Mahindra & Mahindra 144A

Hi, good afternoon everyone. We are a couple of minutes past, so we'll start now. And let me just take you through the highlights of the quarter, then we'll have Rajesh come in and talk about the auto and farm businesses, and Manoj will talk a little more about the financials. Overall, a very solid operating performance, excluding TechM. You've seen the TechM results, it's getting on a path for recovery and a turnaround now, but there's more work to be done, obviously a lot more work there. But besides that, auto continues on a very strong momentum, gaining market share in SUV, up at 21% now from a revenue standpoint, number one in market share, and at 49.6% in LCV. So very strong performance on both of those fronts. Farm While the industry has been tough and we expect it to be down 5-6% for this year, the business has actually gained 80 basis points of market share. And at the level that we are at, at above 40%, that again is something that is a very strong performance by the farm team. Mahindra Finance turnaround is very much on track. GS3 is at an all-time low of 4%. You've seen the results from Mahindra Finance that were published. The credit costs are on track in terms of what has been committed. Strong disbursement growth, sequential NIMs are up. So overall, the business is on a very solid track. And TechM is the sore spot for this quarter. Profit is down 61% due to a number of factors which were discussed in the TechM call. But it's one where with the new CEO coming in, we are seeing very good signs of a turnaround. A number of things have been put in place already. So we shall expect much better results from TechM as we go forward. In addition, our Growth Gem value unlock continues. We've launched... India's largest renewables INVIT and that puts Susten in great shape to be able to deliver the growth that we want. We've got a large number of investors and we had to say no to many of them as well. But as the business grows, we have the INVIT to be able to fund a large part of that growth in terms of the strategy we've outlined. Susten has performed very well this year. It's in fact much higher than the track we had outlined for it. We had talked about a 5x growth in Susten in five years. We are now looking at that and saying, should that be 10x or should that be somewhere in between 5 and 10? Second, from our last month mobility standpoint, we've got a second investment. The first was IFC, the second is NIIF's India-Japan fund, and this comes in at a valuation of 6600 crore, 10% higher than the first one. Again, driven by strong performance in the business. As a result, overall consolidated PAT is up 34%. This does exclude two items from last year. One was the sustained gain that we had as a one time when Ontario teachers came in and took the 30% stake and the entire company was revalued. And second is the trucks and buses impairment that was taken last year in the third quarter as well. So you see it on this slide here where revenue is up 15% for the quarter, 17% year to date. And from a PRT standpoint, you see the net impact of the two offsetting parts, the plus that we had last year from the sustained gain and the negative that we had last year from the trucks and buses impairment on a net basis was a gain of 693. Without that, it's up 34%. On a year-to-date basis, up 33%. We've talked about the three elements of a strategy. Capitalizing on market leadership in auto and farm. And you see that in the numbers here beyond market share. As we look at the profit increases up 49% despite the slowdown in the farm industry. That's driven by market share, margin performance in auto. And it's also setting the business up for the future with brand investments as well as product launches that have been done in farm that will be done in auto for EVs. TechM and Mahindra Finance, we talked earlier, Mahindra Finance is on a good track now. TechM has to get on that track and start its turnaround journey. And Growth Gems, while you see the numbers here, profits are up 3.3 times, but I'm a little less focused on these numbers, more focused on the value creation from the Growth Gems that we will see. And we again talked about LMM and Invit. Life Spaces, I'd highlight, is doing on a very strong track in terms of sales and on a 5x growth path that we've set for it. So on balance, we've got our strategy working as we had planned it. And therefore... We go back to the commitments we made, 18% ROE, we stay firm with that. We are 19% year-to-date. And from an EPS standpoint, we are a 40% CAGR over the last two years. We've taken away the F21 number. Obviously, it will be a lot higher if we include that, but that was a low number, so we haven't included that in the EPS growth that we see here. With that, let me invite Rajesh for comments on auto and farm.

