Good afternoon, everyone. Can you please settle in your places? We will start in the next couple of minutes.
I think they will be able to change it. It's there.
Yeah, yeah. I'm not touching this.
Good morning, good afternoon. Welcome to FY 22 M&M Annual Investor Meet. Very happy to see you all today here after a gap of two years. two years we didn't have any physical meetings, and it's good to be back here. I think while pandemic had taught us to learn doing things in a different way, but it has also taught us to the importance of face-to-face meetings. I'm happy that all of you are here today.
Thanks for taking time and being here. For those who are not able to be here, we have also provided the online link. I think I'll welcome all those who joined through the online link also. Today, we have the entire senior management team with us here. We have Anish, Rajesh here. Manoj would join in some time.
Before I hand it over to Anish, here is the safe harbor statement. Brian? Okay, I won't read it. I'll just leave it for a few seconds. Okay. After the presentation, you will have the opportunity to ask questions. Those who are attending through the online, you have a chat box on the screen, you can key in your questions at any point of the time. We will take it during Q&A. With that, I hand over the conference to Anish.
Thank you, Sriram. It's great to be here with everyone in person. I understand this is the first in-person analysts' meet for the auto industry, at least after the pandemic. It's good to see everyone here in large numbers, and we look forward to a very engaging conversation. Let's start with what we said last time.
What we said last time was we had accomplished some things, we had a focus on a few areas, and we were committing to certain things for the future. Let's see what we were focusing on. A roadmap for ESG, maintaining financial discipline, accelerating core growth, and enhancing customer experience. Let's start first with the financials.
While you've seen all of these reported, I just want to set the stage with this, which is at the standalone level, we've shown a 26% increase for FY22 versus FY21. At the PAT after EI level, it's a 5x increase, which is really a function of the capital allocation actions that we've taken to ensure that the impairments that we've had in the past do not really show up again. At the consolidated level, similarly very strong numbers.
PAT before EI is up 35% and PAT after EI is up 97% or almost double. What are the drivers of this consolidated PAT? Let's take a look at this across the four key groupings that we would have at M&M. First is our core, which is auto and farm. Second is the core of Tech Mahindra and Mahindra Finance.
Our growth gems and then investments. If you look at auto and farm, despite a very challenging year, and I'm sure there will be lots of questions as we start on supply chain and how we've seen it and what we've seen in the last year. Despite all of that, it's a 15% growth in profit after tax for auto and farm businesses.
This does reflect the slowdown in the tractor industry as well, which as you will see, has been offset by a market share gain for us. Tech Mahindra has had obviously very good tailwinds from the IT industry, and Mahindra Finance has shown a very remarkable turnaround in this past year, and we'll talk about that in a little more detail. Our growth gems are contributing at a much greater level.
The contribution to our profits has gone up from INR 45 crore to INR 280 crore. All other investments were loss-making in the past at -INR 189 crore, and that's up to INR 105 crore this year. We've got all our cylinders firing very well and really contributing to the growth numbers that we've seen. In summary, therefore, the standalone level revenue is up 29%. PAT before EI up 26%, after EI up 5x.
At the consolidated level, PAT after EI up 97%. ROE at 14.8%, which is greater than a 600 basis point increase, 662 to be exact. We'll talk more about ROE as well. EPS, again, mirroring PAT after EI up 97%. Beyond the numbers, let's look at what's really driving this.
Leadership in auto and farm was one of the key commitments we made last year. What we have seen through the year is four blockbuster launches with 178,000 or 1.78 lakh open bookings. We're now a market leader in SUV in revenue market share in fourth quarter as well as in the second half of the year. A market leader in electric three-wheelers with a 73% market share. Also continue to be a market leader in LCV less than three and a half tons at 43% market share. On the farm side, our share is over 40% with a 180 basis point gain.
We launched a number of new products, and I know there were lots of questions in the last two years on international subsidiaries, and happy to show a very strong performance of INR 195 crore of PAT from international subsidiaries of Farm alone.
These are companies that we had categorized as A and B, and what we are seeing is they are on their path to an 18% ROE for category A companies, and category B companies are delivering good financial results and good strategic benefits as well. Let's take a quick look at Mahindra Finance. At the end of the first quarter, GNPA had risen to 16%, and we had taken a INR 2,500 crore provision.
At that point, we had also committed that 70-80% of that provision would be reversed in 3 quarters, and that we would see a business transformation that was initiated and growth that would again get back to pre-COVID levels. The business has actually delivered far more than that. 106% of provisions were reversed.
The transformation is well underway because just the reversal of provisions is not enough. We have to significantly reduce the volatility in GNPAs. In the next crisis, we cannot go back up to 16%. We have to be at 9%-10% at max. There are a number of actions being driven to reduce that volatility, to recharge growth and to really use technology, data and digital in a much bigger way into this business. We've completed 3 quarters of that transition.
We have another nine quarters or maybe eight quarters to go. Two more years that we would look at for a complete business transition or transformation of Mahindra Finance. What we have seen in the short run is a 54% growth in disbursement in Q4 as compared to Q4 last year.
We've talked a lot about our path to 18% ROE. That was our headline and only focus tow years ago. Last year, we started pivoting towards growth. Let's talk about the last three years first in terms of PAT. Should actually be LAT, which is loss after tax. We've had a INR 3,400 crore loss two years ago, INR 2,358 crore last year, and this year we are at a loss of INR 191 crore.
We had committed to a loss of INR 300 crore, so we are slightly better than that, and we should get back on the profit track as we go forward. As we look at return on equity, we are up from 0.3% to 14.8% for the year. More importantly, in the last three quarters at the consolidated, at the group level, we've achieved 18%+ ROE.
This is much earlier than we had expected. We had talked about a path to 18% in three years, and in one year, we've got three quarters with 18%+ ROE. A lot will depend on commodity prices in the coming year. If they get back to reasonable levels, that's something that we will show. The basic message is our businesses are poised for this, now they've delivered this.
Therefore, our path to ROE is something that I would put in our accomplishment column at this stage, while we will continue to maintain the fiscal discipline that is required as we go forward. What next? The pivot to growth is now firmly established, and we are accelerating growth in a very significant way.
This will be driven by core growth in our four core businesses auto, farm, Tech Mahindra with margin play, and Mahindra Finance with the transformation play. With value creation through our growth gems who have signed up for a clear plan to get to $1 billion of market cap in the next two to four years. We talked about three to five last year. We're moving into two to four now. Our digital platforms, we're looking at monetizing our investments and partnerships, which will create value as well.
That will allow us to target a 15%-20% EPS growth that we have talked about earlier. Beyond growth, we've also committed to lead ESG, and especially coming after a week at Davos, M&M is very well poised to be not only a leader in India on ESG, but a global leader. In various conversations we had there, M&M has been profiled as a company that is clearly in this leadership space.
We are the founder members of the First Movers Coalition that has been led by the World Economic Forum and John Kerry. We are also the co-chair of the Alliance of CEO Climate Action Leaders India, and participating and leading a number of discussions at the global stage. Let's talk a little about our sustainability actions, because this is not about commitments.
We are moving from net zero in 2040 to planet positive, which is a broader picture. It includes being water positive. It includes zero waste to landfill. As we saw at Davos in the last week as well, the focus really is on actions, not on commitments. Our actions are first around greening ourselves. There's a lot that has been done already.
We had set a target of EP100 or energy productivity 100% by 2025. We are at 74% already. We had also set a target of RE100, which is renewable energy 100%, by 2026. We are at 45% there and well on track to meet or beat that target. Our scope one and two emissions are down 20% in the last two years. These are audited numbers.
FY22 numbers are not audited as yet. As they are, we will share them as well. There have been about 2,000 projects that have been done on greening ourselves that have resulted in these numbers. Beyond that, we are starting to play a more active role now in decarbonizing our industries. Let's take a couple of examples here.
In the auto industry, it's driven by auto recycling and also a path to net zero scope three emissions, which is the toughest one to crack. In the real estate space, we've just launched a residential net zero carbon community in Bangalore. It was sold out in three days. Consumers are starting to feel that as well and want to associate with actions that are planet positive. Third, on rejuvenating nature, we are driving an initiative around afforestation.
