Mahindra & Mahindra 144A

Limited. For the main presentation today, we have with us our Group CEO and MD, Dr. Anish Shah, ED and CEO of our auto and farm business, Mr. Rajesh Jayjorikar, and our Group CFO, Mr. Amarjyoti Barua. Once the presentation concludes, we will start with the Q&A session. I would just like to read this disclaimer. 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 materially from those in such forward-looking statements. With that, I now hand over to Dr. Shah for the group overview.

Hi, good evening everyone. And for those joining online, good afternoon, good morning, depending on where you are. Pleasure having you here today to discuss our results. As you've seen a quarter marked by various uncertainties across the world, translating into a number of challenges in India. But despite that, happy to say that our team has actually delivered some very strong results and across multiple businesses. So the key messages for this quarter are consolidated profit up 34%, ROE at 23%, auto and farm resilience in a strong quarter, Despite commodity price impact of 400 to 500 basis points, auto profits up 21%, farm up 15%. Rajesh will talk more about the margins as well. Some impact on that, but not as much as could have been the case. A lot of good actions taken by the team. Mahindra Finance & Tech, Mahindra on a very strong journey now. We've been talking about both saying that they have been turning around. They're on a good track. What you can see from results is we can show proof around the turnaround now. Mahindra Finance has had two or three very good quarters. This time profits up 78% and driven by a lot of things that we wanted to have in place, especially around asset quality, a lot of work done on technology and data. And we started to see results being delivered. tech Mahindra up 28% again a very strong quarter on track for all the commitments that the business has made and our growth gems we've been talking about them they're starting to deliver meaningful results profits up 3x for growth gems so as we look at all of these businesses together we got multiple growth engines delivering value in tough times As we look at the overall results, revenue up 28%, PAT is up 34%, and the key drivers, the summary of a few points I said earlier, growth gems driven by real estate, XLO and logistics, Mahindra Finance driven by NIMS driven by asset quality and growth. The growth part is new. We talked about pivoting to growth last quarter and that pivot to growth is starting to drive asset under management being higher as well as maintaining GS3 at a reasonable level. tech Mahindra driven by margin expansion EBIT margins up to 14.4% and the promise has been to get to 15% by the end of this fiscal year on track for that auto volumes offset by commodity prices farm volume again offset by commodities in Turkey and investments we had again on sale from CIE that have contributed to investments so overall as we look across everything we do Very, very strong numbers. Let's look at each business, and this time we've added an element of future growth drivers. So not just talking about what's happened for performance, but also what are we seeing for this business going forward. And as we look at auto, well, Rajesh will cover the detail. The key highlights are SEV volume up 15%, despite some challenges from a production standpoint. Penetration for electric is at 12% now, and that's a fairly significant number on a good track there. Inflation I talked about. But more exciting is the future growth drivers. The new IQ platform will start delivering models fairly soon, and we will have a number of new models coming out from there. That gives us a much stronger foothold into a segment we really haven't played in in a big way. accelerating EV volume growth and for that we will need more capacity because as you know we are strapped for capacity right now and there is a plan to double capacity from where we stand today and Rajesh will walk through details of what that means when in terms of specific questions that you may have so I'm fairly hopeful we can answer all your specific questions on what capacity comes on board at what point in time over the next few years Mahindra Finance The growth pivot is very clear now. So AUM and disbursement growth is what you see as driving performance in Q1, along with the credit discipline and NIM expansion. As we look forward, continuing on the same path that we've been talking about, technology and data fixed, asset quality in good place, need to continue maintaining that. diversification have started need to accelerate diversification into mortgage and SME and add more from a fee-based income standpoint so that's going to build a very strong stable business with good returns and something that will add significant value as you go forward so that's the part that Mahindra Finance is on at this point tech Mahindra performance driven by large deal wins by margin expansion and free cash flow as a result is up 94% continued focus on large deals geographically we're diversifying and looking at reducing the margin gap we will come out with the next phase for tech Mahindra as we close this phase that we talked about which is by end of