Mahindra & Mahindra Reports Strong Q2FY26 with Margin Growth and Robust EV and Farm Segment Performance

Mahindra & Mahindra (M&M) posted strong financial results for the second quarter of fiscal year 2026 (Q2FY26), with standalone revenue climbing 21.3% year-on-year to ₹33,421 crore. Although revenue realization was slightly lower than anticipated, the company's profitability improved significantly. The standalone Ebitda margin expanded by 20 basis points (bps) to 14.5%, exceeding Bloomberg's consensus estimate of 14%. This margin enhancement was attributed to a richer product mix and improved performance within the electric vehicle (EV) segment.

The EV division, which was previously a drag on profitability, is now showing positive contributions. Its Ebitda margin increased by 260 bps sequentially to 6.2%, partly supported by the production-linked incentives (PLI) scheme. The XUV9e model is already benefiting from these incentives, and the BE6 model will qualify from April 2026, further supporting future margin growth. Nomura Global Markets Research forecasts that EV margins could reach double digits by fiscal year 2028 as the entire EV portfolio becomes eligible for PLI.

In the auto business, the Ebit margin rose 30 bps sequentially to 9.2%. The farm equipment segment witnessed an impressive 32% year-on-year surge in tractor volumes. This strong demand led M&M to revise its industry growth forecast for FY26 upwards to 10-12% from the earlier 5-7%. Key tailwinds identified include improved reservoir levels, increased government spending, stronger rural liquidity, and the recent Goods and Services Tax (GST) rate cut.

Brokerage JM Financial Institutional Securities expects farm margins to benefit from operating leverage and anticipates that strong SUV volumes, EV expansion, and PLI benefits will boost auto profitability. The brokerage has raised its margin estimates for FY26-27 by 50-70 bps, projecting an earnings per share upgrade of 9.6-11.4%.

M&M continues to lead the SUV market, gaining 390 bps in revenue market share year-on-year to 25.7%. Festive demand remained robust, with retail sales showing mid-to-high teens growth. The company has plans for two refreshed internal combustion engine (ICE) models and one new launch in calendar year 2026 to sustain its product cycle.

In a strategic move, M&M announced the sale of its entire 3.53% stake in RBL Bank for ₹678 crore, achieving a 62.5% gain on its investment. This divestment provides a sentimental boost, though the stock's re-rating will ultimately depend on the sustained momentum in its core businesses.

So far in 2025, M&M's stock has appreciated by 18% and is currently trading at approximately 25 times its estimated earnings for FY27.

Impact This news has a significant positive impact on Mahindra & Mahindra and the Indian automotive and farm equipment sectors. Margin expansion indicates operational efficiency and pricing power. Strong EV performance and future outlook suggest successful diversification. The farm segment's growth signals a healthy rural economy, which often translates to increased demand for vehicles. The stake sale provides a financial boost and strengthens the balance sheet. The overall outlook is positive for M&M and its investors. Rating: 8/10.

Difficult terms * Ebitda margin: Earnings Before Interest, Taxes, Depreciation, and Amortization margin. It measures a company's operating profitability before accounting for interest, taxes, and non-cash expenses. * Basis points (bps): A unit of measure equal to one-hundredth of a percentage point (0.01%). For example, 20 bps is equal to 0.20%. * Product mix: The combination of different products a company sells. A "richer" product mix means selling more high-margin products. * Electric vehicle (EV): A vehicle that is powered, at least in part, by an electric motor using energy stored in rechargeable batteries. * PLI scheme: Production-Linked Incentive scheme. A government initiative to boost domestic manufacturing by providing financial incentives based on incremental sales of manufactured goods. * XUV9e: A specific electric vehicle model planned by Mahindra & Mahindra. * BE6: Another specific electric vehicle model planned by Mahindra & Mahindra. * FY28F: Fiscal Year 2028 Forecast. The projected financial performance for the fiscal year ending March 2028. * Ebit margin: Earnings Before Interest and Taxes margin. It reflects operating profitability before considering interest expenses and taxes. * BEV: Battery Electric Vehicle. An electric vehicle that runs solely on battery power. * Operating leverage: The degree to which costs are fixed or variable. Higher operating leverage means that a small change in sales volume can lead to a larger change in operating income, as fixed costs are spread over more units. * GST: Goods and Services Tax. A consumption tax levied on the supply of goods and services. * SUV: Sport Utility Vehicle. A type of vehicle that combines estate car elements with off-road vehicle features. * LCV: Light Commercial Vehicle. Vehicles used for commercial purposes, typically smaller than trucks. * RBL Bank: A private sector bank in India.