We have planted 20 million trees already. They have an 83% success rate. We've been doing this over the last 15 years. Over the next two or three years, we want to ramp that up from roughly 1 million trees a year to 5 million trees a year. Actions around watershed management and regenerative agriculture, these are also helping significantly as we think about rejuvenating nature.
This is a set of actions, and there is a lot more to be done in this space, but individual actions alone will not meet our goals of reducing or pulling back to 1.5 degrees that we've got. It will have to be collective actions, and this is where we're playing a role on the India and the global stage to work closely with other companies, with governments, to really make a meaningful difference in sustainability.
In summary, with the results we've shown this year, it is fair to say that we have reignited value creation. We have delivered a strong financial performance in a very tough environment. The focus now is sharply on accelerating growth, and we're not going to lose the financial discipline we put in. We are taking a global leadership in sustainable development. With that, let me hand it over to Rajesh.
Hi, good afternoon, all of you. Good to see so many of you here in person. I mean, beyond the point, the Zoom thing and WebEx is never anywhere near the same as getting to see all of you in front of us. Breaking the presentation into brakes and accelerators, I'm just gonna touch quickly on three things that we saw as brakes through FY 2022, many of which we believe are turning around.
The first was rural stress. We saw rural stress coming out of two things, cutback in government spending in agriculture and rural, and unfavorable terms of trade for the farmer, where input costs had gone up faster than the increase in the inflation for the farm produce.
We have seen this change quite a bit in the last two and ahalf to three months, and as we've seen often in rural, you can't always anticipate when it slows down, and you can't always anticipate when it picks up. Post Holi in March and going through the Navratri season, we've seen a tremendous increase in momentum and sentiment, and a lot of that sentiment was, to be honest, driven by the wheat exports which started. It pushed the price level up for farmers and got into momentum. Also the fact that there wasn't off-seasonal rain in March this year, which, you know, has happened in the last many years and destroyed crops.
Even though people talk about the heat effect, the positivity of no rains in March, it was actually greater than the heat effect, where typically we've seen harvests getting destroyed. All of that led to a very good momentum through April. We've seen that continue. A bit of slowdown after the wheat export ban came in, but still at a much, much healthier level than what we had anticipated.
We expect to see tractor industry in a single digit growth. That's our view at this point of time. It would change depending on how we see the next two months pan out, which is a more optimistic view than we had two months back. The second and one which all of you are very seized with is the huge commodity inflation we've seen.
It has been huge over 18 months and then again went into one more increase in Feb/March with the Russia-Ukraine thing kicking in. We see some positive news coming out of the actions the government has taken. Cutting, you know, putting tax on exports is, will cool the market, and we are beginning to see signs of that.
We haven't been able to pass on price increases as fast as material costs are going up. That has put pressure on margins. On the auto side, that's got recovered through operating leverage. On the farm side, where we had a very strong volume growth last year, the operating leverage worked reverse. Hopefully, as we see tractor demand come back, that will kind of come back to some level.
FY21 we would have to treat as a year which is an outlier year, where everything was hugely positive, because the material cost increases hadn't started kicking in at that stage. The third factor is the supply chain disruptions. We went through a very difficult time in August, September, October, November, you know, as Malaysia was into COVID shutdown and our whole supply chain was disrupted.
Things are significantly better. There is some impact out of the China situation at the moment, but hopefully that will even out as Shanghai is opening up now in June. That was really a key bottleneck because logistics was affected as well. Those were three things that we felt affected us negatively through FY22. Many of them we're seeing as turning around.
I'll change the focus of the presentation to accelerators that we saw through FY 2022 and play out a video for a couple of minutes for you to see some of the highlights of the year that went by. That was you know a whole bunch of things that happened through the year. We're not covering all of them, just focusing on some key ones here.
This was the highest revenue year for us, quarter four and FY 2022. You all have these numbers. I'm gonna just quickly run through them. You've seen them. You've seen we've a very strong standalone and a consolidated revenue growth. You also have the profit numbers. We did have a reduction in quarter four in our farm profit.
It was on a very high base and, you know, even with this reduction, it's still the third highest quarter four PBIT for Farm. You know, when we compare the Farm profit, we have to think of last year being an abnormal and an exceptional quarter four with INR 1,000 crore plus of profit. Very strong exports.
FES had its highest ever exports of 66%, and Auto had a 77% growth in exports. You have the numbers up there. South Asia grew strongly, and we had the highest ever sales in South Africa, Brazil, and Australia. We launched the XUV300 in South Africa as well. We gained 1.8% market share on FES for the year, and we're back to that 40% plus level, which we would like to be at.
He spoke about the FES international subs. This kind of gives you a quick look at what's happened around the world. Mitsubishi in Japan created a positive profit for the first time. Both the Turkey companies were positive. Brazil is profitable and growing very well, gaining market share in a market which has all the key global players present, and the U.S continues to be strong.
This is how the numbers look when you see the profit turnaround on the FES side. It's been seven consecutive quarters of a positive PBIT. The last mile mobility in electric has seen very good momentum, moving in top gear, and these numbers play that out. In the last quarter, we've seen average sales over 2,000 a month.
We have 73% market share. We think the segment is very well set and at an inflection point for very rapid penetration of the ICE market. At the moment, even these numbers are coming out of constraints on capacity, mainly linked to procurements from China, impacting the cell availability.
You see the highest number there in March was 2,300. Talking about the SUV legacy, I'm gonna focus on this concept which you're hearing today, which is the revenue market share. I'll talk a little around that and the 700 and the two new things which are under a huge amount of anticipation. These are the volume market shares coming out of SIAM data.
You can see that we are in quarter four in the top three, which is a very close top three with a very small gap with the other two players and number three, one in the second half. We thought it's an interesting perspective to think about since our portfolio has a much higher average selling price than the rest of the market to think about revenue market share as well.
You can see both in quarter four and the second half we were number one in revenue market share. The way this is computed is a number which comes from JATO Dynamics. All of you are familiar. JATO is a well-known data body for the auto community.
It is based on the SIAM SUV classification of what is an SUV with the average selling prices that JATO collects based on their model-wise data. Based on that, you know, we have a revenue market share which is number one as you can see in quarter four and the second half.
We think this will get stronger as we launch the new Scorpio-No N and hopefully will put us on the top of the table. The 700 as all of you know has done extremely well. It continues to do very well even with a waiting period of 18-24 months, we are getting more than 10,000 bookings every month now quoting that as a waiting period. We still have 78,000 open bookings out of what we've done so far.
We will be revealing our Born Electric vision in Oxfordshire, U.K on the 15th of August this year. We will start a build-up with more information as we go towards the 15th August event starting in July. Watch this space for more. It will be a very, very exciting reveal of how we see our Born Electric vision portfolio play out for SUVs. Many of you may have seen these films, but I'm just gonna show you what we internally call the making of Z101. This film has all Mahindra employees as actors. Let's take a quick look at that.
It was a dark night with a bright idea. Guys, we need something big. Let's take on the D-segment. Let's create the big daddy of all SUVs because nothing else will do. He's not human. Henry. I hear he's quite a head-turner. I know. Tell me about it. The only question was how big is big enough? Daddy's so big, even the big will feel small.
I hear he's from the future. That I do. You know what they say about daddy? What? Daddy is fast even in slow motion. Oh. Wait, who is the big daddy of SUVs? You will soon find out and so will the D-segment. The big daddy of SUVs from Mahindra coming soon.
That was the first teaser that we put out, and as you may have guessed, we have Amitabh Bachchan as the voice brand ambassador, and we have Godfather as the music. That's the brand reveal film which is playing currently.
Huge amount of buzz and excitement around the launch of the Scorpio N. We're already seeing that build up in social media with views on these videos and a whole series of shorter version videos will play out as we lead into June. We are pretty sure we'll pre-sell this before the 27th of June. Let's see where that goes.
Right now we see that this is another big blockbuster that will come from our portfolio. Some key levers on the FES side, build a fortress in the domestic business. We will work to improve our market share. Further aggressive growth in farm machines, we've spoken about this earlier. Global expansion, now that we've got our global subs under control, we would like to see growth from India and there.