F27 we get to 15% EBIT margin and then we talk about the next phase as we go from there but the one thing I would say for these businesses as well as for the next few I'm going to talk about an underlying theme is very strong execution across that's one underlying thing that we've got and that's what's being able to deliver good results let's talk about some of the growth gems real estate this quarter has added 5600 crores of GDB up 60% pre-sales number 925 crores up to X. A number of OCs were delivered ahead of schedule, not something that happens very often and therefore strong execution here again. As you look at the future, GDP is up at 50,000 crores now from 8,000 crores only three years ago. This is a fuel for future growth. And that has been acquired already. So the future growth is going to be driven by what we already have in place. This includes multiple large projects that will be multi-use. 5,000 crore to 10,000 to 12,000 crore projects. And that also gives us certainty as we look into the horizon. And we're looking at expanding our industrial portfolio. So we're going to start seeing life spaces really move to the next gear and start accelerating. logistics has gone from reverse gear to a positive gear now logistics was a business that wasn't doing very well we talked about it execution was poor and this has been turned around very well Mahindra 144A business level it's a 25 crore positive profit and this is the highest ever quarterly profit for this business coming out of a turnaround not just through the turnaround obviously but even before that I usually don't like highest ever because I expect every business to be highest ever every quarter so which is why we say why use this term but in this case it's worth using because it's a business coming out of turnaround and therefore we wanted to portray that future growth drivers growing logistics in India e-commerce QCOM penetration is going to be much higher express business is turning around well That's a drag even today, but that's a drag that we hope to eliminate and Heather start contributing. And then very strong operational efficiencies that the business is driving at this point. So logistics is now coming back into territory that will start really creating a lot of value, which is the path we wanted when we changed management there and brought the business to a much different trajectory. truck and bus you saw the combination yesterday of SML and our truck and bus division and this only enhances the competitiveness it creates more synergies for us it allows us to do a lot of things in a business that is double its size now and it continues a strong trajectory we've seen in truck and bus from three or four years ago I remember questions from three or four years ago which is why do we have this business and I remember acknowledging saying look you're probably right let's decide whether we want this business or not let's see if the business can execute if they cannot we will exit but the business executed really well and as we now brought SML on board we feel even more confident that we can create very meaningful value in this business going forward and that's what you're seeing the combination also very positive from an SML standpoint very positive from an M&M standpoint as well because it is going to be a creative and the synergies that we get will add to it even further so from from that perspective we're looking at this as a big step forward Aerostructures we've talked about earlier, we're sharing some numbers now. $1.2 billion of accumulated contract wins, half of them in the last year alone at $600 million. Business that has continued deal wins, has a growing presence in what we call the shell and skins panel industry. and accelerating industrialization. The key to this business is very high quality. It's been recognized as among the top quality players and therefore OEMs are giving this a lot more business and want to continue down that path. This is a business where we will move up the aero value chain as a result of the quality. We've got two large deals with Airbus recently where we're the single source globally for the fuselage for two helicopters, which is a very, very big deal. And that again is a testament to the quality this business can drive. and this is a business we will look at making a potential acquisition globally based on the strength of this business and what the OEM partner customers that we have want us to do and it's going to be something that we will look at them to underwrite as we go forward in terms of making sure that this business can give us the returns that we would want so these are some of the businesses that we have Again, driven by strong execution, but more than that now, potential that is being realized. So we're starting to see some of that potential in numbers, which is where we want to be. Let's come back to AI. We spoke about it for the first time last quarter, though we've been doing work on this for a while. And you remember this page from last quarter, our aspiration is to be a tech leader in every industry. In some industries, we can say we are there. In some industries, we need more work. We talked about deploy, transform and invent with four