Q1 21/22

Aug 6, 2021

Hello, everyone. Good day, and welcome to AM and M Q1 FY 'twenty two Earnings Call. Let me start with the Safe Harbor statement. Certain statements on this conference call with regard to our future growth prospects are forward looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those inside forward looking statements. Please note that this conference is being recorded. I would like to welcome the senior management of Mahindra and Mahindra Limited for this call. We have with us today Doctor. Anish Shah, Managing Director and CEO Doctor. Rajiv Jureka Mr. Rajiv Jureka, Executive Director, Auto and Form Sectors Mr. Manoj Bhatt, Group CFO and other senior management, including the IR team. We will have a presentation by our management team before opening the floor for Q and A. You are requested to use the raise hand feature if you want to ask question during the Q and A session. You can also type the question in Q and A tool in your browser. Before handing over to Anish, I just wanted to bring to your notice That's on this quarter, we have started reporting M and M plus MBML Financials as M and M standalone Financials as all the formalities for the merger of M and M and MBML have been completed during the last quarter. With this, over to you, Anish. Thank you, Shriram, and good morning, good afternoon, good evening, everyone. I know you're joining in from various parts Subur, so thank you for joining our call today. We're going to cover the 4 key messages that are listed here. One is significant headwinds in Q1 as we've seen across many companies. But despite that, we've seen a very strong performance in pharm, Good recovery in auto. Mahindra Finance has been hit hard, and we'll talk a little about what has caused that And what has Mizra Finance said in terms of how it's getting back on track. And TechEm's very positive momentum continues. So that has been a huge all of that together has helped deliver very strong results for M and M. And we continue to maintain a very stringent fiscal discipline, and we'll talk about some of the actions and outcomes on that front as well. First, just a quick highlight on the headwinds that we saw. The impact of wave 2 in many ways was very different from wave 1 because first, it did penetrate into rural areas a lot more. The impact was much higher on our associates, on dealers and their families. And that caused a significant disruption in operations, not only for ourselves, but for the entire ecosystem around us. And we obviously saw commodity price increases, Supply chain issues as well as the semiconductor shortage and higher freight costs. But despite all of these challenges, What we really felt good about as a team was that the farm business came out really strong. And when we see auto, we'll see fair amount of spend there, obviously not as much. But the farm business delivered its highest ever profit for the Q1 at INR10.81 crores, up 59% from Q1 last year, which As April as a watch out, but a very strong May June. Volume up 52% and volumes in fact even up 7% quarter over quarter after a strong Q4 of fiscal 'twenty one. Market share is up 2.6 points to 14.8%. Commodity price increases were largely offset by cost management and by price increases. And the one point that We were really focused on through all of last year was profitability of international subsidiaries. And today, very glad to report that Every single subsidiary, international subsidiary of the pump sector was profitable in the Q1 of F 'twenty two. So good momentum, strong volume and good momentum on cost and market share as well. As you look at auto, there were a lot more balances in auto. But despite that, auto did manage to get INR 103 crores profits, Up from a $584,000,000 loss. In contrast to farm, auto was much worse than last year in the Q1. In many ways, that's really not as much of a comparable number. But the key aspects in auto are the market share improvement for both UV and PV segments, Very strong product pipeline as well as recent launches. Harish will talk a little bit more about The R and the XUV300 as well as the Bolero Neo and the excitement we have around the 7.00. Commodity prices, same comment as a farm. And in auto, there has been a lot more supply chain issues. But I would say the team has really managed them very well and come out much stronger than we would have expected at the start of the quarter. Mizra Finance deserves a deep dive. And Many of you may not have been at the Binder Finance analyst call. So this, in some ways, is a summary of what was covered there. Profit after tax dropped significantly to CHF 15.29 crores. The key drivers were GNPA, up from 9% to 15.5%, which resulted in P and L provisions going up from 7.35%, which is A little more for normal quarter, probably a little higher than a normal quarter because that was again a tough quarter last year to INR 2,517 crores. The INR 2,517 has 2 aspects to it. 1 is an ECL provision increase Of 2,000,000,000 24 crores that is essentially driven by forward flows of loans into Stage 2, which is greater than 60 days and Stage 3, which is greater than 90 days. And the second aspect of the provision was a $3.93 crore overlay provision. This is Don from a prudency standpoint, just to make sure that the business is staying extremely safe. We had put in some overlay provisions last year as well because of some uncertainties that we've seen over the last 18 months. And with the addition of $393,000,000 the total overhead provision is $2,700 and 9,000,000 The way to think about the overlay provision is this is over and above what our models would estimate from a loss standpoint. So this factors the uncertainty in the environment. And once the uncertainty in the environment goes away, then this may not be required at that point in time. From a capital adequacy standpoint, despite all the provisioning, The business continues to be extremely strong at close to 24% from a capital adequacy standpoint. And I will also add that the provisions are 54% of Stage 3, which is industry leading. So from a safety standpoint, we make sure the business is very safe. Now let's go to the right hand side and talk a little about what happened, why did it happen and what else from here. We talked about the ECL provisions being driven by Stage 2 and Stage 3. So let's start with Stage 3, which is greater than 90 days. What drives the GMPA? Stage 3 contracts at the end of June were 294,000. They had gone up by 180,000 between March June. Of this 294, 78,000 contracts were partially paid back in July. 92,000 contracts has an outstanding loan amount, which is less than 50% of the loan value, which essentially means that the value of the asset, because these are all asset backed loans, The value of the asset is much higher than the value of the loan. And historically, what we've seen is when this happens, there is no loss on it because Usually customers will repay back because they don't want to lose the assets. And in the event they just cannot repay, if the asset is repossessed and sold And typically, there's enough value in the asset to cover any losses. So a combination of 78,000 and 92,000 is 170,000, which essentially is close to 90%, 95% of the 180,000 increase. Similarly, in Stage 2, This had gone up to $402,000 an increase of $316,000 Off to $316,000 right now we feel that $334,000 are salvageable. Some of them possibly may stay in Stage 2 and continue making some payments. So even on a conservative