Building the AgTech platform through Krish-e and to reinvent costs further. On the auto side, build a strong brand value, develop platform and EV strategy, transform customer experience, de-risk our supply chain. A lot of actions taken, but more to be done in FY 2023 and of course, again, optimize costs for margins. We had put this out as our 2025 commitments, and I'm just gonna give you a very quick update on how we are doing. 29% growth in FY 2022, so we should be on track for 15%-20%+ CAGR. Leadership in SUV segment. In revenue, we are at that place. LCV, less than 3.5 ton, we are number one with 40.3%.
Growing market share in tractors, and quantum growth in farm machinery, we should see a lot of that play out in FY 2023. We are number one in brand power in Q4 FY 2022. This is a study we do with Kantar, a reputed research firm. That's in the SUV segment. Reduce cost as a percentage of revenue, something we had put out during the course of the year. We are on track to that. Deliver ROC of 18% plus plus, we are on track for that. With that, I'll hand over to Manoj.
Thank you, Rajesh. So first of all, thank you all for joining. I think it's wonderful to see you all here and in person, and I'm sure we can interact more after the event. I think some of the elements around the performance Rajesh has already covered, so some of those things I'll probably cover quickly.
After the presentation, feel free to ask more questions. This, we covered 28% revenue growth, led by auto. 53% growth in auto. A decline in farm, but of course, April is a much improved book month for farm. We covered the reasons for PAT before EI. 17% growth, I think while the absolute farm numbers were down, auto compensated for it.
In a way, the volume leverage on the auto side is playing out despite the commodity cost pressures which we are seeing. PAT after EI, I'm not gonna talk about Q4 FY 2021 because we had a lot of capital allocation actions. In the current quarter, there was a positive INR 125 crore of EI in the quarter. If you look at the consolidated numbers, again, mirroring that led by auto and farm.
Clearly, many of our group companies are showing improved performance. If you look at businesses like Accelo, businesses like our used car tech business, all of them have shown growth in addition to holidays, in addition to real estate. I think we are looking at a strong quarter of growth across the group. That's also translating into profits.
I think we are seeing good profits coming from MMFSL, Tech M, so on and so forth. Multiple group companies contributing to PAT before EI. Overall, I think at the consolidated level, there's a positive EI during the quarter. This is just a representation of that, in terms of how it builds up.
As I mentioned, domestic farm was down at a PAT before EI level. Domestic auto was up. International auto and farm subs are doing well. I think they have contributed +59. Then the group companies, this is largely led by MMFSL and Tech M. I think those are the two big contributors. While the other businesses have contributed as a percentage or as a contribution level, it's much lower. Looking at the full year, again, 43% growth in auto.
Farm grew, while the volumes were flat. Farm grew about 8% or so. I think that's the story on the standalone side. The profits, again, Farm declined, Auto increased. On the EI side, of course, FY 2021 was a year where we took a lot of capital allocation actions. I'm happy to report that many of those actions are in the past now.
If you look at the net EI impact, it's about INR 200 crores negative for the year. That's something which we will try and see how we can keep it to that level as we go forward. On a consolidated level, again, the same pattern. Across the group companies, we have seen strong growth.
If I look at the profitability, I think Tech M was a strong contributor, MMFSL, then we had multiple other business contributing to that 35% growth in consolidated PAT before EI. PAT after EI is a small positive number at the consolidated level. A growth of about 97% in PAT after EI. This is a representation of that.
Again, farm and auto I've covered. International subsidiaries was about almost INR 500 crore positive during the year, and this used to be one of the areas where we had taken up as a item to do work on and make sure that the performance improves, and that's been delivered.
Finally, if I look at the group companies, again, the same contributors, the major contribution is coming from Tech M and MMFSL, and then we had some of the other businesses help in terms of this growth of about INR 1,178 crores. I'll spend some time on this slide. I think what we have done here is there are two columns.
One is what I would call our core business, auto and farm, and the group companies. This is a standalone cashflow. So we started the year with the opening balance of about INR 10,950 crores. If I look at the inflow column, I'll first talk about auto and farm. Our inflows from various parts of the operation was about INR 7,483 crores.
If you remember last year, it was, it's more than INR 10,000 crore, and we had highlighted working capital was one of the elements which we will not expect it to repeat in this year. That has happened during the course of the year. But even otherwise, I think if I look at that number, it's a very healthy, strong number of INR 7,483 crore.
Then the next row is the CapEx, which we have invested in our core auto farm. This is in the M&M standalone kind of depiction, and that's about INR 3,186 crore. Then we had the auto farm subsidiaries, and MEML is a subsidiary in this depiction. Seven hundred seventy-two crore is the capital deployed there.
If I look at auto and farm, at a net cashflow level, it's INR 3,525 crores for the full year FY 2022. Now, the other column is the group companies. One of our initiatives, and we've spoken about it, is looking at our various investments and thinking about, you know, shareholder returns as a parent company.
That's one of the things we have focused on, is increasing dividends and monetizing some of the opportunities. That number is about INR 1,998 crores, almost INR 2,000 crores, which is significantly up. Now, obviously there is an element of the Tech M share sale which we did, but even if we exclude that, I think it's a very healthy increase from where we were last year. Then the capital deployed in the group companies was INR 661 crores.
The net from a group company perspective, as we look at, as a parent company view, it's a positive of about INR 1,337 crores, which we have got during the year. Our net total, FY '22 cash flow from that perspective is about INR 4,861 crores. The next line item is subsidiary debt, which we have repaid.
That's about INR 828 crores. Now, within that is, what we did, we had given guarantees for SsangYong, and that's included here. About 460 odd crores is what we paid the banks. If you take out that number, this is a much lower number. It's about 360 odd crores is the debt repayment number in the course of the year.
Then since the cash generation was strong, I think we repaid debt at the M&M level, which is INR 1,796 crores, and the dividend payout last year was about INR 1,089 crores. Our closing cash balance is about INR 1,209.9 crores, and our current debt position is about INR 6,300 crores.
We are in a very comfortable position from a liquidity perspective, and we kind of are in a position where we can continue to invest, and which is gonna be our next slide on CapEx, because I'm sure many of you are very, very interested in that element of that. I think that's the kind of view of the standalone cash flows and how we think about those cash flows.
If I look at deployment, again, the first column is what we had said last year, which is INR 9,000 crore overall in auto, including EV. Farm was INR 3,000 crore. Auto and farm investments, which is the group companies of auto and farm, INR 1,500 crore. Then the other group companies was INR 3,500 crore, totaling up to INR 17,000 crore.
What we have done in the first segment is, I think, Rajesh alluded to it, the demand cycle is so strong that we have budgeted extra capacity creation, which is about INR 1,900 crore over the next two years. This is the same period of three years which we are using as a comparison. It's an update on the number we gave you. That's INR 1,900 crore additional.
If I look at Farm again, we are setting up a new factory, so capacity addition and some of the newer products. Both of them put together is adding up to an INR 400 crore increase. On the Auto and Farm investments, there's no change. I think many of these companies are turning around, and I think they should be able to take care of their capital needs very, very strongly as we go into the future.
Then finally, group companies investments, we had budgeted INR 3,500 crores. I know there was a lot of questions around this, and I'm happy to report that we are actually reducing that number by INR 800 crores because many of the group companies are self-funding growth, and that's something which we hope will continue to be a trend. That's the number which is reducing.
The last column is what we call monetization and partnerships. Now this could be a combination of multiple things. We have many, many unlisted investments. We have listed investments. We have, of course, listed companies which could go public.
All of that put together, we are budgeting for INR 2,500 crores, which is a demonstration of the value creation, which we are creating as a group and where they are hidden, kind of, in our balance sheet today. That's something we want to bring out very, very clearly. We have put it as a goal. Out of this, about INR 500 crores is already done. The next two years we are looking at an additional INR 2,000 crores coming through.
If I look at an M&M level, for the CapEx needs, I think we'll maintain it as INR 17,000 crore of cash. The source might be slightly different because its monetization is coming through, but that's the way we are looking at it, that given what's happened in the course of the year, given what we are seeing in the market, I think we are investing for CapEx, investing for growth.
That's the big, big change from probably some of the commentaries about the last time, where I think we were going into a year with relatively less visibility. Today we are in a strong position, and that's where we are increasing the overall CapEx guidance over the next two years.