impact areas, quality, experience, reach and efficiency with real outcomes for revenue, cost and customer satisfaction. We also talked about transform and for each of these four areas what are businesses like auto and farm doing and finance and we gave a few high level view in terms of here are kinds of things that we're working on for this quarter we now want to go deeper and give you specifics about some of those examples we're not going to talk about all the transform projects but we picked four in auto and four in finance and here are some specifics paint.ai This is making a significant impact on the paint shop in terms of one, creating a better vehicle that looks nicer in terms of reducing the paint that's used and helping us reduce the rework required as well, which effectively is more capacity. Service.ai for auto, 2,600 workshop assistants are using AI today to help Make it easier for the customer, give them faster solutions, be able to reduce the turnaround time in the workshop and therefore again create more capacity in the workshop. Reach.ai, we've had 91,000 test drives done entirely by AI. or getting customers to the test drive. AI is not doing the test drives as yet. We'll get there at some point in time. But we've got 91,000 customers to come for a test drive, leveraging the AI communication that has been done with the customer. And this is business we would not have got otherwise. So this is direct addition to revenue as a result of that. Simulation in the fun world of product development. This is one specific example where there's lots of simulations done to look at drag coefficient. It's something that really becomes the centerpiece for product development in many ways. Each simulation would typically take an average of 10 hours. With AI, we can do that in two minutes. And think about the speed of product development as a result. Our goal is to cut down the product development timeline. And this is one example. There are many others that the team's working on to be able to do that and to be able to create better products as a result as well. On the finance side, Samurai is our model for loan file processing. 65% of our loan files today are processed by AI, 65%. service request 5 lakh plus service request fulfilled through AI cross sell 30% lower cost of acquisition through the AI orchestrated channel that we have for cross sell now and voice.ai is something we're using in Mahindra Finance and across multiple businesses in multiple solutions around collections sales and other areas so here are some real numbers on what we are achieving in some of the projects that we showcase and as we go through the next few quarters we'll provide more information around what we're doing on AI on a broader basis as well this is driven by a very strong foundation we have 50 forward deployed engineers and AI experts that are working with our businesses we have 19 proprietary models that we have built for AI for specific applications that are giving us very meaningful results and these are applications that are built on GPUs we have so we don't need to pay for tokens for this which is even better we don't have to worry about the cost of tokens on these applications we have 1900 of our leaders and teams trained in RM.AI Academy and 15 transformation projects that we are driving through. These are large-scale transformation projects, a number of other smaller projects as well, along with a group AI governance council, business governance council. So a lot of focus on security and governance from an AI standpoint as well. So these are a large number of activities that we're doing in AI with this foundation. And we, based on various conversations, feel there are multiple areas we're leading in this space, and we continue to be able to drive this and see results from it. That's the most important part. We're seeing meaningful results from AI at this point in time. The one other thing I'll mention here is beyond the foundation, AI is really being driven by process owners. And I know some of you have been to a chocolate plant. If you go there again, you will have people on the shop floor tell you about how they're using AI and ideas that they've come up with to use AI as well to create better processes. So this is one area where process owners are the ones that are really driving this transformation. And that's the power of AI. And that's the power of being able to really leverage AI. chart you're familiar with a number that you're not familiar with is 23% which is for ROE and I will stay with my standard approach which is our target is 18% so we will go slightly up and above 18% but 23% is higher than what we expected as well so we are not resetting expectations we will stay with 18% as a target there on growth we continue to grow faster we are at 34% growth in EPS at this point in time so 48 rupees EPS and consistent delivery from that perspective we will share some thoughts on What are some of the factors driving this performance? But I'll hold off on that at this point in time. I'm going to invite Rajesh up to talk about auto and farm, and then Amar will come up to talk about numbers, and I'll come back to talk about some aspects of performance that we're driving.