basis, if you assume that 250 are solvable, The Mizer Finance team feels fairly confident right now that they could reverse 80% to 90% of the additional ECL provision of the 2001, 2024 floor that I talked about in Q that was taken last quarter. And this will be done by the time we get to the 3rd or 4th quarter. What also gives us a little more comfort is that over the cycles, we've always seen Among the credit portfolio of higher Chicken BAs, the credit losses have always stayed within a tight range. And a similar trend, As an example, during demonetization was a peak G and P of 14.5% and 3 quarters after that it was 9% And for the 3 quarters late grade of 6%. So the minor finance team essentially sees this as Higher provisions due to COVID related liquidity impact with a number of earn and pay customers in various segments, a clear path to reversal and a business which is well capitalized and has student provisions. If you look at TechEm, which For this quarter, it seems that the other end of the spectrum, just an outstanding performance, up 39% versus Q1 last year, which also was a very strong quarter for TechEm. In fact, up quite significantly over last quarter as well to INR 1353 crores of profit after tax. A lot of traction in various sectors, health care, VPS, communications, high-tech manufacturing. The pipeline is very strong. The total contract value is double the historical run rate at $815,000,000 Driven really by cloud, data, customer experience, AI, margins are improving. So everything is going great, Constance at this point for Tech M and we do see the continue with that. We also want to focus on our growth gems and talk about 3 of them, the listed entities. We've talked about each of them reaching $1,000,000,000 market cap. Well, logistics seems to be headed there faster than we had expected, Because logistics has gone up to $720,000,000 in terms of market cap, up 2.7 times or 173%. Hospitality has closed or doubled. Real estate is almost 4 times at 2 73% compared to a Sensex of 54% growth during the same time period. Logistics is really driven by core execution. Hospitality because of a business model that was in a sense protected through COVID and growth that is being driven through various initiatives right now. And real estate was a combination of core execution and growth. So we have seen each of these three businesses really start to function well, And this should be great value, and it is for our investors as we go forward. So summarizing all of this in terms of standalone operating PAT and PAT after exceptional items. Operating PAT is at INR 9.34 crores, up many multiples compared to a quarter last year, which In many ways, it's really not that comparable. But similarly, BAT after EI is INR856 crores and up significantly. So despite the headwinds, our teams have given a very robust operating performance. As we look at the consolidated numbers on the next page, As reported, INR 4.73 crores profit on the consolidated side. If you look at last year, we had Negative 20 from our continued operations perspective. But if we include Sanyang, it was really negative 582. And that essentially is a 1,000 crore swing despite the significant loss of binderfinance. If we exclude minor finance, then we're looking at nearly a 2,000 crores positive swing on the profit side as we would have been at 13 100 crores, whereas the Tangshan impact would have taken it that much further. So this is really capital allocation showing results plus the strong operational performance that helps us overcome the impact we think from minor finance this quarter. Rajesh will take you through more details on auto and farm. Manoj will then cover the financials. And I'll come back and talk about where we go from here. Rajesh, over to you. Good morning, good afternoon, good evening. I guess it's not good afternoon for anyone who's calling on the call. So nice to be with you. And Anish, thanks for the first part of the presentation. I'm going to start with a recap of a slide that I had used the last time, and we had broken up this year into 2 phases. The gear up phase, which we thought would be quarter 1, which is about managing cash costs, inventory and enhanced well-being. And then our readiness to fly and some key strategic levers on the auto side and the pharm side, which we've spoken about. Happy to share with you that one very important part of the enhanced well-being and people engagement has been that our automotive and farm sectors were ranked number 2 in India's best companies to work for. We're particularly happy about this because it's happened in a year, which was a year of high stress. And We truly believe that our teams really came well together to see us through what has been a difficult phase through the COVID period. The gear up trades had, like I said earlier, 3 key areas. We believe we managed margins very well, challenging environment in the quarter 1, debtors have been under control. We build stocks through the quarter 1, Prepare ourselves for the festival season and a lot of focus has gone into enhanced well-being, vaccination drives, family assistance policy, The MProtect for customers, mainly on the tractor side, but also in Google Auto And COVID-nineteen package for 80,000 plus dealer employees. All of this has, of course, created positive goodwill, But also we believe that really is the critical and core part of our values. Some highlights. We saw a Big increase in the market share of factors. You know that through last year, we were losing share due to supplies And we're happy that we've gained back and come back to a level of 41.8%, which is the highest in the last 8 quarters. Anish already spoke about the global subs performance on the FPS businesses. And the Hisala restructuring, which we believe It's a part of capital allocation. We moved out of the non core metal fab business and restructured the Ag Machinery business into our full package. On the auto side, we have the XUV700 launch, which is on the Amazon, we're very excited about it. The Bolero Neo and the super profit truck launches are, of course, very good start. Our brand selling momentum, we'll talk a little around that and auto Sums are on track, in line with our expectations. When you look at the Automotive business, the revenue was at a level of around INR 6,000 crores. This is automotive standalone. Last year, quarter 1 was depressed, but quarter 1 of this year has seen a relatively good performance in the context of large number of lockdowns we had in Q1. We did make a profit of INR 100 odd crores in quarter 1. Last year, of course, quarter 1 was a big loss. You can see that we are the volumes are lower in quarter 1, which was With the various lockdowns including in the dealerships. And That, of course, has impacted the bottom line. But we think we managed a difficult environment. We've used this time to build up our inventory, still not back up to the levels of the previous years. But we believe now we have a much healthier stock compared to the last three quarters. All our brands are in momentum. We have open booking of 39,000 for the part, which is a waiting period of 10 months. Open bookings of 10,000 plus on 3.00 and we did 6,000 billings, the highest ever on XUV300 in July and products are doing extremely well. 4,000 plus open bookings on Bolero and 6,000 plus open bookings on Scottsville and a very strong demand momentum on pickups as well. Volaro Neo has got very well received, which opened