Finally, I think Anish mentioned it. I think one of the themes was about value creation. I think we started the year saying we will reignite. I think if you look at most of the measures, whether it's the financial measures, whether it is around making sure that we execute on monetization, whether it's making sure that we are getting our group companies ready for a self-funded or IPO path. I think all of those are happening.
I think from our perspective, this part has been executed, and this will continue to remain a focus, but I think the reignition has happened, and we hope that we can continue going forward. Thank you so much.
Thank you, Anish, Rajesh and Manoj. We'll now open the floor for Q&A. Before that, I request to those who are attending online to, you know, post your questions, and we will take it after a few questions from the audience here, participants here. Okay, first question is from Kapil. Just state your name.
Yeah. I'm Kapil from Nomura. Thank you for the presentation and many congratulations to the management for setting these bold targets and, you know, they're tracking well. My first question is for Rajesh. It looks like you have a big problem on hand. You know, there's a lot of, you know, a huge order book, and looking at the new Scorpio, it looks like the problem is going to get bigger.
How are you preparing, you know, in terms of production capacity? Also, a slightly larger question is, you know, you're having a very sharp focus now on SUVs, and it's a very coveted crown because everybody wants to make SUVs today, even the small car companies. In your vision, how are you going to retain that position?
How are you preparing the organization for more premium customers who are walking into your dealerships with, you know, product design, customer service and you know, just the overall vision of how you will retain this position?
Thanks. Thanks, Kapil. The first question is I wish I had a good answer. There's no easy answer in the short term because at the moment, the constraint is not so much our own manufacturing capacities. It is through a combination of things, including suppliers and semiconductors, so they all play out together.
We've got 700 to about 5,000-odd, which is still lesser than the 6,000-odd capacity that we have. We haven't even yet been able to get to where we are. We are, as Anish said, investing in capacities to prepare us for this huge upswing that we are seeing. You're right that we will see a strong upswing again with the new Scorpio-N.
I think in the short run, the critical thing is managing our customer experience and, you know, being able to communicate commitments which we are realistically able to meet. That was very difficult for us in the first five, six months because we had huge disruption on semiconductors, much beyond what we expected.
We did struggle with meeting deadlines. We are at a more stable level now and hence it's easier to communicate to customers. Our sense is that customers who are booking now have a better expectation of when they'll get their vehicle compared to those who booked in October or October-November, right?
When people booked in the first phase, nobody thought they will get a waiting period of 18 months, and that was, you know, very hugely disappointing for anybody who waited up to book on the first day of the bookings open. Today, when customers are walking in and they're getting, like I said, more than 10,000 bookings every month, people know that the waiting period, what the waiting period is when they're booking. Cancellations are in the region of 10%-15%. So they are very, very reasonable. This is now over a fairly large data that we have over 100,000 bookings.
You know, I guess people are willing to wait for a good thing because the value proposition of XUV700 is so strong that you know, people are trading off INR 40 lakh, INR 50 lakh rupee cars or products or SUVs for you know, something which is less than half the price of that.
You are getting people coming in from the premium segments as well as people who are wanting to upgrade from one step lower. You have both, and both see a huge value here. I think we're gonna live with this shortage situation for some time. From the standpoint of all of you who are analyzing how we are doing, you will see an upward curve because we are going to be doing better than what we did.
We think the trajectory is positive. We don't think the waiting period is going to come down very dramatically. It will come down, but it's not gonna come down very dramatically because if 70,000, just to take XUV700 as an example, you have more than 70,000 open bookings, and you're getting twice your production rate every month as a new booking. Unless we cover the open bookings and we are able to produce at twice our current rate, the waiting period is not gonna come down dramatically. I mean, just simple math at the moment, and that's going to take some time.
On your second question, I really think if we hit the sweet spot like we've done with these two, three products where we are differentiated, people want to buy us for who we are, our true DNA, which is why what the essence of the whole SUV strategy is. There is no reason why we will not continue our leadership.
We are now the only body-on-frame player, by the way, so there's nobody else offering body-on-frame vehicles, which is what the Scorpio-N is about, and the Thar, and the Bolero. So that space is completely ours. But we also have a very strong monocoque offering with 300 and 700. So it's a very well-balanced portfolio.
With Born Electric coming in, you know, there are models which are gonna be cutting-edge on design with the new design center in U.K. Don't wanna say more, but we're super excited about what we're going to reveal in August, where you will see the whole portfolio and platform strategy.
Kapil, I'll just add one more thing to that. On your last question, what we feel good about is the fact that we've started moving back to number one in SUVs, and we have done that already in the second half of this year. Even more important than that is the fact that the XUV700 was developed indigenously in-house.
That's just a function of the capabilities that have been developed now. For us to have a car like this, which is clearly a world-class car and far ahead of any of the others in this space, and to do that in-house, gives us a lot more confidence about the kind of cars that we can produce, not just on the ICE side, but also on the electric side.
Sure. Anish, if I may ask you one question. You know, you've set very bold targets since you've taken over and, you know, it's something that requires to achieve those, it requires to push the whole organization very hard, maybe on things like target setting, decision making, accountability. What kind of changes and maybe, you know, Rajesh and Manoj, if you want, you can come in as well. You know, what kind of changes are you bringing in on, you know, people management and how the organization does some of these things? You know, we'd like to get more insights on that.
Thanks for highlighting that, Kapil. We had set a bold target of 18% ROE, and I know when we did that, there were a lot of skeptics looking at us and saying, "Really?" You know, "Why would you set 18% ROE when you've gone through all of these issues?" We've actually hit that far earlier than what we expected. Similarly, as we've set targets for profits as well, 15%-20% EPS growth is what we put out a few quarters ago. This time we've achieved a 97% EPS growth. If I were to look at it for the three year horizon, we sort of achieved that 15%-20% CAGR already, but we're still staying with 15%-20% going forward.
For us, it's important to make those commitments and really have a plan to get there. It starts with that. For each of the commitments we have, there's a very clear plan as to what each business needs to do, what each function needs to do, and how do we get there. The second thing we've done is really got back to the fiscal discipline that we had in the past. We've talked about that earlier, and that is a very important part of driving these commitments. It's not just fiscal discipline in terms of businesses on a path to ROE, it's also in terms of cost. While we put that on the slide, I don't think we emphasized this too much.
There was a very significant reduction in fixed cost that has taken place as well, and a strong management of cost at all levels, which is also helping in the results, because you wouldn't see these kind of results with the commodity prices and margins being where they are right now. It has to be driven by other things.
The third thing that we've done is really build a culture that goes back to, again, where we were in the past of a lot more collaboration. One where we will be in the future of a lot more agility. Large companies are generally not agile, and in an environment today where in many cases there are much smaller companies that come in and challenge incumbents, it's important for us to be agile.
The behaviors that we've put out there are collaborative, agile, and bold. You're seeing the bold already. Collaborative and agile is what's helping enable that on a foundation of our values.
Thank you.
Hi. Thanks for this presentation. Really, you know, really commendable job last year. It's good to see, you know, all the targets being achieved. I had a question on the EV business. Now, you do lay out pretty aggressive plans, Born Electric, leadership in last mile mobility. Again, this business will need a lot of investment as we look forward in addition to the capacity ramp up that we're talking about in the UV business. How are we thinking about long-term funding of this business, these strategic partnerships, you know, around the electric mobility?
I'll just start with that and then hand it over to Rajesh and Manoj. First is, as we saw our FY 2022 to 2024 numbers, our EV funding's already in there. We've taken it up slightly from what we had said last year. We had said INR 3,000 EV, INR 6,000 ICE. We've increased it by INR 2,900 overall, which is a INR 9,000 going to INR 11,900, INR 1,900 comes from capacity, some element comes from EV, and some from other things.
As we think about the future, we're going to have more of our CapEx go in EV because our product line today is, in a sense, the best positioned in the industry. With five new launches right now, we really don't need a significant amount of CapEx going into new product development on the ICE side.
