Mahindra & Mahindra 144A

Hi, good afternoon everyone, and a very warm welcome to the quarter four analyst meet of Mahindra and Mahindra Limited. For the main presentation today, we have with us our group CEO and MD, Dr. Anish Shah, CEO and ED of our auto and farm business, Mr. Rajesh Jayjorikar, and our group CFO, Mr. Amarjyoti Barua. We will be taking your questions at the end of the presentation. As a reminder, this meeting is being recorded. For the purpose of completeness, I wish to read this out. Certain statements in this meeting with regard to our future growth prospects are forward-looking statements which involve a number of risks and uncertainties that could cause the actual results to differ from those in these forward-looking statements. With that, I now hand over to Dr. Anish Shah for his opening remarks.

Good afternoon. It's a pleasure to be here with you, more so when we have some very strong results and a continued journey that we've had for many years in terms of execution. So let me start with the standard key messages. Auto and farm, as you continue to expect, very strong execution. both in terms of market share as well as margins. SCV volumes up 20%. A year ago, you'd asked us a question of what are you signing up for. At that point, we said mid to high teens. And it was a fairly ambitious target at that point, but we've managed to come in slightly higher than the mid to high teens target with 20% growth. As a result, market share is up 210 basis points to 22.5%. Auto margins are up 110 basis points as well. And farm, not to be left behind, basically said that, look, we are at 40% plus market share, but we are still going to grow. And therefore, we are at 43.3 now, up 170 basis points, not easy to do in the 40% category. And with that significant improvement in margins as well, up 210 basis points to 18.4%. And this, again, is... continuation of the conversations we've had over the last few years in terms of the fact that we will continue to focus on margins and on execution. Also want to point out that you will see some write-offs. These are largely for what we had identified as category B businesses. In particular, MAM Mitsubishi and SAMPO. So MAM in Japan and SAMPO in Finland. These were businesses which, as a reminder, had a good strategic benefit or a quantifiable strategic benefit, but not necessarily a profit trajectory. And we have gotten significant strategic benefits from these companies. We are now pivoting them to ensure that there isn't a profit drain from those businesses, and therefore the write-offs. So that's something that you will see in the numbers. Tech Mahindra and Mahindra Finance are on a strong trajectory. Both have laid out a path to first getting to market average and then going above their peers. And both are firmly on that path, techem on the path to margins. And Mahindra Finance has... accomplished a very important transformation of going from 7% to 8% GS3 or GNPAs on average or in normal times to less than 4.5%. At this point, it's actually less than 4%, but our target is to be less than 4.5% in normal times. And that is a very important transformation because it has been done while maintaining profitability at levels higher than we had expected. Because you would expect typically to have lower profitability as you're giving up some very good customers. who didn't have high credit losses but had high volatility, but the business has been able to do that well, is focused on controls and will get back to growth, even though growth has been reasonably strong for this year at a 17% increase in assets under management. And you see a very strong profit number here, up 33% on a standalone basis for Mahindra Finance. This is the first time that on a standalone basis, Mahindra Finance is greater than 2,000 crores of profit for the year, 2,300 plus, in fact, as compared to 1,900 and something, which was the highest ever so far. So on a good trajectory. And we will talk a little more about scalable growth gems today. and the momentum that we see in them, and why we feel good about these growth gems becoming significant contributors to us as we go forward. All in all, consolidated profit growth of 20%. This does exclude the mark-to-market from KG Mobility, which is SsangYong, shares that we had gotten as part of the exit. That has no operating impact, no cash flow impact, but we had a gain in F24 of 330 crores and a loss in F25 of 238 crores, which sort of offset each other, but from a percentage standpoint, we therefore took them out. On a reported basis, it's a 15% PAT increase. Excluding the KG Mobility mark-to-market, it's a 20%. And the real operating number is a 20% PAT increase. And ROE, we have maintained at 18%, despite a significant cash phase as well, which Amar will talk about. We have gotten to a much higher cash level than we were before. So at the headlines, consolidated results, 14% up in revenue, 20% up in profit after tax. Standalone, 17% increase in revenue, 17% higher from profit after tax standpoint. And now look at our businesses. We've talked about road gems, but we're getting a little finer in terms of how we look at our businesses now. We plotted them onto axis, competitor position, and scale. Auto and farm, very strong from a competitive position are high-scale businesses as well. Mahindra Finance and Tech-Am, scale businesses but not quite the competitive position we want them to be in because we want them to be higher than the peers and ideally near the top of the upper level. And then we look at the left-hand side where we've segregated our growth gems into what we call scalable and emerging. Scalable growth gems have a very clear competitive advantage. They've demonstrated that and therefore now have a target of $2 to $3 billion of valuation each by F30 in the next five years. Our emerging growth gems have something meaningful going for them, either in terms of products, in terms of service, in terms of what they do. But they really haven't demonstrated that market competitiveness as yet, or have done it to some extent. These are businesses that we want to get to a billion dollars of market valuation in the next five years, and then hopefully move them higher and get to a higher competitiveness, and then move them to the right in terms of scale as well. So this is how we're looking at our businesses. Over time, yes, we ideally want everyone to be in the top right segment. But if everything was there, we'd have nothing else to do. So this is part of the work that we have to do to get everyone there. So let's talk about each of these businesses. I'll cover the headlines for auto and farm, and Rajesh will cover everything else and give you a much broader perspective on these businesses. But auto, as you know, number one SUV player. Our electric vehicles are off to a very good start. And disciplined