Good afternoon, good evening, good morning, depending on where you are. Quickly walk you through the automotive business first. And as you see in the auto, we had a volume growth of 20%. The SUV part of it was close to 30%, which is 211,000. And the revenue market share is at number one position for the quarter and YTD April to September. And the quarter number is out there, 21%. LCV continues to be strong and our LCV market share less than 3.5 tons is at 49.6%. We got the automaker of the year or manufacturer of the year as they call it at the Auto Car Awards, a reflection of the multiple things that have happened in the auto business. On the left side you see a chart which has the SUV volume growth and we have been able to be number 2 on volume in a category in which most of our products are priced much higher than competition and for 6 quarters in a row. You know many of you have this question why are we not playing in the low end of the market. We strongly believe that we should play where our strengths are and our strengths allow us to be number 2 on volumes. even in a very competitive category, which the SUV market today is. And of course, we are number one on revenue market share, given our price per unit is much higher than everyone else. I guess this is the slide you all want a little bit more on. I'll talk a little on it now, but we'll take questions on it. So 226,000 booking numbers have come down. On one hand, that's good news because we wanted to bring down waiting periods. That is what the whole ramp up was meant to be. So part of it is that. Part of it is December does see a higher cancellation rate. So what you're seeing here is a 10% cancellation rate for the quarter. That is partly spiked by December, which is the wins changeover number. The January cancellation rate is back to less than 8%. So what are the things that have happened? And we can take more of this in the Q&A. So firstly, new bookings continue to be healthy at 50,000 odd per month. The daily supply average has gone up to 40,000. So obviously your bookings are going to come down as your availability has moved up from the past from 32,000 a month to 40,000 a month. So you are correcting the bookings by improved delivery. Cancellations did go up and like I said part of it is due to the win number. So on an overall basis, we would expect the bookings to be in this range. But the endeavor is to bring bookings down. Because if you really have to grow the business, it's not going to be easy to grow a business when a customer walks in and they hear that you're going to get the product after 10 months or 12 months or 8 months. That is not the nature of the market today. It may have been the nature of the market two years back, but it's not the nature of the market today. If we have to grow, we have to bring the booking numbers down. So my input to all of you is, it's not good news to have a good booking number. It's good news to have growth. So we want to be focused on bringing down this booking number. uh with a period of time and we can talk more on this in the q a i'm sure this is the top of mind question for all of you uh where are we on capacity expansion we had said we'll be at 49 000 capacity end of uh this financial year that's end of this quarter we are on track for that however we don't expect to hit that number in the near future for two key reasons one We are ramping down the 300 and as you see that we are in a mid-cycle refresh which is going to happen soon. So for the next two to three months, we will see a significantly lower volume of XUV300 which is one of our large selling products. So we are not going to see the spike in volume coming out of capacity. The second is there is a variability between demand and specific models that we have. So there will be some capacity mismatch. So what we've done is to give you an idea of what's going to happen next year. We've basically taken the SIAM projections for the industry, which is passenger vehicles at 3% to 4%, UV at 10% to 12%, and saying we will grow faster than that in mid to high teens. So that's in a way an expectation of where you should see us next year. And we can talk again more on that as we go. The LCV industry has by and large been flat through the year, a little negative in fact, but we've, as you can see, gained a very good market share and got growths out of the ability to grow market share with a very refreshed or in actually all new pickup portfolio, which has really helped us penetrate and gain share. The last mile mobility, we just put this up. We have a wide and very strong product portfolio, many more new products in the pipeline. a lot of work happening on product development in this space, there is increasing competition and that's good news because the penetration of the L5 segment as we know it to be is only 11% still. the ability to grow and penetrate this segment is going to happen with more competition. And we believe that is good because this is the segment out of all the automotive segments which has the best possibility for category penetration. And that will happen when more people come in and together drive growth. So, we feel good about the fact that the industry will grow. Obviously, there will be some loss of market share. That's not significant at this point of time. And again, we can take more questions on that if you have. The volumes in this segment in quarter three were 11,600, where we grew 118%. In January, we grew 69%. The market share in this segment was 48.5 in Q3. It's back to 60% plus in January. So there are series of things happening and again the message is huge upside on category growth which will allow us to drive a strong growth in the segment. The consolidated numbers for auto revenue was up 26%, PBIT was up 91% without considering the impact of trucks and buses impairment which was happened in last quarter. If we take that then it was minus 95 for PBIT but we are leaving that out of the equation. Margins, favorite topic which all of you have questions on. So in quarter 3 of F22, we had said we will go up by 3% in something we vaguely call the medium term. But that happened in one year, which is quarter 3 of F23. And in quarter 3 of F24, it's up by another 1.7%. So we have basically moved from 3.3 to 8.3 over this two year period. On FES, we all know the industry is down 4.9% in the quarter and about 4% for the year. In the quarter, we were down 4%. On YTD, we are down 2%. And we've gained 80 basis points of market share in the quarter. The rural economy is not having the best of time. but there are positives and negatives. So one key driver of rural economy is government spending index, an internal index we've created which looks at all the spending that happens in rural. It's not just Agri, it is all the spending that governments do in rural. We can see that curve moving up a little bit and hopefully that for us is a good indicator when you start seeing buoyancy and you can see the downward curve which is the time we've started seeing rural not as buoyant. The positive, of course, all of you know the rainfall delay, shortfall, reservoir levels, all of that. The positive news is terms of trade are becoming positive. Output inflation is 6%, input inflation is 3%. So there is 3% positive terms of trade, which is normally we've seen a very good sign of farmer sentiment. So that's one very positive news on the rural side right now. This is the market share trend just for you to see. Farm machinery is continuing to grow at 29% in spite of rural being slow. We had said we would feel good if we end this year at 40%. We may not get to 40% this year, but we feel we are on the right track at 30% plus. And as we see signs of rural economy pick up, we'll probably see much greater growth in this segment coming in. Revenue was flat. This is consolidated and PBIT was down 9% in the tractor segment. On core tractor margin, basically we were at 16.9. We had called out World Cup. It said we have got a World Cup spend in quarter 3. We have not taken the impact of that on auto side. Of course, auto spend as well. So we have not called that out as a percentage impact on auto margins. But because it has a significant impact on tractors, we've called that out. So that's a 0.7% impact in the quarter of what we spend on World Cup advertising. So if we had not done that, we would have probably been at 16.9% plus 0.7%, which we believe is a good core tractor margin in the current context. So you see the same thing on this graph, which is something that we've been showing for a period of time, which is industry growth mapped with our margin. And basically saying that our margins operate in a very narrow band of 17 to 19% typically, irrespective of what happens to industry in that quarter. And you can see that if it was 16.9 plus 0.7, then we are in that 17 and a half kind of band, even though we've seen industry down at minus 5.6 and minus 4.9 in this period of time. So with that, I'll hand over to Manoj. Thank you. Manoj.

Thank you, Rajesh. Good evening, everyone. So I just have two short slides, and I think this one Anish has covered largely in terms of the PAT. I think I just want to highlight two things. One is from a revenue perspective, while Otto and Farm Rajesh did cover, but financial services saw very good growth, about 24%, with Axelo growing about 21%. So multiple businesses are doing well from... from a perspective of contributing to the consolidated results. I think on the sustain and trucks, the 693 was an impact in the last quarter. To look at the MTBD business, I think we had looked at, performed a critical review and taken the charge last year. And that's an extraordinary item, was classified as extraordinary. But for purposes of comparison, the 34% is probably a more accurate number to look at. I think just another cut in terms of what is the journey from 1984 which is the number which is excluding susten as well as excluding the trucks and buses impairment. I think clearly auto is the significant addition in terms of 721 crores of profits. Farm, as Rajesh mentioned, was slightly down, including I think there's an impact of the World Cup there. And if I look at services, two things. First is TechM. I think there has been a drop in profitability and that's something we are working towards in terms of how do we get back on the journey of profit improvement. On Mahindra Finance, while the number looks down, I think last year we had the benefit of some of the credit cost reversals coming through, which is absent this time. But otherwise, the business continues to do very well with the focus on credit costs and and were much in line with whatever they had committed from a year-end perspective. And overall growth gems, I think there's a small increase. I think the 147 is also there was some Forex charge in the previous quarter, which is no longer there, a Forex loss. So I think that's a quick journey from 1984 to 2658. With that, I think we'll leave more time for questions because I think we don't have... too many other events happening like some of the past quarters. So I thought we'll engage in more discussions. Thank you so much.

All right. We'll open it up for questions here and then move on to online as well. A fair bit of questions coming in there. So Kapil, do you want to just give them two minutes to settle down and then we'll take questions. Somebody handing over the mics. There's a question there on the left, please.