up new segments, acceptance in newer markets. And that's what we were hoping for. We were hoping for a launch which would create new markets and segments for us with a minimal cannibalization of the level. We priced it well and it looks, it's the design have been Appreciated like and it has created its own traction and we are hoping that this would move on Yet another new successful launch from our stable. The Supro Profit Truck also got launched in July and has seen a good traction since launch. It's a good product and we are sure will create a very strong The XUV700 launch is around the corner. We would reveal it this quarter, and we hope to start deliveries in the Q3 of the year. We are not going to be delaying the launch Because the semiconductor prices, we believe we will be able to see through with the planning that we've done so far. The response on the 700 has been immense, with 97,000,000 views on the videos that out and a huge amount of social media engagement and a lot of excitement that has got created out of what we call the snackable videos, Short videos talking about some critical tech features, which are going to be segment leading. Thanks. On the equipment side, we're seeing a revenue of INR 5,300 crores in quarter 1, a growth strong growth on last year. Last year, quarter 1 on FPS side was not so depressed, so it's Strong growth and a strong growth in PBIT as well. You can see from this chart that quarter 1 volumes on the tractor side was not as impacted. It's almost equal to the quarter 3 season volumes. So the factor momentum in quarter 1 has continued. And you can also see that we've been able to build back stock at the end of quarter 1, which is now at a reasonable level. This said to recap is our stock with us plus dealers. We've delivered again a very strong margin performance in spite of the inflation on commodities, a margin of 20.3% and an increase in market share of that nature. These are the 4 key levers that we have spoken about, strengthening our core domestic business and what is happening around that to drive our market share up through the year. We focus on scaling up our pharma, which we see that as a big opportunity, grow the category and gain share, Focus on technologies, new programs, K2 program, leveraging our global centers of excellence and building on Precision Act. And global growth, as we now see consolidation of our global subsidies, we really think there's an opportunity to leverage that for growth and profits. This chart represents how we've done in our key markets where we have ground presence. As you can see, all of these are Profitable, Anish mentioned that as well. And we are seeing very good momentum in North America, delivered a positive PBT in Magna. And Turkey is seeing a very strong momentum. And again, Turkey was a profitable business operation as well as Brazil. Next. This chart brings alive the turnaround in the FPS subs. And you can see that from losing Substantial amount of money in F 2019 and F 2020. Over the last 4 quarters, we moved to breakeven and now a positive in quarter 1 of it. We believe we are on the path for a bold and aggressive growth strategy. There will be some constraints, especially on the auto side that will come around the semiconductor issue. But we believe that We will be able to address those. And say that through that is this is something that is going to be Dynamic and we will have to learn to live with it for a few at least a couple of quarters, we believe, and we are gearing up towards that. With that, I'd hand over to Manoj. Thank you. Thank you, Rajesh. Thank you, Rajesh. Good evening to everyone. I think I'm going to quickly cover the financials before we throw it open for questions. Rajesh talked about the revenue. I think the revenue was almost more than doubled. On the EBITDA side, I think if you look at the numbers, we have seen a 3x improvement in EBITDA compared to Q1. I think this has been driven by Increase in volumes, and we'll talk about it some more. And then finally, operating pad has gone up 23x from the Q1 levels of last year. The other significant feature here is EI has come down. I think last year we had A lot of capital allocation actions, but I think this part of the year has come down to INR 78 crores. So the PAT after year is about INR 8.56 crores For the quarter. I think coming to the year on year performance, I think if you look at domestic farm, Q1 F 2021, while it was muted, was still profitable and that performance has since then improved to INR 844 crores. So are seeing a positive contribution of INR 288 crores from the farm business. Auto, which was in a loss position in Q1 because of the shutdowns, I think as despite the lockdown situation in Q1 this year, it has managed to get to profitability through a combination of Cost saving and other measures. And so auto is a big contributor when we look at the year on year bridge run margins. The other two amounts are about international substitution group companies. There are some small adjustments here or there, so it's not significant. Moving to the consolidated numbers, it's a growth of about 60% in the same quarter last year. I've already talked about auto and pharma and Rajesh and Anish have also covered it. From a group company's perspective, I think there's been growth across the board when compared to Q1. And I think their performance, while some many of them were impacted in April May, I think we are seeing a Rebound coming in June July, and that is a trend we are hoping will continue. I think the operating pad side, If I look at Q1, I think the number after for continuing operations Before EI and after NPI is about INR 20 crores negative in Q1, which is more to INR 4.73 crores. Within that 4 73 course, there's an impact of 8 26 course for Financial Services because of the provisioning we took there. And the other element which Anish also touched upon is that since we don't have SYMC now in any of these numbers, In Q1, we had an impact of 562 after EII and after NCI and tax impact of SYMC, which is no longer there in the numbers. So that's the benefit we have come because of the SYMC actions we took. EI is a smaller number this time. I think the INR 14, which you see in the current quarter is a part of the Hisaklar deal, which we did where we sold Part of our business to another party and as part of that there was some EI we booked during the course of the quarter. Moving to the next slide, please. I think in terms of Q1 to Q1, across the board, we have seen Substantial increase in profitability and profits. The one thing I want to highlight here is the international subsidiaries. In Q1 FY 2021, We were in a loss position of about INR 248 crores, which has now become a breakeven overall. So I think we have made substantial progress on both cost optimization and also kind of repositioning the business for the right kind of product set and The right kind of market approach. I think those are paying dividends, and that's something which we are hoping will continue. On the group companies, as I mentioned, there is improved performance across the board. And the major ones here are It's Tech M, which has been strong performer Q1 to Q1. And finally, Mahindra Finance, I think if you look at it and Anish This is a provisioning which we have taken based on the current situation and that's something we will look to recover And we'll cover more as we go along. I think, Anish, back to you. Thank you, Manoj. Going back to