A lot of that will go into EV. At this stage, we're pretty comfortable in terms of being able to maintain our CapEx requirements. Also, as we think about the cash generated, if we looked at the last two years in auto and farm, the inflows were INR 18,000 crores. As we look at our trajectory going forward, in some ways, I'd expect that to go up as we have more capacity come in serving greater demand, et cetera. This is INR 18,000 crores in two very difficult years.
Given all of that, at this stage, I'd say we are fairly comfortable in terms of what we need from an EV standpoint in terms of funding. Rajesh, Manoj, anything you want to add?
To just build on what Anish said by saying that, you know, we're also setting up the ICE. You saw that in my presentation as well on platform concept. We basically, you know, focusing our portfolio on working out of two body on frame and two monocoque platforms, and everything else that we'll do going forward will really build on that. The cost of any new ICE introduction will be significantly lower and that will allow us to move monies to the EV.
Even on EV, we are, since we are, you know, doing ground up one time rather than evolving with time, we are gonna set up the whole thing around platform and high level of commonality and configurability, and we'll talk more about that, which would relatively bring down investment using partnerships like the Volkswagen one we are talking to and so on.
You know, there's a very good balance of areas in which we will want to bring in expertise and excel and where we will leverage partners, you know. We're not gonna try and do things which others are doing better than us and try and reinvent the wheel.
Just, the second question from my side is on the margin for autos. Now, when I look at the delivery this quarter, really we're almost touching 6% with commodity where it is right now. And we do expect that some of this, you know, commodity aspect to ease going forward, and there's a lot of operating leverage and cost efficiencies which are yet to play out.
You all had laid out this 7% target sometime back for the auto segment EV. Given the launches that we've had and the pricing power, you know, do you think that there is a case to surpass these margin guidance that we'd laid out? Or how should we think about, you know, from a medium-term perspective, the margins in this business?
Manoj, you want me to start and then you can chip in? Multiple factors at play here. You know, this, first, I just want to refer to the point you made on pricing power. It's very easy at this point of time to leverage that pricing power, but we are very mindful that we shouldn't, because we don't want to kill the golden goose so early, right? We have a great momentum going. We need to build that. We need to get customer confidence back, get many more vehicles on the road.
We are being very mindful of not, you know, getting into that mindset where we lose humility and say, "Okay, we have a 24-week period, so we can charge another INR 3 lakh on XUV700." We have taken aggressive price increase, but that's for commodities and some margin improvement, but really not trying to take advantage of the situation, and we don't think we're gonna do that in a hurry.
We will build our business back with four or five very strong brands before. We know in time when the brands get strong, the margins go up. We've seen that in the past with all our successes. Bolero and the Scorpio all had extremely good margin structures, and so will this portfolio of products. That then comes down to what are the other levers to improve margin?
Operating leverage will kick in, and you're already seeing the effect of that in quarter one, that a lot of that is operating leverage. The commodity front is a little uncertain at this point of time, because when we say it's going down, it's going down relative to what? You know, because we've seen go up, and we thought that's the end of the story in Feb and March, and then we saw another huge increase of 5-6% that happened just with the Ukraine crisis. How much is the cooling off, and relative to what base is something that we need to wait and watch for.
We had also put out a target which is more salient in my mind, which is that we'll improve our cost as a percentage of revenue by 3%. We had said we are on track for that. There are lots of actions we have taken on optimizing our material cost, which is nothing to do with commodity.
When we take material cost targets internally in the organization, they're always without commodity impact. It is basically through renegotiation or value engineering. A lot of work has happened on our key modules on that, which has significantly improved our margin. The full effect of that we will start seeing, you know, in the FY 2023, because in FY 2022, it happened through the year, so you don't see any full impact of that. I would, without giving a specific target, unless Manoj chooses to, I would remain optimistic on the margin uptick on auto.
No, I don't have a specific target. I've never given one ever. I'm not gonna start. I think just one point to add, I think, there is a model mix, because there are a lot of new launches in the mix which are driving the growth. Countering that is the value engineering piece on that. As volumes build up, I think we optimize the cost per vehicle, I think that's the counter.
Now, timeframe-wise, I think, we can't predict whether it'll happen in H2 next year, et cetera, but I think directionally the statement we made in the medium term, I think we will target a certain increase in margins. That will stay, and I don't think we'll change that guidance higher.
From our perspective, the initiatives, the key kind of levers are already there. There are teams working on it and there's a comprehensive plan. Maybe as we go into the future, if we see a different outlook, we will do that. Currently, I think, the thing we said in the last quarter around improving margins, the timeframe might have changed a bit here or there depending on commodity prices, but that's something we'll kind of stick to.
I just want to take a second to add on a point which Manoj spoke, which is model mix. That's been very favorable. We've seen the XUV700. That's one of the reasons why we were struggling so much to ramp up because we just got 5% of the total bookings on MX, which by itself is a very strong model. 95% on AX, which is, you know, the one with the big screen, and 65% of the total booking is on AX7 L.
Which is where we have more than 200 semiconductors in that model. Everything needs a semiconductor. The lights, the wireless charger, the power seats, everything needs a chip. Which is one of the biggest challenges in being able to ramp up because the model mix, but obviously the margins there are also more favorable.
Raghu here, sir, from Nuvama. Thanks for the opportunity. Congratulations for a good FY 2022. I had two, three queries. Firstly, Anish, sir, on the growth gems, where are you seeing traction, and how do you see that ROE roadmap towards that 18% in those entities eventually leading towards, you know, monetization, which Manoj sir talked about?
Secondly, Rajesh sir, on the tractor side, the year started off on a good note, and despite whatever government restrictions on export, even May seems to be reasonable. How do you see the full year outlook given that the monsoon expectations are on the positive side? One last question to Manoj, sir. If you can talk a bit about the impairments that have been taken and if you can indicate where it has been taken. Thank you, sir.
First on the growth gems, the way we've defined it is to set a target of $1 billion of market cap that needs to be achieved in a specified time frame. That specified time frame last year was three to five years. It's two to four years now. We have seven businesses who are on track to do that.
Three of them are our listed entities, Holidays, Lifespaces, and Logistics, and there are four others. Of the four others, there'll be at least three, is my sense, that will go to an IPO, and again, in the same time frame. That's really what's going to drive the value generation from there. Which is where we feel good about an 18% ROE target.
As those are monetized as they go to an IPO, we will likely see them contribute very well from a returns perspective. Rajesh. Yes. Tractor demand, Raghu, is like you said. April has been very good, much higher than what we thought. May is much higher than what we thought. It has slowed down a little bit after the ban, but not significantly for us to be worried.
At this point of time, our view is single-digit industry growth, but we'll update that once we see more through June. Typically, we like to do a calibration end of June or so as we get a better feedback on the monsoon and cash flows in rural areas and so on. At this point of time, we'll talk about single digit, which is higher than what we had thought about a few months back. Manoj.
Raghu, on the impairment bit, I think just a little bit of background here, right? If you look at impairment, it's based on the current view of the business. The current view of the business, we keep looking at it again and again.
We have put in a process where it is multiple level checked, in terms of it goes through the company, then the sector, and then we take a call at an overall level saying how does it link back to what's happening in the market and so on and so forth. What you see here is a net result of it. Splitting it is actually, I mean, if I go to split the INR 125, it's going to be a long journey.
I think instead of that, I think what you should look at and take comfort from is the process. For example, I can tell you in one of the subsidiaries, we took a write-back this quarter, because when we did it the last time, I think the market situation was very different. We said we would rather be more conservative and take a market-based view on that.
As the situation improved, we looked at the projections again, and we took a write-back. There are multiple puts and takes in that number. The broader message from our perspective, which I was trying to convey, is FY21 was the year of big impairments and the big EI elements.
I think that kind of year is in the past. From a tracking perspective, it should not be a major factor as you go forward. That's one. The second is, you know, as I talked about monetization, some of that could lead to EI gains also. I think that will also come into the picture. I think there are multiple puts and takes. That's why if you get into the detail of EI, I think it's probably more distracting for everybody. I think that's why we are probably not disclosing that.
I'll just add to what Manoj said, Raghu, which is if the businesses are performing, there should be no impairments. What we saw in a period where we sort of had a number of businesses that were non-performing, the impairment section was very long, and those were the numbers that we had in terms of losses as well.