Hi, good afternoon sir. My question is firstly on the demand itself. We are looking at 3-4% growth for the industry for SIAM. If you could just look at the fact that UVs we are talking of 10-12% growth. So basically what we are implying is that non-UV segment is probably going to decline in some sense and if I look at M&M talking of 15 or let's say mid teens to high teens kind of growth, then X of M&M industry growth will be a very low number, if my math is right. So is this forecast made bottom up by SIAM or how is it done? And how are you as a company thinking about it?

You know, I had exactly the same set of questions when I saw these numbers. And my follow-up to that was I want to see the modeling. So I have asked for the modeling, which has just come to me a day or two back. I mean, I maybe spent two minutes on those slides, but there is a modeling. So it is not some consensus view of talking to five OEMs and putting it together. There is a modeling that has gone. Vijay, I don't know if you got a chance to go through what you sent me.

It takes a typical regression model into understanding where it looks at economic factors, it looks at agri factors. I think it also along with that takes into consideration what OEs are talking about and they put all of that together to give out what their forecast is. So there is a very clear regression based model which they use to arrive at their forecast. It's not a unique modeling. It's typically what most economists would use in terms of arriving at the growth figures.

So for M&M, if you could talk about what's going on through the different models. We've seen, as you were saying, the order books we see for some of the models like 700 have seen a big dip. We've seen some upgrades also. So if you could just give some color on different models, how you are thinking about it. And also on electric vehicles, we've recently seen some price cuts. So is it? is it becoming more cost competitive versus ICE or the competitive intensity is actually increasing and how do you see the buildup versus, you know, because some of the players say that probably EVs will not be viable and hybrid should be a solution as well that should be looked at by the government. So, yeah, that's the question.

Lots of questions. Let's quickly walk through the model wise because I think that will also be of interest to most people. So, Thar has got a very strong, continues to have a very strong order book. The longest waiting period we have in all our models right now is the two wheel drive Thar where the new bookings are strong and the old bookings are very strong. The Scorpio Classic is again continues to be extremely strong. Scorpio N is strong as well. Bolero is has a few weeks if at all waiting period so you know that's that's more or less like not on a booking list and it hasn't been for the last few months if you've seen that chart what is going off from from a number point of view is also 300 because there's really no we're not taking bookings on that now so clearly that that whole thing is gone and that will come back when we come with the mid-cycle refresh. So that I think is one thing that you need to factor in that's not there right now. So that's one thing which is not there. XUV700, I'm going to spend a little bit of time because I think your question is also specifically around that. So I think we have two things that we need to do from an XUV700 point of view. One is signal that you don't have to wait for too long. Because one of the problems that we will have or we face as we ramp up wanting to get a big increase is the perception that you have to wait too long. So if you know the perception right now on XUV700, you've got to wait 12 months or 15 months because that's how it has been. Unless that perception changes, you're not now it's two and a half years old product. I mean, in August this year, it'll be three years. So we do have to have people feeling that you can get this reasonably quickly in weeks, if not days. So one of the things we have done is to bring in this new model which comes in with captain seats and so on and so forth and we are making that available faster. So we are trying to signal that some models are available faster. I think the big thing that we need to do on XUV700 right now is You know, we had the MX series, I don't know how many of you remember, and then we have the AX3, AX5. Because 80-85% of our orders went to the AX7, AX7L. In a way, the existing word of mouth on XUV700 is it's a 25 lakh rupee product. Now, we've got to open the funnel because we have product, really good competitive products from 14-15 lakhs going up all the way. But because the whole first flush of demand and continuing to now, continues to be on the higher end version, we have to correct the feeling that this is a, whatever, 25 lakh rupee product. Because this can play against multiple set of competitors. And we've not got the chance to leverage that. So that's one of the things that we'll start doing. So, you know, in a way we have this, in a way, a dilemma that we need to start marketing ourselves here because we have segments to open up. And we don't want to get locked in the mindset that we have to keep a booking period open. So we've actually proactively reached out to old 700 customers and seen whoever doesn't want to buy or buy the... We've removed them from the booking list so that we are able to put ourselves in a mindset that we need to market ourselves in the right segments to get growth. I'm coming back to saying what is important for us is growth, not a numeric booking number. And 700 is a very strong product, but if we have to... We have to think of the fact that we have right now two very strong products at volumes which primarily the average price point is 23 to 25 lakhs. There is no other product which is selling this kind of volume at that average price point. So in a way we have variants. We have to bring the average price point down to drive growth. Does that answer?

Yeah, on EVs and 400 as well.

Yeah, no, the first part of your question was your car. I'm just kind of addressing that. So on the EV front, I think you're talking about the recent price drop and is it competition or commodities? I think it's a little bit of both. We did bring in the upgraded 400. I don't know if any of you had a chance to see that. It's looking really nice. And then... Competitors do react to moves that are made. So somebody's reacted to a move that we made. Of course, it's enabled by the fact that battery prices have gone down as well. I really don't think right now it's a competitive intensity thing because the size of the category is so small. I think it's roughly 3,000 or 3,000 rupees a month in the category that we are talking, which is the price points these products are playing at. And we hope with the 4OO that we have, we should get to about 25% market share of this small segment.

Just one last one if I can squeeze in on profitability. Was there an impact of World Cup spend that we should think could be sort of not a normal spend for the auto business as well? And if you are looking at 15% growth or higher than that, then should we expect operating leverage and how are you thinking about playing the market in terms of, you know, Do you want to keep the products affordable to drive growth or should we expect margins also to have potential to rise further?

So there was some World Cup impact on the auto side but you know in the overall scheme it would have made a decimal smaller than a point seven percent decimal impact on auto so we didn't want to call it out specifically but of course there was an impact of World Cup in quarter three on auto. To the point of view of next year, I don't want to answer that very specifically because firstly, we have to go through our budget process and which will all happen now. But directionally, we would want to see growth. We do want our products to remain within access and there are multiple ways to do that. It doesn't mean necessarily price drop. you know, marketing variants, which we have in our portfolio today, which we haven't marketed because we were on a long waiting period. So I think there are multiple set of things that we need to do to drive growth. So growth is going to be important for us. And we have to use cost levers. And we, you know, we always talk about the fact that Cost is something which can be a bottomless pit. You just got to keep digging and finding cost and we would continue to do that. So I think directionally we would want to see growth and improved business performance. Anish, you want to add?

