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Excise reduction to 16% across the board important for the growth of auto industry: M&M

Friday, September 7, 2007

Pawan Goenka, MD, Automotive Sector, Mahindra & Mahindra said that it is very important for excise reduction to 16% across the board for the growth of auto industry. But the expectations of the industry that interest rates will come down however not been witnessed so far.

He further said that passenger car growth of 12-13% is sustainable for rest of the year but a growth beyond that will require reduction in interest rate and reduction in excise. He said that the Axe vehicles currently are being tested by the Army. This process usually takes about 1 year. The land acquisition of the company is behind schedule and the possessions will happen this month, he finally said.

Mahindra and Mahindra has touched an intra day high of Rs 735 and an intra day low of Rs 716 and is quoting at Rs 722.40, up Rs 0.25, or 0.03% with volumes of 57,603 shares. Yesterday the share closed up 1.72% or Rs 12.20 at Rs 722.15. Total market cap is of Rs 17,737.09 crore.

In the opinion of CLSA, a research firm, a view on the Tech Mahindra stock as well as on the overall market is as important while evaluating an investment in M&M’s stock as is core business analysis. It is possible for M&M’s stock to do well despite weakening sales of UVs and tractors if the overall market and the Tech Mahindra stock are strong. In this case, the increase in value of the Tech Mahindra stake combined with a reduction in the holding company discount could make up for the fall in core business value. This combined with CLSA’s cautious view on Tech Mahindra and the risk of a potential acquisition of Land Rover & Jaguar results in M&M coming in lower in our auto sector pecking order. CLSA has recommended buy rating on Mahindra & Mahindra with 12-month target price of Rs 840.

Posted by FR at 8:11 PM  


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