Why Mahindra & Mahindra stock price is going up?

Good news for Mahindra & Mahindra shareholders

Introduction

Recently Mahindra & Mahindra stock has delivered ~40% returns on YoY basis. Let us take a look at the reasons behind this rally and some recent new developments which are likely to fuel this rally further.

Why Mahindra & Mahindra stock price is going up?

Last 1 year stock price movement – delivered ~40% returns

Reasons for upward movement in stock price of Mahindra & Mahindra

1. Exit from loss making businesses

Company has decided to sale its stake in a joint venture with a Korean company SsangYong Motors Co. Company was incurring losses from this JV to the tune of INR 2500 crore and this JV was also a burden on company’s balance sheet. Decision to exit from loss making business will result in cost saving and make its balance sheet stronger.

2. Commitment to tighter capital allocation policy

M&M had planned a partnership with Ford Motor Co. for engine and vehicle development. However both the companies have mutually and amicably called off this partnership. This is mainly due to the global disruptions bought by COVID-19. M&M plans on conserving cash for investment in emerging technologies and increase focus on its automobile business.

3. Strong response to recently launched THAR SUV

THAR was launched on 2^nd October’20 and till date company has received more than 32,000 bookings. 50% of these bookings are for automatic variants, which shows that technological upgrade is paying off. Such strong bookings are likely to boost company’s sales in upcoming quarters.

4. Robust Tractor Sales

M&M is a market leader in tractor sales. Performance of tractor segment is majorly dependent on rural economy which was least affected during the pandemic. Also decent rabi harvest and good monsoons further provided impetus to the rural economy, auguring well for tractor sales.