I just go back to your question, Kapil, on hybrids versus EVs. We see hybrid essentially as an extension of ICE. And we had a choice. We could have gone into hybrids very easily. And we felt that EV was a better place to be because that is a technology for the future. That is dramatically different from ICE. The products are much better, much more fun to drive. you've got a huge impact on emissions, a huge impact on operating cost, whereas if you look at all of those factors on hybrid, it's not dramatically different from ice. Now, there are certain markets around the world, Norway for example, which is 90% plus EV already. What is the noise coming from some of the markets, which have hit 20% or so from an EV penetration standpoint? There are two parts. One is in cold weather, the range fluctuates quite significantly and second is charging ecosystem is not as strong as it should be because people still have to wait for 30 minutes to charge a car and sometimes if a charger is not working or you got more people in line it is a much longer wait and which is why folks are saying I don't want to wait that is the reality we will have to face an adoption of EV and which is why governments around the world are incentivizing EV use because Charging ecosystem as well as cars on the road will go hand in hand. As more cars come in, greater charging ecosystem comes in. If one lags, the other will fall slightly as well. In India today, we got a very low penetration, 1.5% or maybe even lower. And therefore, we will see first people who can charge at home and charge at office by EVs. then it will start moving towards getting a broader population of chargers in place. And as it comes, there will be a greater market that opens up. So that's what we modeled out saying it will go through that evolution in India as well. and even globally I think as ecosystem charging ecosystem and charging technology I was talking with someone in the battery space and they said there is technology now that can charge 200 kilometers in three minutes now we've got to look at that in more detail and see what is required for that to happen as that starts happening and maybe it's there now or maybe it's there a few years later but as that starts happening then it's much more easier to do it then you have petrol pumps around the world start putting up EV chargers because it takes the same economics in a sense to have a car come in and go out from a time standpoint. So those are going to be some of the challenges that we will see in EV adoption. I see us being able to go through each of those modules, but we'll have to work through that. It's not going to be an easy answer. It will have to be charging ecosystems comes together with the demand on the road. But EV is going to be the future. It'll go through some hiccups along the way, but that's really where the markets are going to end up.

Thank you. Thanks.

Please.

Actually, just continuing on that, on the CAFE regulations or any emission regulations that are coming up, could you update us a little bit on that and is there any sort of internal estimate about number of EVs you need to sell to meet the next CAFE norms or anything on that side?

In F24, which is a current year, with whatever we have sold of 400 so far and what we will sell in Feb-March, we will comfortably meet the norms.

What is the next key milestone to watch?

By way of the number? For the cafe norms. That is far away. There is no date yet.

There is nothing between BS 6.2 and BS 7.

So even for cafes after 2024, the 25, 26? Yes, the same.

Yeah.

So in a way, you don't have to sell more EVs to meet that requirement?

To the extent that which our ice grows, the number of EVs will go up marginally higher. So it is based on what you are selling in a mix of diesel, petrol, etc, etc. So that is what is used to say how many EVs do you need to sell to? offset and meet a certain cafe norm so that's a derived number so what i'm telling you is for f24 based on our current sales mix whatever we've sold affordable till now plus what we are planning to sell in feb march we should be comfortable

And secondly, just going back to rural, earlier we knew that M&M on the UV side also had a sizable rural exposure. So whenever rural would be weak, your UV portfolio would also get impacted by that. At least in the numbers now, because urban is doing so well, it's not very visible. But is there any underlying data which makes you think that if rural was to rebound a year down the line, there are a few models which are sort of underserved now in those categories which could turn around? Or you don't see any rural slowdown in UVs?

So Bolero is primarily a rural semi-urban model and clearly that hasn't seen growth this year. Possibly because of the state of rural. That being said, Scorpio Classic is also primarily a rural product. But it caters to a totally different target group. And that target group has a lot of money. So when we say there is rural economy is under pressure, it's not everyone in rural is under pressure. Even when you look at urban, there are segments which are very rich and that's why we are seeing demand for certain kind of vehicles. And there is maybe the salaried class or some smaller businesses who are... postponing buying of vehicles. So, you see that in urban as well. So, that would be, that is affecting us in products like Bolero. But it doesn't affect us in a product like Scorpio Classic, which is primarily, primarily really rural. Even Scorpio N, I think, Vijay, 40% plus rural. So, it's not, it has very high rural presence as well and we don't see a stress in these segments there. Yeah. Yeah.

Thanks Vinay.

So we see some bounce back from Bolero etc. Yeah, Bolero and even 300 to some extent when it comes in because that has also I think almost 35-40% semi-urban rural. But not dramatic. Hitesh.

Hitesh from CLSA. Sir, two questions. First on this Red Sea issues. So we started hearing from people that there is 55-60 days of delay in machinery coming to India because of container not coming. So, are you seeing any issues in your supply chain or something on container or part shortage? That is the first question. Second question, I will talk on tractors later.

Yeah. So, let me take this. So, Red Sea issue has basically three implications. One is cost, second is exports and third is imports of material or equipment. On cost, we are covered with contracts to a large extent. But anyway, the impact is not significant on materials. That's not a big deal. On exports, we've had some impact to get the new Ojas for launch to North America. But the delay is predictable now. It's four to five weeks. So we would factor that in. So there's no real business impact. once you know that it's a delayed cycle of four to five weeks. On the incoming material, raw material now, we are kind of covered with having proper inventory in place, some contracts which prioritize shipments in. So at this point of time, we're not seeing any supply chain disruption risk coming on. That doesn't mean that it won't ever happen, but right now we are not seeing that. I haven't heard of any capital equipment. I don't know if you heard of that's getting delayed because of Red Sea.

My second question is on tractor. So, you know, Vahan is showing a pretty good growth in tractor retails. You know, other companies also talking about that this number is not right. So, if you can give us some sense on tractor retails, what is happening and where is our inventory levels? And my second part of the question is also on that farm equipment. When do we see profitability, you know, on the farm equipment side? At what revenue we break even?

Yeah, so on the first part, I'm not answering the question of vahan context, but more a retail momentum context and stock levels. Typically, billing is worse than retail in a down cycle, we know that. So, you know, the retail growth is not as, retail negative is not as bad and in the festival season, we actually saw positive retail growth in the festival days, what we count start of Navratra to Diwali. So right now it is many people including us suggesting stocks which brings the industry level downward. And I think that's the right thing to do, preparing, keeping in mind the current sentiment that's prevailing. We typically like to be at about 30-day stock for tractors with dealers. We are a little higher than that. and not too much higher, a little higher which we will correct in the next three months or so. We have been correcting last couple of months and we will correct it over the next two to three months. So we typically like to be at 30, we are a little above that right now. So we do need some correction. The farm machinery, sorry I missed that. The farm machinery, you know, I don't know if we want to share a number of breakeven, but it's very much on our mind. And as a direction, maybe we are like a year and a half or two away from being able to breakeven with the current growth plans that we have.