This year it's sort of more or less at par, and that's what we would expect going forward as long as the businesses continue to perform. EI really shouldn't be a factor in the business. Profit after tax, before EI, and profit after tax after EI should be more or less the same.
Thank you, Anish. Thanks a lot.
Yeah, hi. This is Pramod from InCred Capital. First question is to Rajesh Jejurikar. Considering the recent tie-up with the Volkswagen, wanted to know, considering last two decades of your experience of hits and misses with the tie-up of global OEMs, what made you to go now with EVs?
Especially in the context that you have a very low design cost. Is it more to do with the supply challenges you see in the EV component? Or is it more to do with the capital allocation restrictions you have, and hence you need to look for these type of tie-ups? One. Second, to Anish, this is with regard to the capital allocation. Especially with the subsidiaries which were...
For the companies which were struggling to meet your threshold, and you were trying to give them a time and come up to there. Where do those stand? Are there some of them falling apart, you need to push them out? Or you feel all of them will go through to meet the deadline?
First, before Rajesh goes, there are no capital allocation restrictions on EV. We feel that's a space that, we are very well-positioned in, we're going to be very successful in. EV will get all the capital it needs. You want to take the second question? All right. Well, you then answered the first one.
On the second one, we had classified companies as A, B, and C. C was companies that will not meet the threshold of 18% or do not have a clear quantifiable strategic benefit. All of those have been actioned. On companies in category A and B, the vast majority were international farm subsidiaries. As you saw from the presentation, they're on a very good track of performance. We had Sampo in category B. We had Hisarlar in category B as well.
Hisarlar, actually, we went ahead and kept only the strategic part, which was implements, and sold the rest. Hisarlar was one company that sort of straddled B and C, but that action's completed also.
The ones that are in A, which was MagNA, which is a U.S. farm business, a Brazilian farm business, they're actually doing very well on a very good path, faster than we expected, which is what's contributing to our ability to get to an 18% ROE even faster. As far as we're concerned, the ABC chapter is now closed. Pramod, your first question on our history with tie-ups and Volkswagen, where does that fit in? Firstly, we strongly believe that in every tie-up we've learned a lot and we've gained a lot.
We may have lost some, but we've gained a lot, we've learned out of it. Volkswagen is not an equity tie-up. It's basically a supply agreement to buy components, which will enable us to be successful. Everybody's buying from somebody. If you look at all the announcements in India, in the EV space, announcements, people are buying some core part of battery cells.
Motors, you either buy from an OEM type supplier, or you will buy from a normal supplier. These are all things that, you know, the whole industry is buying. The EV space is about collaboration and partnerships, and there are several around the world. It's a very neat, clean supply of components agreement, which will give us greater assurance on quality and relatively faster go to market.
We hence don't see any risk, and I don't think you can. One would bucket it with any of the past tie-ups, because this is a pure supply agreement.
Yeah. Hi, this is Shirish from HDFC Life. Few questions taking over from Pramod's line of questions actually. Two years back we had an agreement MOU with REE Automotive of Israel. They also had a skateboard platform, if I understand correctly. Where does this VW thing fit in? In addition to that, we could have bought the whole MEB platform, which is what Ford did in Europe, but we chose to use the word components and not the platform. Is there something that we have in mind what we want to do in-house? Similarly on the battery side, that being the biggest cost, do we have anything in mind in terms of how we are going to go about?
I understand VW would be having tie-ups with right from the lithium miners level. Are we gonna take batteries from there? Are we gonna make it in-house? Whatever you can answer will be fine. Thank you.
Yeah. The REE thing was firstly not for the SUV space, it was for commercial vehicles. It was an agreement by which they could access us for any engineering, manufacturing support they would want out of Mahindra in India for what they would do for their global customers. We would have the option of using it for Indian customers if we wanted.
Broadly, that was the contour of that. REE right now has a different set of priorities, and we haven't really progressed much on that effort. Any time they want to leverage us and use, you know, either our product development capability or manufacturing capability, that's possible. But that has nothing to do with this, because that was for commercial vehicles. A lot of what they are doing is for, you know, the very large trucks around the world and so on.
They're not really Indian market product offering. We would want to, and we have wanted to develop our own Born Electric platform because that's the future, right? We would like to control what we do with the platform and not really be buying out an entire platform someone else. Buying out components gives you flexibility.
When you buy out a full platform, then you are kind of much more locked in. We have a platform which we think which we've developed, which is very relevant for our kind of vehicles in Indian usage conditions. We've gone that path of developing our own platform. Not gonna say more about it because we will share all the details about this as we lead up into fifteenth August.
We will be fully sharing the details of what this platform is and what's gonna come from where on it. Tying up with people like Volkswagen does help us secure the, you know, battery chain. You're absolutely right. Volkswagen has a very strong presence in this area.
They're amongst the largest investors in the world with, you know, more than $40 billion, and they have gone all the way up to, you know, tying up mines. Supply chain in EV is going to become a very big issue and is gonna remain a big issue for some point of time. Having a secure supply base will be an important part of the strategy. All of that has gone into the decision on what kind of tie-ups we should look at.
Can you share the cost and CapEx implication of that tie-up? Or is it too early?
Sorry, cost and CapEx.
Yeah, like, will it be coming at a very competitive cost to you or anything on that?
Well, you know the game we play, where it's about creating value, so we will not tie up with anybody which is not competitive.
Is there any exclusivity in that tie-up or not really?
Can't talk about the terms more than what I've said.
Thank you, sir.
Thank you.
Okay. Now I'll take a couple of questions from the online participants. This is from Devanshu Sampat, Axis Securities. Question is for you, Rajeev. The question is on KUV100. What is the game plan here? It's touted to be a tiller killer, but with the tillers being subsidized, how will it allow the same? How is it priced versus tillers and what is the value proposition for farmers?
Actually, Devanshu, I love the term tiller killer. We haven't come up with that term before. If you invented it, we love it. The initial response to KUV100 has been one of the most innovative concepts that we've created. It's a horticulture-compatible farm mechanization solution offering developed by Swaraj. It's hence CODE by Swaraj. It has some very interesting features like the seat turns direction. You can change the ground clearance and so on.
I thought since Harish is here, he's the CEO of the Swaraj business, maybe he wants to talk a little about it. We've got a very, very good response. Just launched it in 3, 4 states, but a very, very good initial response. Harish?
Yeah. Thanks, Anish. I think the big plan is, there's a big focus as we all see that there is a crop diversification is a big thing which is being talked about. You know, many farmers are shifting their cropping patterns to grain crops, to horticulture crops. The key thing is there's no mechanization solution for such transition. Because there's the narrow row widths, you know, very less weight. These are very niche application is needed in mechanizing that. And KUV100 has actually achieved that sweet spot. There's no machine which is as narrow as lightweight as KUV100.
When it comes to, you know, customer segments, you talked about the tiller killer or power tiller, but I must tell you, horticulture is not only adopted by the farmers which are small farmers who are buying a lower cost machine like power tiller. What our order book is, almost 40% of the order book comes from tractor owners.
The fellow who has more than 50 horsepower tractor. It's a unique value proposition which is addressing a mechanization need. As regards the power tiller user is goes, power tiller is a very, very small machine which involves a lot of drudgery, and this resolves all this health, all these, its issues, and therefore it is loved by power tillers. That's the one, big one value proposition as we talk about.
As regards subsidy is concerned, yes, power tillers are subsidized. Our machine KUV100 is also subsidized. To that extent, it is very well positioned between a small tractor and a power tiller with a much, much higher value than a power tiller, which it offers to the farmers. I must connect as a big game plan what Anish talked about regenerative agriculture.
I think it means you are creating an ecological system which is much more robust. The crop diversification is a key part of that regenerative agriculture, and we are happy that the innovation, what we have done, is really addressing that piece and it's consistent with our planet positive goals. Thank you.
Thank you.
Thank you. There's another question from Anoop Bhaskar of IDFC AMC, and this is to Anish. Congratulations to the management for sustaining growing the quarterly profits. How is M&M placed on the journey of efficient capital allocation going forward? I think you addressed some part of it.