our key focus areas. As we've talked about earlier, we are looking at taking a leadership role in ASG globally and have I'll find a road map for it. We'll talk a little about that today. Maintaining financial discipline, accelerating core growth with leadership in auto ad farm, A turnaround in MIMO Finance that goes beyond taking care of the short term issues. New trajectory at TechEm with strong momentum there, Scaling growth gems and scaling digital platforms. Beyond that, enhancing customer experience. So let's talk about a few of these today. First is 10 commitments that we're making for ESG. You've seen some of these before, but now we have targets around these and the teams are geared up to deliver them. Starting with maintaining a gold standard in governance, being water positive across the group, carbon pricing, RE100, EP100, Planting 5,000,000 trees a year, educating 1,000,000 girls a year, supporting 1,000,000 women a year to get drops from a woman empowerment standpoint, 0 waste to landfill and carbon neutrality by 2,040 with science based targets along the way. So a significant set of commitments that we're making to really be able to make this real, to really live our purpose. I do want to come back to this slide because you've seen various versions of this over the last year. And the promise we had made was By March 31, we would categorize all the companies into ABC, which we did. We had promised that we would take actions on the C companies, which we did as well. And what we had also promised was milestones for everyone in A and B and continuing to maintain the discipline for companies that don't make the cut that may come into the C category. So what we show here first is a report card in a sense. Under category 8, PMTC has had some COVID impact in terms of various challenges of supply chain, but it has still performed Quite well based on the challenges, fundamentals are strong. And on the farm side, as we look at The farm subsidiaries in category A, we've seen a very significant turnaround from a RUB 103 crores loss to a RUB 37 crores profit. Similarly, in category B, APF has launched will be launching the Batista soon. And even in this category, the pharma subsidiaries have Tone, a very strong performance from a 17 crores loss last year to a 22 crores profit loss in the Q4 of fiscal 'twenty one and a 31 crores profit in the last quarter that we are reporting right now. Beyond that, we have put 2 businesses in category C And we have taken action and they have been sold already. 1 is the metal fabrication unit of Khyzarlal, which was one of our Turkish entities. And second is the dairy business that we had as part of our agribusiness. So we will continue maintaining this fiscal discipline, Continue monitoring categories A and B closely and where they don't make the cuts, they would fall into category C. For leadership in auto, there is a series of actions that have been laid out With 23 new products by 2026, 9 of them are the core SUV segment. This is obviously in addition to what we launched ready to target XUV300, but you see great traction on things that we have launched. The bullet on Neo is taking up quite well. And We're very optimistic around all of the excitement that has been created for the HUV700. So stay tuned for that. On the EV side, it's not only about 4 wheelers. On the 3 wheelers, we sold 30,000 plus 3 wheelers. We're at the 50% market share in this category. Collectively, we have over 300,000,000 kilometers for EVs. So a lot of experience that has gone into a battery management systems. The Battista, as I talked about it earlier, is launching soon. An EV hypercar, arguably one of the best EV cars in the world. And that's really starting to position us to Maintain the EV leadership that we've had in the past and continue that for 4 wheelers going forward as well. On the LCV side, as you're aware, we've always had a very strong market share leadership in the pickup segment for 2 to 3.5 tons. The sucral profit truck launch in the 0 to 2 ton segment also is doing extremely well and giving Some of the others, they are allowed for the money. And compact pickup is coming up soon. So a number of activities outlined for us to maintain or rather in some cases regain leadership in auto. Let's talk a little about The turnaround for Mahindra Finance. While we feel that some of the issues for the past quarter are short term, as explained earlier, We do have to ensure execution as the team has done before. They are confident they can do it again, put a Soft focus on collections and really move towards reversing 80% to 90% of the 2,000 and one-twenty four ECL provision that was made last quarter. But beyond that, as we take a step back, let's look at the strengths of the model and what we need to augment. Microfinance, In many ways, it's a very unique model. It has a wide distribution in rural and semi urban areas with a strong local connect and trust. 1400 branches, local talent pool and a brand that really epitomizes trust for all our consumers. It is a leader today in rural asset based lending, but it has gone beyond rural as well. Rural today is 42% of its asset base, Semi urban 35%, 23% is urban. The business has shown a strong expertise in financing cyclical products over decades and has managed stress periods well, despite having volatility in re NPS where they go up to 14%, 15% and they come down after that. It has diversified into non captive with multiple products, strong OEM relationships. And As I mentioned earlier, we are very well capitalized, managed from a very prudent standpoint with an industry leading provision of 53.7% cover and CRAR of close to 24%. But that said, we do need to augment certain things here. We are looking at how do we reduce some of the volatility in 3 FPS. Should we rationalize a few micro segments and customer types, Enhance early warning signals with data and a link to collections. Leverage data and digital a lot more And we've done so far, sharpen origination and credit underwriting. We've got a lot of proprietary data sets for Bharat for rural India, 7,500,000 customers. And how can we unlock value in that? How do we drive growth with cross sell? Now this is one area where we have been much worse than our peer group. And there's a huge opportunity for cross sell and to carefully target attractive product and market segments. And strengthen organization with specialized talent in AI, in digital and data sciences, we already have built a good team there, but we're looking at expanding that significantly, Empowering affiliates. So as you see across this, it's really looking at data and AI to drive a lot of actions, a lot of decisions and be at the center of what Michael Finances going forward. And finally, I do want to leave Everyone with a view to our path to 18% ROE, we are not going to put numbers because we don't want to, in a sense, give Forward guidance. But directionally, you have seen a few businesses being negative in ROE in F 2020. In F 2021, that has Largely improved, but COVID hit businesses, auto, hospitality and real estate stayed negative. What we are seeing All of them do is to track to positive territory this year. And by F 'twenty six, we see good position for all our businesses to be able to get us to 18% ROE with the growth rates that we're looking for. With that, Sriram, I'll hand it back to you and open it up for questions. Thank you, Anish, Rajesh and Manoj. A reminder to all the participants, please