We'll just take one… And it will have meaningful contribution after that because that's one of the things we are driving to say that with the investments we are making in that, it should have a meaningful contribution.

The industry itself is, I mean the players who are there, current competitors do have a decent margin profile. So it's not like the industry doesn't have a profit pool. So once we get our momentum going and our product strategy and material cost optimized over the next two years, there's no reason why we won't make money in this industry. There is a profit pool in the industry amongst current competitors.

Right now the cost is also higher because of the investments to grow share across multiple products. So that's one factor that's driving it. And we're not shy of making those investments right now because we feel that there's a huge market here that we can really benefit from.

I'll take one question, Gunjan. Just give one question from online and then we'll come back to you. So Pramod Kumar from UBS. Actually, it's a two-part question, one for Manoj and the second one for Anish. Manoj, the question is, are there any non-operating income expenses like mark-to-markets, divestments, et cetera, in the segmental performance this quarter that you wanted to highlight?

So I think if you look at what is impacting the standalone segmental there is dividend income which is classified as operating under the new standards and that is the only big item there is some 36 odd crores of There is one investment of ours which got listed in the US which was Zoom car. There is some reversal of impact of 36 crores. So, broadly speaking there is not much of an adjustment this quarter except for the dividend income which comes into the IBCS segment. Anish, the question. Sorry, the other item is of course we have KG Mobility and RBL which we mark to market every quarter. So there is a gain coming from that which is shown as other income. It's not shown as operating income. So it's not in the operating income from a segment perspective.

Not in segmented results in the consolidated. Anish, question for you is classic legends given its performance would fall more in the divest bucket the way you have thought about capital allocation or laid out capital allocation in the past. So what makes you believe we should put money in there?

So Pramod on that, our capital allocation was always based on Can we make money in this business in future? Not as much on is it making losses right now. And while we did exit a number of businesses, we also turned around a number of businesses. And therefore, this is one we actually feel very good about. We think the products are outstanding. These are very good brands. There have been some hiccups in the past couple of years that we've gone through. And today we feel that it's well poised to grow which is also the reason why we put in a commitment to put additional capital over the next three years. And not just us, but we had external investors coming in as well, which is part of what we've been doing with many of our growth gems. And that is external validation for us to say that it's not just us believing that something can grow. They're putting the money behind it also and believe that it's going to grow significantly. So, it's one business where hopefully we can come back and show great value creation and I'm confident we will. And that's the reason why we put it as what we would call category A, which is invest and keep.

Great. Gunjan, please go ahead.

Thanks for taking my questions. Before I get to the questions, Manoj, just clarification on this 36 crores, the number that you called out. I assume this is all in the investment. None of it is in the auto and the farm segment, right?

No, it is an investment.

Okay. Just going back to the order backlog which we have, now we clearly have capacity mismatch in Thar and Scorpio. And Thar, we will go ahead and launch the five-door model as well. So if you can just talk about how are we still thinking about capacity ramp-up for these two models because that's where the biggest backlog lies.

Thar is one model, which is the second? Scorpio.

Scorpio. Yeah. Because the booking run rate, if I see, is still much higher than the monthly capacity that you had laid out.

Yeah. So, on... On Thar there is basically we have roughly out of the current sales that we do which is about 6000 or a month, roughly half is four wheel drive and the balance is two wheel drive. A lot of the bookings are on the two wheel drive. We are not able to right now ramp up two wheel drive production because of the engine related capacities there, not the assembly line or the manufacturing related capacities. Right now beyond 3000 that will move up with time because that's a very specific engine related capacity which is what's the 1.5 liter which goes on the rear wheel drive, the two wheel drive. So that's the specific constraint that we have in being able to increase the volume of the Thar two wheel drive. But overall as a portfolio we think it's a very good balance where 50% of our volume is coming from two wheel and but 50% continues to be from on four wheel drive which is a very good sign because that means people do see value of paying the extra money half of the people to go into a four wheel drive. The Thar 5 door capacity is a separate capacity as we have shared earlier and that will kick in when we are ready to launch that sometime in the middle of next year or this year rather, middle of this calendar year. So that's specifically on Thar. On Scorpio Classic, that's one area where we have a constraint because we are getting very good momentum and We were not anticipating that we will get an uptick. In fact, most people thought Scorpio Classic will disappear when Scorpio N comes. It's actually got stronger. So we have, we are doing some capacity tweaking to increase the capacity, but not significantly. So that, I think that is a product which will continue to be kind of in the region of what it is, which is right now between four to four and a half thousand kind of volume. The Scorpio N, most of the capacity debottlenecking has happened. There, we are having a variant mix issue, which is where the orders are versus what we are. So a lot of the orders that have come in are on the mid to lower end versions, which is good for the long term, but we had not ramped up those versions as much. So that's the product on which we have a variant mismatch issue, which we'll fix as we go along.

The other question, Anish, was on the electric portfolio. Now we will start the product rollout from December onwards as we called out. There have been multiple speculations around we not going ahead with Volkswagen, we are looking at battery setup. So if there is anything to refresh on the progress towards the strategy, are we still on track with respect to the launches and you know any alliances that are worth calling out?

So everything is on track as we had planned it. No deviation from that, Rajesh.

Yeah, and on the VW piece, there was some news handle which had reported that there is a… and VW clarified the next day with the statement that there is no change in whatever we are doing with M&M. So that continues.

Battery, is there a thought process to evaluate that?

Yeah, so we've said in the past that we would at some stage have a conversation with VW on localizing cells in India. That hasn't made a lot of progress yet. Doesn't mean that's not happening, but that's the next stage of work that we need to get to. VW right now has multiple of these giga plants coming up around the world. So they have a bit of a bandwidth issue. They need to get that going before they can start focusing on the India piece of that. But that's something that we will evaluate whether we would do that with a partner going forward.

Yeah, right now for the foreseeable future we are set. Yeah. In terms of commitments that we have on that. And we got to look at the next phase after that to say should we have our own battery plant or not. So we The inclination is that we should, just sort of put that out there. But we need to verify that inclination through a lot of data and analysis and say what are the benefits of doing it, what are the risks of doing it. And then on that basis make that final call that we should do it. And then the questions are with whom, what are the technology, all of those things that come out with that.