I think we let our results speak for themselves on that question, in terms of both our path through ROE as well as the growth we are driving. All I can say is that we will continue to maintain that discipline very sharply and ensure that, every rupee of capital used generates more than adequate returns for us. Yes, we are making bold commitments, but the bigger challenge for us in making the commitments is actually meeting them. So far, we have met the challenge, and we hope to continue meeting that challenge as we go forward.
Hi, this is Yogesh from HSBC. Just couple of questions. Firstly, on the subsidiary ROE targets. While 18% is very healthy, I was just curious, some of your larger subsidiaries are in industries where companies make 35%-40% ROE. When you evaluate all your subsidiaries, are you only looking at absolute 18%, or are they evaluated relative to the peers, as well?
Very glad you asked that because 18% is at the group level. It will be different for different subsidiaries as compared to their peers. In some cases, it will also be different where we want to drive growth. For example, what I tell Harish for farm machinery is I'm fine with a 0% ROE for the next five years.
Can we go from INR 400 crore of farm machinery sales to INR 8,000 crore of farm machinery sales? I'm not putting that as a commitment, just to clarify, right? That's the conversation we are having, saying, "That's the growth you've got to show in the market. You need to invest for that growth." Because that's going to be a very strong business for the next 20 years after that. There are going to be different targets by business.
It will be lower ROE targets sometimes for our very high growth businesses. For some of the businesses where they're in industries where there are higher ROE targets, clearly we expect them to beat or outperform financially in those industries as well.
Thanks, Anish. I just have a follow-up from Rajesh on Scorpio. Usually Scorpio has a certain level of fan following and a profile of customers. The new one looks quite contemporary, so will it expand the market? At some edges, will it cannibalize XUV? How will both be positioned separately? Thanks.
Yeah. Yogesh, thanks, and that's one of the reasons we are going to continue with the current Scorpios and Scorpio Classic, because we realize that they are very different target groups. A lot of the current Scorpio sales comes from, you know, rural India, Bihar, UP, Rajasthan, so on and so forth. We think that that segment still will want the Scorpio in its current form, current level of compactness, and so on.
We are continuing with the current Scorpio so we don't lose that loyal base. We at this point of time expect that to continue. In spite of announcing the Scorpio-N, we are seeing very little cannibalization or waiting amongst that target group, at least as of now.
The Scorpio momentum continues very strongly in spite of, you know, all the announcements around Scorpio-N. The second part of the question is around will this create a new target group, and the answer is yes. That's the whole intent of this marketing strategy to bring back Scorpio into cities and into, you know, the tier one towns of India, which is metro. Maybe top 60-70 towns is where Scorpio lost its current momentum and presence.
You know, the brand is still strong. We think in this new form with this offering, it will come back as strongly a city vehicle. The third part of your question was, you know, the overlap between 700 and Scorpio. You've got to see them next to each other to realize that they're very.
They're gonna appeal to very different people. In a way, it's like comparing Thar and 700. The appeal is very different. This is of course not Thar, but it has its own distinct body-on-frame and, you know, strong, rugged presence. We do bring in technologies into it, but it has the character of a real true-blue SUV, as one would call it. It would, we think, be very distinct target group from 700 and will create a new segment for us.
Yeah, hi. Chirag here from UBI. First question is on capacity in auto. Both ICE engine as well as taking it ahead to electric, whenever you showcase your products. Is there a rethinking on how you look at capacity given the momentum that you have gained on the EV side, and the fact that you're looking at platform consolidation?
Traditionally you have started with 4-6,000 units of capacity and then looking to ramp it up. Is there a rethinking happening that you need to look at a much bigger capacity as a base capacity? Given platform sharing, your break-evens will definitely be far lower than what they were earlier.
Yeah. The answer to that is yes. You know, every time we have to go to Anish or Manoj and tell them we are revising a number upward, we don't want to go that path too often. This is a learning that we've got, you know, out of the last launches that we've kind of not investing in the tail of the investment, right?
In a way, capacity relative to the total cost of a project is not such a high investment, given that we already have manufacturing presence and so on. We are now, you know, going into this with much greater confidence and hence building capacities keeping the future in mind, not just with us, but with suppliers as well. Clearly this is a learning out of what we've done in the past. Even on Thar, we had started with two. We've now got. We started with just a capacity of 2,000. We hit four. We are gonna hit six in a month or two. We're gonna move that up further.
How are you thinking about it? When you launch new set of models, do you think you need to set up a capacity of 10,000 units, given that the platform could be used further in Asia going ahead? If you can articulate how you're looking to expand the capacity?
Yeah.
How fast?
How fast?
Yeah.
Yeah. You know, it'll be hard to answer that question without putting out the exact volumes. The plan is that we want to be number one in SUVs. We see ourselves on a clear path to get there. We're setting up capacities to meet that. We've set out a roadmap for EVs. There is gonna be some overlap because there will be some carryover.
All of that is being factored into the capacity expansion. From a timeline point of view, most of this will kick in in 18-24 months. Let me just add a perspective to that. All of you track this industry very closely. If you look back at the launches in the SUV space in the last five years or the last seven years, as we looked at it, there wasn't a very high percentage that hit 6,000 a month.
In fact, even if you take the bar lower to 3,000 a month, right? After maybe an initial blip for some of them, there are very few that can sustain going over 3,000 a month. If you were to look at where we were two years ago, 6,000 a month seemed a fairly bold step at that point in time to say that, yes, it can be done because as you well know, the capacity comes at a cost in terms of our capital and our suppliers' capital as well.
Today, where we stand, 6,000 seems low. That's a great place to stand right now, right? And it's not one launch, it's essentially multiple launches that we've seen. Yes, we will be revising our standards upwards in terms of saying, "Yes, we can hit this regularly," but not just this.
We should be able to hit more regularly. That's what will be factored going forward. Will we get to starting with 10,000 capacity for certain models? I'd love to be there when we get there. I don't think it may be too far off, but I don't think we'd start with 10,000 right now on the next model that we have.
Yeah, but a lot of that, Anish, to build on your point, it will come in through the platform approach, right? We are saying that this platform will be 10K plus, et cetera, et cetera, right? Now we're thinking about it as platform capacity, which solves 70-80% of the availability issues. Then you only have to invest incrementally on what's not common.
Second question is on two-wheeler side. Given that the focus on right to win is there now, where does the two-wheeler piece fit in the scheme of things?
We are not getting back into mass market two-wheelers in India.
But even-
Full stop.
Even globally, if you can articulate, how are you looking at two-wheeler? It's not more from losses perspective, but it's more from management bandwidth and how you are looking at it. Because if you don't have a right to win over there in that sense, or which are the areas that you are seeing you have a right to win in two-wheelers in that space?
Should I take that? Sure. We have two parts to our two-wheeler business as things stand. One is a business which is called Classic Legends, which is the Jawa, Yezdi, and the BSA brands. Then we have the Peugeot scooters in France. Yeah, basically these are the only two legs we have in our two-wheeler business.
Classic Legends, we have a co-investor who leads the management of that company, right? Neither Anish or I spend. It doesn't consume our bandwidth by way of management to drive that business. It has an independent CEO and two of the co-investors, who are non-M&M, play a very significant role in enabling that business.
The other is the Peugeot scooters, which has a full-time CEO, and again, doesn't consume too much of our bandwidth or time on running it. From a management bandwidth point of view, you know, both of these are niche businesses, not playing in the mass market. As Anish said, we don't have intentions of getting into the mass market in India. If we were to do that, it would take bandwidth.
I would just add that, CLPL or Classic Legends is actually a very exciting business. Because if you look at the brands it has with Jawa, Yezdi, and BSA, this is a very strong collection of brands, and this is one, therefore, that has. It might be a very strong right to win. We're playing in a very niche segment there with those brands.
Again, if you look at the industry on that, and, you know, all of you are experts on that, you would see the highest profit creation in that industry or that segment of the industry. If you look at the profit pool, while it's a tiny part of the overall industry, from a profit pool standpoint, it's a pretty significant part of the industry. That gives us a lot of confidence in terms of playing in that space and saying we can actually create and generate a lot of value. The consumer pull on that is extremely good.
Okay. The last two questions, one from the online and one from the participant here. Online question, this is from Vinay Singh from Morgan Stanley. M&M EV CapEx number looks smaller than what peers have announced. How to think of M&M EV share in that context? When do we hear more about Volkswagen MEB tie-up? Also, what sort of CapEx savings come from doing partnership with Volkswagen?