you can use the raise hand tool to ask question. We have the first question from the line of Gunjan Pitjiani of Bank of America. Puneet, you can go ahead. Hi, everyone. Thanks for taking my question. I have two questions. Firstly, on the listed. Now clearly, it's Could you see you also captured the FTM gains there. But When you put out this 18% ROE target, the listed surplus clearly being a drag. So how should we think about the strategy on some of the So that we can get to that 18% roadmap. If you can talk about the strategy around that? So, Binjan, as I shared some of the progress done in the 3 listed entities, logistics, life spaces and real estate, I think what will become apparent as the execution continues is we're going to start seeing much better returns there. And that's really what's contributing to the overall portfolio. What I have also shared in the past is every entity will not be at 18%. Some we will be happy at 15% if they've got a very strong growth rate. And what I would expect in real estate, for example, is a much stronger growth rate for a 15% ROE. And we are on track to getting that done. So each business has a road map to ROE That has been tracked closely. And each business knows that in order to get capital from the group, they have to be able to maintain that and exceed that. So, Puneet, just a follow-up, is it how do we really monitor the performance? And sorry, that is there engagement from M and M to improve the performance? So is this something which has not been brought in past? Clearly, a lot of work has Sanyong and some of the palm stuffs and all. But these are things which have been dragged for a while barring Tekken. So are we extensively involved on this The piece now in terms of unit earning around the businesses? Yes. The M and M representatives on the Board of these companies I've been very vocal and very active in outlining the expectations from a returns perspective that all the investors of that entity have, not just M and M. And each of the entities has a path that has been outlined With specific milestones for every year in terms of how are they going to get to those return metrics. So the answer to that is yes. There is significant change in terms of The discussions at the boardrooms of those entities. Thank you. The second Can I just take the second question? Yes, go ahead, Vijnan. The second question on to business, if you can Give us some color on how we should think about the margin incrementally given all the commodity headwinds. So if you can talk about the price increases Taken and the trajectory going forward. Yes, Gunjan, clearly there has been an unprecedented level in of inflation of Commodity prices across the last 15 to 18 months, something we haven't seen before. We've Taken a series of price increases both on the auto side and the tractor side to cover up as much as possible. So the approach you'll see, 1 is if there's any lag effect or any uncovered material cost that's not passed on. And the second effect you will see is we certainly haven't passed on the margin on the material cost, which deflates the overall percentage margin when you are exceeding percentage margin talks. So you see Some effect on margins coming out of that because with such a high commodity inflation, it's not possible to add the margin on the commodity price increase itself. We have, like I said, taken price increases, but also seriously looked at All options on management of cost, and which is why when you look at the impact at a PBIT percentage level, it is not as significant. So we are focusing right now on managing our PBIT percentages or OPMs. And It is not completely possible to manage the variable margins right after variable expenses and material cost because of the huge increases in commodity prices that have happened. We have been leading the path on in both auto and Tractor going ahead of competition and taking the price increases. We do hope that the moderate increase curve will flatten off Starting quarter 3. Can you quantify the price increases taken in Q1 FY 2022 earnings call? Yes. I'm It is 100 warts? Yes. I mean, I can sorry, Puneet. If you can just quantify the price increases and the under recovery, it will just help us keep Keep the operating leverage as expected or the under recovery to just help us back out the margin? Yes. Well, there's very little under recovery fundamentally by way on the tractor side, we passed on everything. And we've taken 3 price increases this year in January July. The latest one that we have taken in July was Approximately, we have the order of 9,000,000. Of course, it varies depending on model to model. On the auto side as well, I think we've taken 3 price in 3 years this year. We can give you the specific numbers separately, So Shriram can connect with you and share that. Sure. Thank you, Vijay. Thank you, Vinay. The next question is from Kapil Singh of Nomura. Kapil, you can go ahead. Yes. Hi. My question is for Rajesh. I wanted to know in terms of the demand environment both for UVs and crackers, where are we in terms of booking inflow? Related to that, if you could also talk about chip shortages because in July, we have seen probably one of the highest Volume numbers for UBs in last 2 years. And maybe even that doesn't represent The underlying demand. So on chip shortages, what are the actions you have taken? And some of the OEMs have talked about the fact that It has gotten worse for them than expected. So from your perspective, are things getting better or we don't know at this point of time? So that is the first question on autos. Okay. Thanks, Kapil. So on the demand side, on auto, we As I covered in my presentation, we see strong demand for our brands. And overall, I would say reasonably well above MCN Even for the auto industry overall. But in particular, our brands are in very good demand and like you pointed out, we did have a very good month of July. On the tractor side, the demand did start picking up from June. There is a regional skew. The southern markets have done better than It's like UP and the Eastern markets. That's also because the rain dispersion was better in the South and West markets and is moved towards the UP and Eastern markets later July. So there has been some dampening of the sentiment that happened, though that the rainfall has caught up there as well. So the track down demand did get very strong in July. The reason we still maintain a conservative outlook for this year is As you know, last year was on a very, very high base. And last year base started building up from July, August onwards. So to compare the 1st 3 months of last year, growth over 1st 3 months of last year, we don't think is representative or the right representative way to look at the full year. Because the so to say non supply that happened in quarter 1 due to Large COVID shutdowns manufacturing and sales last year did get compensated through July, August, September on the factor side. So we don't think that's the right way to compare and that's the reason we still stay with low to mid single digit kind of forecast on the factor side for demand. Of course, we all know in the tech industry these things change and there could be an upside, but right now we won't count on that. On the chip shortage, yes, there is a tightening of chip availability. It's something that we need to work around. A lot of that is happening because Malaysia, which is a key source of semiconductors, has got into COVID