Thank you so much.

And then I would just also add the EV products have come out very well and We'll make sure that we have a chance to test drive them. I've test driven three of them and just very happy with where we are right now on this.

Just combine a few questions online while that is circulating because they are in the same theme. Rajesh, this is for you. In general, questions are coming from SPI pension funds, Abhinav Mukesh from Evendus, Viraj. They are all asking what the outlook for tractors is for Q4 and next year.

Q4 is minus 10 and F24 is minus 5 around. F25 too early to call.

All right. So then a question for you, Anish, as well online, and I'll come back to the room after that. This is from Viraj, and his question is, 15,000 crores of net cash and likely to grow. What are your plans for that cash?

I'm surprised that question didn't come up earlier. Okay. See, look, the one good thing is that we have not been going off and spending that as some of you would say. And we've been very disciplined in ensuring that what we do is on track with what we've committed. We are looking at a phase of what I would call exponential growth possibilities. And that's something we've talked about with our growth gems. We've talked about a 5x growth plan that we would have for that. We haven't had to put a lot of capital in it so far because we've had capital coming from the outside for that. So, last mile mobility, we were ready to put that capital in, but we had people really pushing us to say we want to come in and we want to give you capital for it. So, we don't need to put capital into last mile mobility. Similarly, for sustain with the renewables in which that we've got in place, we've got a great growth plan for that business, but we don't need to put additional capital in right now. As we think about holidays, life spaces, logistics, all three are businesses which can easily grow 5-7 times from where we are right now. Now we may get someone else to put in capital as it happens or we may put in some capital ourselves but those are businesses we want to invest in. Classic Legends is one we want to invest in. Again we didn't have to put in all the capital that we needed to because others came in along with it. So we will look at growth to really take us to the next level as a company. What we are very conscious of in my mind, capital allocation is not we will not invest. Capital allocation is we will get the returns of where we invest. And that's something I tried to clarify earlier also when we had some discussions around it. Because if everything we'd invested in the past actually gave results, everyone would have been very happy with it. The fact was it didn't. And we got lessons from there as to why should we be careful in certain areas and what we need to do before we invest in certain areas. So our approach is as follows. One, be very careful about where we invest. Ensure that we have all the capabilities required to win in that space and that we can deliver returns in that space. And then whatever plans we lay out in terms of saying we're investing to get these returns, we actually deliver on them. That's our approach to it. Now, where will we invest? To start with our current businesses. Because we've got huge potential across our current businesses. EV is an investment. Farm machinery is an investment. Mahindra Finance needs just core operating rigor right now, which is what it's focusing on. So it doesn't need investments in that sense. Techem needs core operating rigor, doesn't need investments. Our growth gems need investment because they've got huge potential for growth. So that is where we're going to look at putting cash behind it. Would we do something beyond that? At this point, we are not focused on it. But if something really meaningful comes up where we say that the Mahindra group can actually make a big difference in this space and we feel we can deliver on it, we may look at it at that point in time. But that's where we are right now. And I would also add that we feel that where India is poised today, there is room for tremendous growth. And having a war chest... to be able to drive that growth is something that will be very positive for us. At the same time, I do want to say that that does not mean that we are going to go off and invest in 10 different areas. We are going to be very, very careful, as I just mentioned earlier, about where we invest and how we invest.

Any questions in the room? Because there are a fair bit online.

There is one.

Yeah.

Hi, this is Nitesh Mangal from Jefferies. Two questions. Firstly, on the tractor side, I know you don't want to talk about F525 outtook yet, but are you thinking about what are the outer bounds in terms of what can be the extent or the length of this down cycle and what would you look at to assess that demand is coming back?

So let's think of what are going to be the positive enablers. One clear positive enabler is going to be a better monsoon than what we saw this year. Both the reports that have come out right now, the first reports, and I'm still saying it's too early to call because we know these reports keep getting upgraded and updated as you come closer to the time. both SkyMet and IMD are talking about a positive, I mean a normal monsoon this year, which is going to be good news from multiple points of view, especially, you know, reservoir levels have dropped after a very long time below their LP average, which is now this time at minus 5%. So we would want to see, there is going to be an effect of positive monsoon that will have on the sentiment, and overall buying in the economy uh in the rural economy so i think that's one factor i said the former terms of trade are positive which is a positive enabler some of the base effect has got corrected because you know tractor saw 27 growth and then we've seen two years of a down cycle so in some way we've seen a stabilization of the base a little bit uh next year is going to have uh navratra's back this year as you know We didn't have April and we didn't have March. So you kind of lost out on two fronts, which is one of the reasons why there's going to be a negative growth in this quarter. Because last year March, Navratra this year is going to spill over into April. And then you get a second one, I think five days at the end of the, two days at the end of March, spilling over into April. So that's going to be a positive festival-based enabler for F25 as well. So I'm just putting out all of these things. Obviously, we look at all of these. That being said, there are years and some of you know I have spent 7 years doing tractors only. There are years when I thought the industry will be minus 5, it became plus 20. There are years I thought it will be plus 20, it became minus 5. After 7 years, I have learned to say it's too early.

I think we have experienced that. Secondly, on the SUV side, can you remind us what are the IC launches you have from here? And also... Do you think there is a need to address a mid-size kind of an SUV price point like where XUV500 used to be? So is that your lower variant XUV700 or do you think you need one more kind of nameplate, maybe not all the way down but somewhere in the mid category?