execution, that's one thing that you will see consistently across what we do. Or at least we strive to be consistent in what we do. There are times when some things may not be exactly right, but that's part of what we will fix. And you see the numbers as a result of that. On the farm side, new products, OJA has gone off to a very good start, giving us good market share in the U.S. and allowing us to get to other geographies as well. Margin increase, and we are sharpening our international focus with pivoting a couple of our Category B businesses. Again, you see the numbers there, extremely strong from a market share standpoint and a PIT standpoint as well. The PAT here is impacted by the write-offs. And therefore, you see that in single digits as compared to what would have been, which is much higher otherwise. Mahindra Finance talked about a 70% asset growth. GS3 is under a 4% threshold at this point instead of being at 4.5%, which is what we had planned for. We have deliberately had a slowdown in disbursements to focus on asset quality and to focus on controls. We will continue to focus on controls and then start pivoting back to growth as we go forward. You see a good GS3 number here and profits at the consolidated Mahindra finance level of 2,262 crores and the standalone Mahindra finance level of 2,300 crores plus because we had to do some cleanup in the rural housing finance business, which was disclosed as part of the Mahindra finance presentation a couple of weeks ago. Tech Mahindra, good deal wins, a good pipeline in consumer and BFSI, which is where it's expanding or diversifying. Momentum in Europe and Asia Pacific is very strong. A couple of very good leaders in both of those geographies. And focusing on its margin expansion part, which it has outlined. And here, again, you see some very strong numbers in terms of TCV, EBIT, and PAT as well. And that essentially puts this company on a good trajectory going forward. So we're going to share a little more detail on road gems. Many of you have had questions on this in the past, and we'll continue to add more details as we go forward. Let's look at six businesses today, starting with hospitality. In fiscal 20, room inventory was 3,700 rooms, or keys, as we call them. Today, it's 5,800. And the business is working on a plan to be 2 to 3x that in the next five years. We'll come back with the exact plan and how we're going to get there, maybe in a quarter or two at max. But that's the trajectory we're going down, which will give it a 5x growth in a decade. Ideally, we'd want faster growth in a shorter time frame, but we'll take 5x growth in a decade at this point. Logistics has struggled, and we've talked about that in the past, but this is a business which I've always believed has phenomenal potential and one that we're actually positioned very well in. With Hemant Sikka coming in to lead it now, one of our strongest leaders, we feel that this business will get on a very strong path going forward. And while we have a 3x number there as a placeholder right now, we shall give Hemant the time to come and see the business and then come back with the specific targets that he would set for the next five years. Real estate, these are targets that have been committed by the business and they've done that in their last analyst meeting. We've taken the liberty of rounding it up a little bit because they were at 670 crores of pre-sales going to 2,800 pre-sales. and going to 9,500, which we've taken the liberty of rounding up to 10,000. Because the pre-sales that they have committed to for the next five years, 70% to 80% of that land has been acquired already. So it's now pure execution. And as they go forward, they should hopefully be able to do more, but we shall not push them too hard on this. This is a good set of numbers of 14 times improvement over 10 years. And more than the numbers... What we really like is a very sharp focus on profitability of projects. And that's something that is done at a very granular level by project, by quarter. And in addition to profitability, the focus on customers, customer experience, ensuring any problems are resolved quickly. So all of those things are contributing to building a very, very strong business in live spaces. Susten, we've talked about before, this was the first business to come up with a 5X growth plan. It is on track. In fact, the business has committed to delivering this before fiscal 30. We are not changing the targets as yet because we shall wait for that execution and then look at increasing targets from there. Last Mile Mobility has been a fantastic story. From 14,000 vehicles a year, we're at 78,000 now, which is 5x already. And the plans to get to another two to three times from there, which will be a 10 to 15 time overall increase in targets or increase in this business over a decade. And that's something that's being reflected in its valuation as well, as we've seen from external partners coming in. This is also a space where we continue to be number one with the 40% plus market share in a very, very competitive market with some real heavyweights in there. So that's one that the team has done extremely well in driving and maintaining that momentum. And trucks and buses, we've talked about recently. The acquisition was a very good one, something that needed a lot of preparation on our side first to make sure the business is doing well, it is well-positioned, the leadership team is strong, and can then deliver on what we expected to deliver. and at a valuation which we felt was reasonable and good. So a combination of all of those things led us to that acquisition. As we've talked earlier, we continue to be very disciplined in terms of what we do and where we go. And that discipline is something that would be evident in this acquisition. And the results are something we will continue to track as we go forward. So with that, we come to my favorite chart, which we've updated every quarter. And we had made a commitment on 28th of May 2021 when we reported our fiscal 21 numbers. At that time, our reported numbers were 4% on ROE and 4%. 16.2 on EPS. And we had committed to 18% ROE and 15% to 20% EPS growth. So we have maintained the 18% faster than what we had committed. And we have grown ROE 63% on an annualized basis as compared to the 15% to 20% we had talked about. As I've always said, though, it shall not be a 63% promise going for the next few years as well. So please temper that in terms of the expectations. But we continue on a very strong path at this point. But more than the numbers, again, What we're very proud of is our team. We've got a very strong set of leaders, associates who helped us build this business, a very strong focus on execution, and that is a foundation that is helping us deliver what we do. With that, Rajesh, over to you.

Thank you, Anish.