lockdowns in August or later part of July and in August at the moment. And that's the reason there is a tightening of that. We will really have a wait and watch, but we believe that we should be able to navigate that through and are hence going ahead with our launch And so it's 77. But clearly, there is a tightening, as you rightly said, couple, and that's coming out of the situation in Malaysia. Okay. Secondly, on capital yes, can I go ahead? Yes, go ahead, Kapil. Yes. Just on capital allocation, if you could explain Slide 41, what does the Green pluses and stars and 2 plus and 3 plus, what do they mean? And the last quarter, we had Talked about investment of €35,000,000,000 So what how much CapEx and investment we have done in Q1? And whether those investments are formed up or they are dependent on some of the events which may take place? So, Kabil, we debated a lot around Whether we should show the ROE slide or not because the one thing that we do want to stay with is not give forward guidance. So which is where we finally went with a terminology around pluses and stars. The star essentially means that it is Well, out of the ballpark. It is just so strong that we can't even compare it with any other business. So that's what the star means. But that's something that you and your colleagues are all aware of from a tractor business standpoint. The pluses essentially show A range, right. And all I would say there is a single plus is not acceptable for us. 2 and 3 pluses are better. And I would stay at that right now because if I start giving numbers, it will start really becoming forward guidance for many of those businesses. Some of them are public entities as well. So at this point, the basic message there is We have a clear track for ROE for every entity and that track meets what we're looking at from an overall portfolio perspective. 2nd, with regard to your question on the 3,500 course. At this point in time, it is not going up, This was given more as it could be that much over the next 3 years just in the spirit of being completely transparent saying If we do need that to create more growth to have a growth chance get to $1,000,000,000 market cap, that is the max we will do. It is very likely that we may use only half of that or maybe even less, right? At this point, we have visibility for 10% of that. So 90%, we don't have visibility. We will maintain a very strong lens with regard to is it giving us the returns we want or not. And if it is not going to give us returns, we won't use it. In many cases, for our growth streams as well as our digital platforms, we will seek outside capital also. And where we get where we feel outside capital will help grow that business faster, that will release a need for us to put in more capital. In the Q1, I would say that we put in a small amount. At this point, I don't want to deviate from our practice of not Disclosing that quarter by quarter, but that's something we can possibly do as we go forward. But it's a very small one at this point in time. And as I said before, most of the INR 3,500 crores is not Something that we are looking specifically at, here's where we need to put it. Only if we do need to put it to create value, we will. Thank you, Anish. Thanks a lot. Thanks, Kapil. The next question is from Itish Goel of Kotak. It is, you can go ahead. Thank you. Just a follow-up on the tractor piece, Rajesh. Like you said, it's too early to give a Direction on the growth outlook for this year. But we have not seen this kind of 3 years of monsoon being good. The reservoir levels are at 10 year High levels, right, as you compare with the 10 year average levels. There was issue in swing, but swing has also picked up. So I'm trying to understand why the industry should grow only single digit this year. I mean, already 1st 4 months, you have seen a 40% growth. So are we indicating a decline in the rest of 8 months? So what are the Things you're seeing on the ground because to really make that call or you think it's more of a conservative guidance The overall outlook should improve because second quarter should also be a growth quarter, right? So, That's right, Hitesh. Yes, Hitesh. So Hitesh, like I said, quarter 1 growth is not representative Last year, quarter 1 was and it was better than auto, it was depressed. Most of the markets were shut from 27 March 23rd March, actually, all the way through May. And everything, including dealerships, factories, were all shut. So I don't think it's right to judge this year based on the quarter one growth. Like I said earlier, July, August onwards, we started seeing phenomenal growth. So let's keep in mind that Last year saw 25% plus growth for the industry in spite of 1.5 months being washed out. Now that is unprecedented As well. So that's the reason we believe we are on a high base. As you all know, the tractor sell in 2 seasons of the year. And if we see a very good festival season, which hopefully we will, obviously, the year will end up better than what you're saying. But we think it's a little early to reach that conclusion that on such a high base year, we don't see anything more than single digit. Sure. Just a follow-up question on the tractor implement space. Can you give us the market size of the tractor implements, say in FY 2021 and do you expect in FY 2022? And what is Mahindra's revenues as a group in tractor implements? So if you can give that one. Only domestic data. Yes, the rest of it. Yes. So it's not always easy to get these numbers because many are not published, but our guess Is that the pharma machines, not only tractor instruments. So I mean, including harvest term on the self propelled products, Would be in the region of about 5,000 per ounce. We are at about 10% share. Okay, great. And then we'll also add that today it's An industry that's highly unorganized, and we see huge potential in that. So if you look at that industry as A percent of the tractor industry in India, it's a small fraction. And we've talked earlier about globally that is 2x The value of practice sold. So we see huge potential in India and we are looking at a significant growth in farm machinery over the next few years. Thanks, Anish. Thanks, Anish. Yes. It is just to clarify the INR 5,000 crores is organized. Sorry? INR 5,000 crores is organized. There is a huge unorganized on top of that. So who would be the bigger player then? Sorry to just follow-up then because you're only 10% normalized. So So that's the thing, right? There are many, many players Even within the organized sector. So there is no like one player who is very large quantum of it. You have multiple sets of people, Shaktima and so on and so forth. So but they're all in the region. So they're not very far off, but there's no one player who is dominating this. Okay, great. Thanks. Where it lies, John? Yes, sir. Thanks, Hitesh. Thanks. The next question is from Vinay Singh of Morgan Stanley. Hi, team. Thanks for the opportunity. The first question is on the auto sector gross margin. Like Sajesh pointed out, there is some bit of under recovery on the auto side. Could you quantify that? And linked to that, given your order book and given the new launch, it seems that in the coming quarters, your share of new models on the auto So will that have an adverse impact on gross margin because new orders are typically launched at introductory pricing? Or you think you'll be able to offset that? So that's the first question. Secondly, on electric 3 