So first, just to reassure all of you and we'll share more detail in May, we are very mindful that we need a strong ICE portfolio. Even if EV penetration reaches 20-30%, 3-4 years from now, still 80% of a very large chunk of business is going to be ICE. So we are very invested in ICE. Like I've shared earlier, we can't talk as much about it because it will have immediate cannibalization effect on our current products, right? Which we don't have that problem in EV. So it's okay to talk about, okay, this is what we're going to do on EV. So we are always a little more guarded about sharing our ICE plans. That being said, we have two big launches coming up this year, which you are already aware of. One is the Thar 5-door and the other is the Bitcycle Refresher 300. So that's already on the anvil. We think both of these are going to do very well. They've really come out well. And as you see them come through, we say with conviction that they're going to do extremely well. To your specific question on should you do an XUV 500 kind of price point, that is one way to look at it. The other is should you do, as what many people say, a 4.3, 4.4-meter SUV. That's another question that comes up. I think, to me, price point is a better way to think about it. How can we create exciting products at a given price point? And that's the endeavor that we have, right? So when we think about why Thar rear-wheel drive, it was not an easy decision to say, should we take Thar into two-wheel drive? You know, the perception is, okay, will it dilute the brand? You know, when people think about Thar as a pure off-roader, four-wheel drive, is it a good idea to do Thar two-wheel drive? I mean, it was something we grappled with. It wasn't an easy decision. But then we said, if we really want this category to grow, there are going to be many, many people who want to own a Thar who don't necessarily want to take it out into the mountains every weekend. But we are able to create a price point with that. We are able to create a 11-12 lakh rupee price point, which is what has enabled exponential growth. in that category. So we are very, very mindful of price points. If you look at all our products, they have price points which enable us to compete and get volume. Unfortunately, if I may use that word, but still remains an opportunity on the XUV700, we couldn't leverage our lower price point product because whole demand just swung so much to the higher end that there was no chance to produce the lower end and everyone forgot including our teams that we actually had lower end products because for one and a half years we could not sell we were into answering questions on when will you get your current delivery now that we are getting out of that phase and as we are ramping up production we have to start selling our lower price point products of 700 Scorpio and so on and so forth. And they are all in the 500 price point. The 500 price point was I think 14 to 17 lakhs or 12 and a half to 17 lakhs. So we have enough products in that price point and that's going back four years. Corrected to inflation, we have a very good portfolio with significantly better technology and product now in the 500 price point. Thank you very much for taking my questions. This way? Up?

Okay. Kate, a couple of questions from online. Anish, this one's for you. Paytm, financial services, anything there that interests you? One word answer, no. Next question for you, Rajesh. And there are multiple questions. I'm just trying to simplify this. Is there a mix impact of Suraj versus Mahinda that's playing into the tractor margins?

I'll try and answer that a little differently. It is not a mixed impact of Mahindra versus Swaraj, it's a mixed impact of South versus others. So typically if you look at the southern markets for tractors, we sell higher horsepower tractors in South which typically have a better margin profile, both Swaraj and Mahindra. Because all the South markets, Maharashtra I think has been minus 30%, Telangana AP have been minus 25 to minus whatever percent. Karnataka has been minus 20. These are all strong markets. These are all tend to be a mix effect coming out of South versus the rest of the country. And I think the answer is more that rather than Swaraj versus Mahindra.

Thank you for that. Also a question on, you answered this in the media queries as well, just plans for MTBD and the trucks and buses business and where do you see it going?

I'll start and maybe Anish if you want to add. So the trucks and buses business is something we are focused on reviving and it's starting to show very good signs. market share has moved up from 2.2 to 3.2 odd percent which is on a small base but it's a very good sign. In the 40 or top dealers that we have actually 8 or 10 of them have more than 10% market share. So what that means is when we have a channel member who is committed to the business we can easily move our market shares up. So for us that's in a way a kind of green shoot. So we are able to see momentum picking up. We are at the moment in a very focused strategy. So we are saying, okay, here are 40 dealers. Let's increase the market share in 40 dealers first. Then we add another 40 dealers, so on. So it's a very, very focused strategy to say, let's strengthen the channel as we build our market share. It's not like we are trying to do this everywhere at the same time, because then we are not going to get channel viability. So the first thing is to say, take a critical mass of dealers, get their market share to a critical level so they get channel viability, they get interested in our business, we are able to use that to demonstrate success to other dealers and then we will add 40 and 40 and so on. So right now we are taking a very calibrated approach on how to build volumes, show success and then start replicating that. We have a very good product portfolio and head to head we do very well. And we are confident that we will move shares of this up significantly in the next 12 to 15 months. It's already a 3000 plus crore business by way of revenue at 3% market share. So just if you're able to get to 7, 8%, which is not difficult, we were 5% before COVID. So if we can get to 7, 8%, it's a 10,000 crore business. So it becomes very substantial. There is enough profit pool in the industry. So once you cross 7, 8%, there's going to be money to be made. So, Anish will add to this and we went through a full review of whether this is a business we want to stay in or not. Clearly, we want to because 10,000 crores is not easy to build. It is possible for us to make this a 10,000 crore business and there is profit pool once you cross a certain threshold. So, I think we are very committed to make this work and we believe that this can be a big potential top line and bottom line driver, Anish.

Yeah, we're the leader in LCV and we feel that we have capabilities to be able to lead or gain a much better position in MHCV as well. And that's the reason for staying with this business. So we did look at it closely and we did consider whether it makes sense to exit or to stay. And based on the potential we saw, we said we should stay. The business is on track right now in terms of the turnaround we had identified for it and is moving well and should be able to give us significant benefits going forward.

Go ahead, Rakesh, please.

Thanks. Rajesh, just one question on the tractor business. In the past, when the down cycle has played, we have usually seen a very sharp drawdown on the volume. But this time we haven't seen so far flattish volume, then slight decline this financial year. So A, do you see a risk of a sharp drawdown on volume still possibly next year? Or B, do you have some understanding of the underlying demand drivers which may possibly have changed now and hence that kind of high cyclicality may not be there in demand?

That's an interesting question. Let me try and think of how to answer it. The way I, based on my experience, I think the sharp drop happens when Retails drop very sharply. And then the manufacturers have to do a disproportionate correction in inventory. I think this time, retails have not dropped disproportionately. So, you know, the retails are probably in the minus 3, minus 2 kind of region, which is not bad. So, the level of extent of stock correction needed by the industry is not that high. I think with evolution of the overall multiple set of industry players, some with now international partners, there is much greater discipline on the kind of stock each OEM is building. compared to what may have happened in the past. So, you know, the stock build up with dealers is not as high as that has happened earlier. People are taking corrections along the way. And which is why you're seeing a little bit smoother curve than what we used to see in the past. In the past, basically, people would wait for a desperate time when you can't get money from the dealers to say, now I have to cut stock. I think people are now cutting proactively and not waiting for the, you know, complete collapse of the payment turnaround cycle and then say now I need to, only way I will get money is if I stop billing. I think nobody is reaching that stage yet and I think that's the reason why you are seeing a flatter curve. I may be wrong but this is my current read that much greater discipline among OEMs, proactive correction along the way and retail hasn't dropped. Suppose next year we go into like a 15% retail drop, you are going to see a very sharp correction. Hopefully that's not going to happen because I'm not, I think the enablers for next year are stronger than the disenablers, unless we have a very bad monsoon.

