Mahindra & Mahindra is the largest car winner of GST 2.0. 5 reasons why

Mahindra & Mahindra shares emerged as the striking profit in India’s auto sector after sweeping tax cuts under the new “GST 2.0” regime, with the shares that on Thursday up to 9% of chats as brokerages including Emkay Global, Motilal Oswal, and Icici immediately said M & M said devision.

Finance Minister Nirmala Sitharaman announced the restructuring of the goods and service tax (GST) on Wednesday, which collapsed four records in two rates of 5% and 18%, while retaining a levying of 40% on luxury and sin goods. For the car sector, the changes in most categories of 28% to 18% beat and reduce tractors to 5%. SUVs above four meters are loaded on a uniform 40%, a decrease of 43-50% earlier. The changes will take effect on September 22.

1. SUV portfolio gets a direct boost

The dominance of M&M in the large SUV category makes it an excellent beneficiary of the new 40% album. Jefferies estimated the tax reduction of 5-10 percentage points of SUV levies, which illuminates the sticker prices for flagship models such as the Scorpio-N and XUV700. Emkay Global noted that almost two-thirds of the SUV portfolio of M&M SUV portfolio will now attract more than 50%.

2. Tractors see the best tax lighting

Perhaps the most important shift is in tractors, where GST is reduced to 5% of 12%. With M&M, who holds the largest share in the tractor market of India, Emkay Global and Motilal Oswal said that the relocation immediately strengthens the national demand .icii said that cheaper acquisition costs will wrinkle by the ecosystem of the farm machines, which will reinforce affordability for farmers and acceleration mechanization. Analysts see this as a structural long -term advantage that plays directly in the leadership position of M&M.

3. Wide portfolio goes to 18% plate

The commercial vehicles, tricycle and small passenger cars of M&M will now fall under the 18% plate, a decrease of 28% earlier. That width of exposure, Icici immediately said, means that the company enjoys ‘wide portfolio reasons’ on national, urban and fleet markets.

Axis Securities noted that lower loads on tricycle return period improve for independent drivers and fleet operators, which means that the demand stimulates segments in last-mile and shared mobility where M&M has a strong presence.

4. Removal of stopping illuminates the load

According to the earlier GST regime, SUVs were not only for the standard 28% rate, but also a compensation walling that increased effective taxation to 50%. Emkay Global said that scrapping the stop is a structural disadvantage for M&M, the portfolio of which was disproportionately exposed.

The simpler structure now gives the company more clarity in the price strategy and reduces the headache of compliance in categories.

5. Festive timing increases the question

Jefferies noted that although some purchases can be postponed until the new rates begin on September 22, the timing is the stage for a strong question during Diwali and afterwards.

Axis Securities repeated that image and said that the revision on the “Sweet Spot” is arriving for the automotive sector, because the raised demand clashes with seasonal buying patterns. De Boost is expected to be pronounced primarily in price -sensitive segments, from rural tractors to urban SUVs.

The brokerage said that the timing matches the peak buy cycle of India, which strengthens the benefits for M&M vehicles.

Market reaction and prospects

The Nifty Auto -Index climbed almost 4% on Thursday, but the 6% rally from M&M made it the best profit from the benchmark. Icici repeated his “buy” rating with a target price of RS 3,800, whereby the company is mentioned in addition to Maruti Suzuki and Bajaj Auto as top choices in the sector.

Emkay Global mentioned the reforms ‘contra against expectations’ in how decisively they prefer M&M, while Motilal Oswal said that the company will see a more pronounced boost than rivals, given the double exposure to SUVs and tractors.

Arun Agarwal from Kotak Securities said that the cutbacks could translate into the price reductions in the middle of the high-single figures in the M&M mass market vehicles, making the stage for stronger recovery in volumes.

For the broader industry, analysts see 5-10% demand growth between categories in the short term. But with the portfolio of M&M tailored to the steepest rate reductions, the market judgment of Thursday was clear: no car manufacturer is to win more from GST 2.0.

Read also | Mahindra & Mahindra shares the shares of 8% on GST revision. Is it the biggest winner of the automotive sector?

((Indemnification: Recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)