hi good evening and good morning to everyone depending on where you are I'm gonna go a little faster because you would have already picked up some of this from the earlier presentation so I'll go a little faster on the farm equipment side we had an 18% volume growth a very strong market share we did lose on a sequential basis a little bit of share but sorry compared to last year same quarter but on a sequential basis it's a very strong quarter as well you can see that last year the 45.2 was a all-time high that we had on market share Farm machinery had a very strong robust growth again Its highest quarter that's a business now, which is getting into momentum and innovate connects with What we are seeing as increased level of mechanization in rural India Both on the tractor side and the adoption of farm machines This is a new chart and I'll spend a few minutes and we'll walk you through it there are three Columns literally. So column one is what you've been seeing in the past, which is what we call core tractors. Core tractors is basically domestic plus exports of the tractor business. What you're seeing in the middle is international subsidiaries. And what you see on the other side is others. The others are defined below, but mainly it's the farm machinery business, the power-all business, and the Indian subsidiaries like Swaraj Engines. So that's broadly the third column. All of that totals to what we also put out as farm consolidated. So these are the three columns which help you understand the margin structure better. So the 19.2 is the core tractor margin. You can see that we've taken a loss in international subs. A reasonably large amount of that is the impairment that we've taken on Arkoond Foundry and one more company. and the third one as you can see has seen a improvement in the margin percentage and the growth so all of that together gets us to a 14.2 percent farm consolidated margin The 19.2 here is the chart that you've been seeing, which carries over to the column 1 for the previous chart. So basically, we are now building on this to give you a disaggregated view of how farm consolidated breaks up into different subsegments. this is a chart we often show you more to kind of say that the band in which the tractor margins operate is 17 to 19 there are periods where we do 20 there are periods where we do 17 we've rarely gone below 17 except maybe one quarter and that is the ability of the business to manage either the up cycle that may happen for an industry or in spite of a down cycle or commodity cycles up or down. So irrespective of what is happening to these two key variables, we are able to manage margins mostly between 17 to 19%. These are the farm consolidated financials. You've already seen them. 9% PBIT growth after impairment, 12% before impairment, and a 15% PAT growth after impairment. I'll spend a few minutes on this because I think it's on the mind of quite a few people. the what is driving rural in spite of all the fears of El Nino and we've kind of tried to capture here the positive enablers right now in the rural market not to say that there are no negatives and I'll kind of call that out as I walk through this clearly we're seeing a farm labor shortage it's not a new phenomena but it's an accelerating trend we are seeing that labor is moving to industrial areas as they're getting paid better there is a lot of labor shortage in industrial areas specifically with small medium enterprises And that's coming out of the movement of farm labor. So as farm labor is earning more, they're seeing greater value in going and working in industrial enterprises, which is what is one of the factors driving mechanization right now in rural areas. So that's point one. Point two is the Rabi cash flows have been healthy. There has been an improvement in wheat procurement by about 19%. So that is strengthening the cash flows in the rural economy. The third is the deficit in rainfall was really bad as we were into June. It's come down significantly from then to what is now at a 15% deficit. If rains continue, then we may be at a reasonable level of deficit. Of course, this is different in different parts of the country. And we track that as well to see how that is impacting it. Because the rains have come in in most parts of the country, our feedback on the ground right now is the sentiment is actually not negative. The data indicates a lot of negativity. If you'll just look at the rainfall deficit, But because rains have actually come in, the sentiment is not negative. Reservoir levels are 7% below LPA but have recovered from where they were. There was a much greater deficit and it is lesser than the same period last year, but it was much worse a few weeks back. Kharif sewing has accelerated significantly after the rains have started over the last 3-4 weeks and at the moment the shortfall over last year is a little over 4% which is not too bad for this time of the year The government spending has gone up by 16%. The state governments too are putting in money. And that itself is an enabler for greater cash coming into the rural economy. So overall, we see many factors beyond the negatives that we may be hearing about El Nino, which makes us believe that the sentiment on the ground or the reality on the ground right now is not as bad. Of course, we need to see what happens to rainfall