wheelers, in the 2 wheeler space, we're already seeing an inflection, but not so in the 3 business days. So what do you think is sort of missing over there? Thanks. Vinay, it's going to be hard for me to answer the question because it will lead to giving a guidance. So I'm not going to be able to give Specific response on quarter 3 margins. We haven't been able to fully recover our material cost on the auto side Because the increases have been significant and we also want to right now not go too much ahead of for what others are doing because we do also want to get our volume move and come back and we believe that's very crucial for setting up our future. So we but we have been taking very good pricing view, share those details. In the Q2, it's again, there is another cost of commodity increase. So it's not stopping yet. We hope it's a million And I mean, you are right about the fact that new products are on to our margins. But we do still have a very strong momentum on our current products. So pickups are very strong, the level is very strong, stocks are very strong. And so we are not expecting that at the moment new products is going to be overwhelming majority. Okay. Thanks for that. And on the electric 3 wheeler side? Sorry, sorry. Yes, so on the electric previously there are 2 parts to it. 1 is the passenger and 1 is the load. Load is Has a good demand. So it does need a lot of local level approvals and so on, which It will take some time to get into momentum and I think that is not the case in the case of the business first time in mind. So the second part of electric, which is the passenger three wheeler overall electric and IC has been severely impacted through last year by forward. And that is not yet seeing a recovery in the passenger three wheeler segment. So that's one of the reasons why even the electric 3 wheelers is Not as buoyant, but we do, as we've mentioned earlier, see the last mile mobility segment at Very good inflection point. And we'll see momentum build up very strongly in the electric business space. But it's not the same as the personal buying decision. They need fleet operators or individuals to come out, Replaced the current sort out, buy a new one, figure money out. So it is very different than what's happening in the personal used tool leaders, where there is a high bias towards owning personal mobility solutions. Okay, okay. Thanks for that. Thank you, Vinay. The next question is from Ginesh Gandhi of Motilal Oswal. Ginnick? Hi. My first question pertains to our can you give an update on Saengyeong divestment, Where we are and how long do you expect that to play out? And second question pertains to the inventory. So given the chip Shortage issues, we have been building up inventory on the auto side. But given the outlook or uncertainty of outlook in tractors, Why have we been looking to build up inventory? So those are my two questions. Thanks. I'll take the first one on Sakhion, and then Rajesh will take the second one. The court process is underway, Going along the lines that we had expected, with one thing that we had not expected There are a lot more buyers for the business than we had anticipated. And that's a positive in some ways for us, but we will have to wait for that thought process to play out. And that will then give us a sense of how much we can recover from it. Currently, we have provisioned everything that we think is prudent and adequate. And at this point in time, we feel fairly comfortable about that. But it will take the next few months for the call process to get over and get an answer to it. Yes, Dinesh, so on your specific question around why are we building tractor inventory. We are not building tractor inventory, which is out of whack is what we normally do leading into the season. We have to realize that when we are talking about the current season at in an absolute context is going to be a very big Point is so on last year's season. And that's the reason we are not very sure about the quantum of growth this year because last year saw A huge increase, which like I said, was also buildup of the last previous start of the year, which is quarter 1 of last year not being operated. So there was a pent up which moved in. As you know, we lost a lot of market share last year. And the reason we lost market share was as we kept reiterating We didn't have enough supply. So what we are doing is building up our supplies and we are sure that that's the right level of stock buildup needed for given that we severely undersupplied last year through season. It's not out of line with our previous stock buildups. In fact, it's Still little lower than what we've done in the past. On the auto side, there's always a bit of a challenge at the moment because there is a balancing act on what is going to Short and what is not. And there will be some mismatched inventories that are there. We believe that's a risk worth taking rather than Have item A today and then you don't have item B and you don't procure A because B is not there and then The situation versus 2 months later. So we do believe that we have to build some inventories into our pipeline. As you can see out of the chart that I had shown, It is still lower than what we've done in the past. So we still are not at a level where we believe we want to be and not at a level in line with the demand for our products. So we are doing it very prudently, but we do have to take some considered risks. Sure. Just to follow-up on tractors. So our cautious stance is just because there is High base and not anything which we are seeing at the ground, which should make you worry right now. Is that right understanding? That is correct. There is nothing on the ground that is worrying us at the moment. The only thing I would personally watch for Is any effect that the recent price increases may have on demand? That's something to watch for, but we haven't seen any of that through July. So that's the only thing to really watch for. There is nothing on the ground right now in excess feel that there is a slowdown. Got it. Thanks. Thanks a lot. Thanks, Dinesh. The next question is from Itish Bhargava of B&K Securities. Hello. Can you hear me? Yes, Hitesh. Yes. Sir, one bookkeeping question. There is increase in employee Is there any one off and what is the run rate going forward? Yes. Let me pick that up. So I think if you look at the employee expense during this quarter, we had a scheme for All our affected employees during COVID. And I think we came out of the scheme where if there is any death of our employee due to COVID reasons, We gave a 2 year salary as an Expletia payment, plus we gave a monthly salary for up to 5 years is what we have committed to them. In addition to that, we said that the children education up to grade 12 will be covered. So I think it's part of a larger package, which we have came up with, which is for all employees and also some dealers. So in the employee expense piece, there is about 43 odd crores of expense, which is there. But I wouldn't call it a one off because I think our salary hikes are coming in effective August. So I think on a steady state, I think while that might go out, we might have the impact of some of the salary hikes. So from a steady state perspective, this might be a good number to go with in terms of employee cost. Thank you. My next question is regarding the tractor inventory. How is our tractor inventory compared with the industry levels in Tractifen? Jitesh, we