The number that we have shared is for the next two years. You know, there's a buildup obviously of capacity. More details on both the Volkswagen, our product portfolio, and how we think about it will all be shared by August.
I would also add that given the capabilities that we've seen in Mahindra Research Valley, if you look at even the XUV700 or the Thar or other cars we've developed, I'm pretty certain that we've developed it at a far lower cost than what many others would have developed. That is one factor here as well that needs to be taken into account.
Question is SUV order book, any data on consumer in terms of M&M consumer upgrading versus new to the brand and urban share seems to be going up. Is that?
Uh, for seven double O?
SUV order book. Overall SUV order book.
I'll answer for seven double O, because if you take then there's a three double O and both of these actually have a hugely new customer base. One clear indication of that is the level of automatic in our portfolio. All the launches, three double O, seven double O and Thar have more than 50% automatic in their portfolio, 30% gasoline.
These are all not traditional Mahindra customers. Seven double O does have a huge metro focus. For three double O, it's roughly 60% metro, 40% non-metro. All of these launches are getting a very new customer base. In fact, even the Bolero Neo is getting us a completely new, very minimal cannibalization with Bolero.
It's taken the Bolero brand back to 9,000+ and a completely different target audience, so it's got back into Delhi. Bolero is never strong in South. The Neo is doing very well in South. Very different target audience even for a product like Neo.
Hi, thank you for taking my question. Nitin Arora from Axis Mutual Fund. Just for the perspective of emission norms in the next three, four years, two, three changes are happening. Just want your thought on why choosing still a diesel over hybrids for the SUV.
If you can throw some light on that. If you can throw with respect to the total cost of ownership, you know, which you might see increase in your assessment for a diesel engine. Would choosing a hybrid be good, or you think diesel would still rule that space? If you can throw some light on your bookings, how much still Thar bookings or XUV bookings are still in diesel.
70%+ are diesel.
I see.
70%+ are diesel.
Got it.
Clear preference from customer for diesel. The new evolving metro segment may be 25%-30% gasoline, and we have a really good gasoline engine both on the Thar and the XUV700. The gasoline is really quiet, very good, very peppy, all of that. This segment is not from a customer preference point of view moving away from diesel to gasoline in a hurry. We think with EV that we will start seeing that shift where they will get the performance parameters much more strongly in an EV.
You know why I'm asking this? Because let's say the CAFE or the RDE, you know, if you can throw some light, what's the total cost increase for you, let's say in a diesel? Why I'm asking this because a small-
10,000-12,000.
Okay.
Which are already done.
That doesn't go in favor of hybrids, even. You feel that way, even if the diesel is extended.
We already made the changes for CAFE on first April, so it's built into our cost.
Yeah.
It's more about performance and the diesel engines we have today are very good. The petrol engines, we've had a few auto journalists tell us that they are the best in class petrol engines that we see around. It's a very strong set of engines. We see the move really going from here to electric, not as much to hybrid, which is sort of an interim solution. Similar to the fact that even for electric, the interim solution is taking a nice car and making that electric. The real game is Born Electric platforms. That's when you get the optimization in the vehicle.
RDE would add how much cost, if I can get that?
Sorry, what?
The RDE norms would add how much cost? Let's say the CAFE is INR 10 thousand-INR 12 thousand.
That is still a while away, so we're not gonna talk about that number right now.
Okay. Thank you so much.
Yeah.
There was one question at the very end that the gentleman was raising his hand for a while, so let's go there please.
Hi, this is Ravi Purohit from Securities Investment Management Private Limited. Sir, I had three questions. First was on capital allocation. I think we've been on this path of creating, you know, shareholder value through various method. Just wanted to get your views on treasury stock. I think between Tech Mahindra and Mahindra & Mahindra, we hold probably $2 billion worth of treasury stock.
We are the only company now left on the listed space who owns treasury stock. There are two other, they've already kind of, you know, written off their treasury stock in favor of shareholders. Any thoughts that you can share on whether by way of distribution, do shares back to shareholders or writing them off or monetizing, whatever, if you could share.
That's like a low-hanging fruit for you, for value creation point of view. Second question is on farm implements. I think we had mentioned earlier that we have a target of about INR 5,000 crore revenue for farm implements. So if you could just share where we are in that journey. Third and last question is, we have a subsidiary of Mahindra & Mahindra, which is into defense and aerospace.
Where would you categorize that business in A, B, or C? Is that business kind of, because we don't hear that business being spoken about in our analyst meet or con calls, but that business has kind of got some INR 3,000 crore order book now. So is it category C on its way out and not a focus area or category B or category A? If you could just share some more, you know, thoughts and light on that. Those are my three questions. Thank you very much.
I'll start with the last question first. We took all our loss-making businesses and put them in A, B, and C. Defense and aerostructures is actually a profit-making business. It's on a very good path to our 18% profit goal plus value creation. It's a business we clearly like. This is also a long-term business. It's not one that can be put in place. We've become the Tier 1 supplier for Boeing and Airbus for some of the components as well. We also supply to Boeing and Airbus' Tier 1 suppliers as well.
It's one that I would look at as a value creation opportunity. We haven't talked about it much so far because there are some things that we will wait till we can actually show results. That's something we will wait for. On the farm implement side, this is clearly a growth area, and one where the business is looking at significant growth drivers over the next couple of years.
I won't talk about specific numbers right now, because any numbers I throw up will essentially be higher than the budgets that the business has right now. But all I can say is that I do think this is an area that we have a very strong right to win. We've got global prowess in this business through acquisitions we made globally, and we can bring those.
Are bringing those strengths to India. We've got a very strong ecosystem in India from a brand standpoint, a distributor standpoint. Therefore, I would look at this business just growing many multiples from here, right? 10x is the minimum I would look at. I'd probably look at somewhere between 10x and 20x in terms of growth.
That will require us to make sure that we are not worried about margins for that business. Don't please don't ask questions on margins for the business. The investment required is not very high, so we're not really worried from an ROE standpoint, what is the investment there.
Ideally, in the next five years, we want to build this business to a very strong business, and then we will start looking at margins and the returns from that as we go forward. Your first question was on capital allocation. Can you-
Treasury stock.
Treasury stock. There our focus right now is creating value, right? Those are things we will come back and look at in future as we have to, but that is not value creation for us. I'm not going to put those numbers out there and say financial performance is very strong because that sort of is there right now. Again, we really haven't spent much time on it, so we'll look at that in future. Right now, the main focus for us is to ensure that from a core value creation standpoint, we can get the business to a level where we are consistently performing and at a very high level.
Just one follow-up on the defense and aerospace business. You mentioned for farm implements, your aspiration that we could have 10x, 20x in the actual scale of revenues. Would you have similar aspirations for this business also? If you could spend some more time, if not today, then maybe some at other platform. You're gonna give us some peek or some insight into what we are really looking at, you know, in that space. What is it that we are really kind of trying to build or, you know, do?
See, this business has two very distinct aspects to it. Defense is based on orders from one customer, and those orders can overnight make the business a hundred times its size, or it can take a while for the orders to come in. We haven't seen many large orders. Again, you've seen the level of orders we've seen from the government so far.
It's something that the government has to indigenize defense production, and therefore, we are in a space that is a good space. At the same time, we are careful about how we play in that space because for us, we are really looking more at things like cybersecurity, things like managing cities, and not getting into areas that are weapon production. That is not a space we want to get in.
We have taken some parts of that business and say we are not getting into that business. Aerostructures is a business that is a very long-term business. It often takes two to three years for the manufacturer, a Boeing or an Airbus, to make sure that the part is perfected before it can be sold to them. Once it is done, it's something that doesn't change for a very long time because the barrier to entry is very high. The aerostructures business, it actually has to be built brick by brick and one therefore that will become more and more valuable over time.
Thank you.
Thank you. With that, we come to the end of the conference. We will have all the senior management available to you during the lunchtime. I take this opportunity to thank all of you for being here and, you know, looking forward to meeting you quite often. Thank you, Anish, Rajesh.
Thank you everyone.
Manoj and others for being here. Let's join for lunch.