and other factors over the next two months. But at the moment, the rural market, and that's been playing out in the volumes that you've seen over the last three months and early signs of July as well, is reasonably okay. So that's on the farm business. auto business the SUV volumes grew we had said mid to high teens we had a 15% growth in SUVs in spite of some production issues especially in April and May and 20% growth in LCV which also had some production issues we continue to be revenue number one market share and a strong growth in market share sequentially on LCVs as well the This is just a chart which kind of shows you that last year Q1 was an exceptionally high revenue market share, but on a kind of linear line basis, we are by and large at the same level of 24-25%. The electric penetration Anish spoke about that was 12%, 9% for the industry, which some of you will remember the industry penetration for EV just a few quarters back was 2-2.5%. So the 2 has gone to 9, we were of course 0 6 quarters back, which now is for us 12%. And we continue to have a very strong performance on revenue market share. And we've sold 77,000 vehicles cumulative till now. And interestingly, the XCV9S is the single largest, even by volume selling EV across all passenger vehicles in spite of its price point, which has done very well. LCVs again strong performance on volumes and market share now I'll explain the same auto margin chart taking a column at a time so the first column is something that you are seeing for the first time what we are showing you here is auto plus LCV domestic plus exports okay so that's really in other words we can be called the core business which is without EVs the second column is the EVs ESUVs which has two components what happens in Mahindra Electric and the conversion cost that we earn in M&M so that comes into the second column the third column of others is listed below but is mainly trucks and buses and contract manufacturing that we are doing for last mile mobility and some other domestic subsidiaries and international subsidiaries plus the last mile mobility company. So all of that comes in column three. So if you look at column one, our margin at a PBIT level is 8.9 and that's What is also represented here is a trend. So it was 10.2, 10.8, and 8.9. Now, of course, we have lost margin compared to last year, and we can talk more about that in the Q&A, but we believe this is a reasonably good margin performance, which has been on the back of a very high commodity price increase, which we've seen over the last many months, but has got significantly escalated after February. This is a chart we've shown you in the past. So you basically see on the top Mahindra Electric as a company, contract manufacturing of EVs and end-to-end of EVs. So the 5.3% margin here that you saw is the same as in column 2 of the 3 column chart. So we made a 288 crores PBIT in the EV business end-to-end out of which 270 was in Mahindra Electric company. So this is the capacity planning chart. The chart has not changed fundamentally, but I'll just walk you through it. There's some updates. So I'm on the first row, which is the ICE SUV capacity. We had said by September we'll be at 60,000 per month, which we should be ready with by September, which is the end of first half. which said we'd be operationally ready for 8000 EVs which we should be ready by 8000 EVs for 8000 EVs of course there's an issue of mix because this one product out of the three which is doing disproportionately well but from a capacity readiness we are ready for 8000 that takes the total september capacity to 68000 By the end of the year, to the 60, we add 10,000, which is the capacity which will flow through into F28, which is really for the launch of the first of the new IQ platform products. Likewise, the eight becomes 12. I'm on the last column, second row. The eight becomes 12, which is really adding 4,000 of EV capacity for the new EV, which will get launched in F28. okay so 70 plus 12 you get 82 so basically by end of the year 64 and a half would have moved to 82 then we are adding 10,000 more in Chakan which will take 82 to 92 that's for the new IQ platform phase 2 so we would have 92 and then we add 20,000 per month which is 250,000 and 250,000 in two phases in Nagpur. The first phase of Nagpur should be ready first half of calendar 2029. So that's what you see in the first bullet point there which is 20,000 and then the second is few months later, 10-12 months later. So that's really the 2x capacity increase between now and F31 in multiple phases as you see it. we had 11% growth in the trucks and buses volume market share was at 7.8% market share is much higher for us in quarter one for this business because SML has a very strong bus queue and the bus market is really in quarter one so we see a much higher market share in quarter one than we see as an average for the year Last mile mobility had a very good quarter, very strong growth, total volume of 42,000, continue to be number one. And most interestingly, the L5 EV penetration now is 40%, which was about 27% same period last year. So significant acceleration in the EV penetration in this segment. The UDO has done very well and is enabling this kind of volume growth. These are the auto consolidated numbers so profit PBIT grew by 28% and PAT by 21%. Amar, thank you.