The other point I'll add here also, and this is based on some level of data, more of a hypothesis and maybe worthwhile for you to look at that hypothesis and see if it makes sense. Government has, the government budgets over the last few years have been what I call very much economics driven, not politics driven. And therefore, there haven't been a large amount of shops that have been given out. That sometimes creates a high degree of variability from time to time as well. If you look at the first year after COVID, from March 20 to April 21, government spending in rural went up significantly. And rural was very buoyant at that time. The tractor industry grew 27% that year. But the government has been very methodical about not giving out too many political swaps and ensuring that it's setting up the economy for the long term. And in doing that, my sense is the variability will be a lot lower because you're not going to see that high upside and downsides after that.

I think also tractor subsidies have come down a lot, which is, I think, very good for the industry. It will be seeing spikes because of that, but it's basically preponement of sale at lower margins. So I'm actually very happy that the state subsidies on tractor buying have come down a lot.

Is there any change in the use cases as well? which predominantly used to be agriculture-driven, that is something which you also use?

You mean agriculture versus mining versus haulage? Not so much in the last two, three years. I think a lot of that change happened in the three, four years earlier. I think it's kind of more stable right now. In the last three years, I don't think the mix has changed a lot. Thanks.

Any questions in the room? If not, we'll wrap up with one. Okay, Kapil.

Could you just comment on the LMM business? Is it showing up in financials in the standalone or how would you report that? And also just on the business environment there, we heard some competition is coming in and they've also talked about taking away market share. So how is the market share scenario for that business?

So I'll pick the LMM question first. So it's a subsidiary, so it doesn't come in standalone. Having said that, I think most of the moving pieces have now moved to the subsidiary. So now the baseline is proper in between. If you go to Q1, Q2, maybe the baseline wouldn't have been the proper baseline. But now largely everything has moved, whatever has to move into LMM. So it will be part of the consolidated and not part of the standalone. uh what we however do and whenever we show that maybe we'll have to decide how do we do it because when you think of cash etc we're still thinking you know that there is cash in lmm and meal and standalone because it's really all fungible cash in in that sense so so we're working through that thing but otherwise from a pnl perspective it's going to consolidate just to add i think till 10th september or whatever that

Till 31st August the numbers were within M&M. After that I think, so quarter 2 may be a little confusing because something would have moved to subsidiary. Quarter 3 is fully standalone subsidiary and hence in consolidated only. I added 3-4 bullet points on that slide anticipating this question from all of you. So maybe I will play that back again. Yes, of course, there is competition and it's a strong competitor. So that's good. Strong competition always enables categories to grow. This category needs growth. We are all going to get growth only when the category grows. Like I said, EV penetration right now is in that category is 11%. It has potential easily to go to 30 to 50% very soon. That is going to happen when you have two or three players who are working very hard to make, improve penetration, improve finance package, improve perception of how good an electric is because it's word of mouth which gets inflection point in these kind of segments which are very commercially driven. And that word of mouth will move very quickly as you start seeing more vehicles playing on the road. And I think competition is gonna be really good for the category, so we welcome them. Yeah we may lose a few share points here or there but we are still the very strong leader and as you saw in January our market share is decent and we hope to be at a very decent market share but really the measure for this is going to be how quickly we are able to grow not so much what is the absolute market share because as you have competitors and if the category grows very quickly it's going to be a very large pie for everybody to have enough of. I don't know if that specifically answers your question.

If you could also touch upon the profitability of EVs for LMM as well as how you think about for the SUV business as well. Just general thoughts that would be helpful.

So firstly we do qualify for PLI. We have qualified for PLI. So we met all of that as MNM which covers us for SUVs and LMM as a conceptual thing. On LMM, we've got our products approved. Now we're at the final stage. I'm specifically spending some time on PLA because it is going to have an impact on how you think about profitability. So in LMM, the products are fully ready. We are waiting for MHI to release the final SOPs and then we go in and quarter one we can get the first disbursement done. So that's where we are on LMM. On SUVs, which is specifically 400, we will meet the value addition norm by the second quarter of F25 as we complete the localization and few other things. that's when we will apply for PLI on 400. Right now, we don't meet that. So we're not going to get PLI benefit at this stage. LMM has the benefit of PLI and the fame both. In the SUV business, for us, since we don't play in the fleet segment and we are above a certain price point, we will be primarily getting PLI. I think in LMM there is a clear set of money to be made. The key thing is how quickly and aggressively do you want to look at growth versus using the money you have to drive growth versus to kind of say okay you know there's a lot of money to be made if you grow conservatively. So I think that's the balance we'll kind of work out as we go along. We have two investors, we'll get their views as well. Clearly we have cash and that's the reason we have cash. So cash is not all for capex. Some of it can be used to fund aggressive growth as well. But we have to get that balance right. So that is something we'll settle in as we move along over the next quarter or two. But there's clearly right now based on price and material cost, there's money to be made. On the SUV side, I think we will see how this plays out in BEVs as the BEVs come in and we will talk more about that as we come along. Clearly they are not going to have the same percentage margin as we have said earlier because there is no GST in the denominator. The GST is different rather in the denominator. So we will not be able to compare percentage margins on electric versus ICE. we have to think of how we are going to be able to communicate this for you to all of you so you are able to understand this uh so we'll probably show you ev and ice separately in a way that you can understand this because if you try to weight the margins it's going to be very confusing because the percentages can't be comparable

And BEVS will be qualifying for PLI with the localization right from start?

That's the plan. I don't know right from start, but yes, directionally, I mean, from start, yes, maybe a few months to get your paperwork. It's not easy paperwork. I mean, we've learned that.

All right. Thank you.

One last question to wrap up. This is from a retail investor. Very apt question, I think. Given everything the group is going through, the focus on growth, etc. Anish, what are your thoughts about Mahindra making an international standard F1 car?

No. We are focused on what we are doing. You know exactly what we are doing. And as I said before, that we have to deliver on what we have committed. if we find something outstanding one new area to get into we may look at that but again may is the operative word but the key is we're going to deliver on what we said we would so okay all right thank you everybody online as well as here in person for your participation and we'll see you in may for the total year view thanks thanks everyone