“Notwithstanding this, the company expects to mitigate the adverse impact by reducing various variable and fixed costs and after absorbing all idle overheads caused by lockdown,” it added.
Even before COVID-19, the company had embarked upon an initiative to bring down costs and conserve cash. This programme is well under way and the company is expected to get benefits as a consequence of these initiatives in future, M&M said.
On sales outlook, it said 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.
“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.
The company said it has resumed tractor sales from April 14. Besides, 75 per cent of its automotive dealerships have also started operations, it added.
“Lockdown phase five effective from June 1 has given additional relaxations, which will enable to ramp up the production, supply chain and distribution,” M&M said.
The company said it has taken steps to ensure that it has adequate liquidity to meet its financial and other commitments.
The automaker has successfully issued around Rs 1,000 crore of commercial papers and NCDs worth Rs 2,000 crore during April, 2020, at extremely attractive rates to shore up liquidity, it added. “Despite the near term strain on operations and cash accruals, the company, due to its strong liquidity position expects to service its debt obligations in a timely manner,” M&M said.