are well within our bounds and very competitive and that is normally in the region of the bottom up. Thank you. That's it, Nisir. Thank you. The next question is from Aditya Makaria, HDFC Securities. Sorry? Okay. Maybe we'll come back to you, Harit. Yes. The competition has launched 7 seater SUVs perhaps ahead of what we were launching. So any thoughts there? Sorry, not clear what the question ended. I mean, They've taken the early mover advantage over us because 7 seater SUVs I mean, I'm just saying that this space was not really that well covered, but now you've seen 2, 3 launches come in the last year or so. Yes. Aditya, we can see the huge amount of excitement around our launch. It is unprecedented and we are very, very positive about it. Okay. And secondly, on the inventory for tractors, would it be 45 to 50 days because that's where the industry is today? No, I just answered that, Aditya, maybe you won't hear it when I responded to Hitesh. No, we are not at 35 to 40 days. We are within the region of 30 Okay. Got it. Thanks. Okay. Next question is from Pramod Amte, INTRED Capital. Hi. This is to Rajesh. First, in the sense of the finance availability, If you are to look at the situation of Mahindra Finance and also the other NBFCs, do you see a challenge Financial liability for customers on either tractors or on the automotive? And second question is with regard to CAFE norms. Where do you stand as commodity region on CAFE norms and what you expect to deliver or what tinkering you have to do to reach the expected requirement of the FEED. Yes. Pramod, I just missed out on clear you a little bit, maybe my network dropped on your first question. I got the second one on CAFE. Do you mind just repeating the first question? Sure. The first one is with regard to the finance, vehicle finance related to the customers, especially in the background of minor finance challenges And similar challenge for other NBFCs on the GNPA. How is the situation on ground for tractors and automotive on the financial So I'll also let Anish comment on that. But we haven't sensed any Challenge on availability of financing on the ground either for auto or tractors up until now. So of course, it's something to wait and watch for and Anish has spent a lot of time talking around that in the context of Mahindra. But so far on the ground, we haven't Challenges. Let me, Anish, just do the CapEx question and then we can come on. So we are promoted reasonably prepared with the CAFE norms, meeting the norms as are expected, multiple actions are in place to enable us to do that and we think And Pramod, just to clarify, the minor finance Stress is around the higher GNPAs. The team feels very comfortable right now that they will be reversed based on what we've seen historically And based on the data that we've shared here earlier, therefore, there is no impact on disbursements at all. So, Mahindra Finance Disbursements are going on as normal, in fact, looking to grow on that front. And the liquidity position has been very strong as was shared in the Mahindra Finance Analyst Meet as well In addition to the capitalization position. Thank you. Pramod, your okay. Next question is from Sonal Gupta, L&T Mutual Fund. Sonal, you can go ahead. Yes. Hi. Good evening. Thanks for taking my question. So just first question on electric 3 dealers. Could you talk about what is the sort of capacity you have and what sort of, I mean run rate ramp ups, can we see if the demand is there? And secondly, on the financing piece for EV 3 wheelers, I mean is that figured out what percentage of EVs are currently being financed, 3 wheelers? Yes. So on the electric three wheeler, I'm guessing your question is more around our readiness on Capacity, is that right, Prasanna? Yes, both on capacity and then on the financing part, yes. Yes, sure. The finance here was the second question. Your first question was related to capacity, right? Both are part of the first question actually. Okay. So like I said, We are seeing very good traction on the food segment that comes out of 2 segments, so to say. One is the e commerce players. And the e commerce players are looking at A significant pickup. And as you know, we have spoken about our tie ups like Amazon in the past, and we see good traction coming out of that. The second clearly is as you've launched TrioZor and now expanding the network for that, We are seeing again very positive response, but clearly, there is a value proposition in it based on the cost structure. So we are well poised for that. As I mentioned, the camper at the moment is the passenger segment. And we think that is going to take a little bit of time to pick up because that has not been very good for the Owners of the vehicles over the last year or so. So there is a resistance for that step of people to be purchased And I'll need people to comment to that segment at this point of time. So that is the damper, but we think that will the Momentum on load will offset this in the short term. On the financing part, clearly, that is something that finance companies are going to We've engaged in some very high level discussions with key financiers, some in the PSU segment and some in the Private Banking segment. And we are seeing a high willingness to support financing. Clearly, there will be a little bit of a wait and watch as resale prices get established and swung. But we are seeing a reasonable So this when any new category is getting created, there are going to be some barriers to change and working around the financing situation is 1. Anish, you want to comment as well on the financing? Yes. I think it's financing is getting comfortable with the product, which is part of any product evolution. So we don't really see too many challenges on that front. Yes. So just on that, I mean could you give a number in terms of what is Like EV3, the capacity is at 60,000, 100,000, I mean what sort of a number you have right now? Certainly, the Cruise Air segment has skyrocketed expectations. So we are reasonably sorry, I'm not going to give you a number, Sonam, we are well placed at the moment. We don't need any significant investments to ramp up beyond some which we've just done, just small investments to Sure, capacity to the demand that's evolved. We will at an appropriate time come out with our overall game plan and So on for how we're going to build last mile mobility into a larger business. We are reworking and evolving numbers and seeing what it will take to get us there. So I don't want to jump the gun right now. We have our strategy team working with the business teams to put in place a long term strategy to drive this year. So I'm just going to wait a little bit till we have all the elements in place. Sure. And my other question was on the auto margins. I mean, over the medium term, I mean, like what would you see as the drivers of the improvement? Because clearly, I mean, over the Longer period, we have seen these margins keep on have kept on declining and now there is a lot of pressure also because of the high depreciation of the previous and our volumes have not really grown. So I mean like so what is the driver here? Is it going to be product led and mix led improvement which will drive it? Or there's a Significant operating leverage, as you say, assuming the volumes come back to FY 2019 levels for SUVs plus the pickups. So I'm just trying to understand what will be the driver to take you back to say a high single digit margin range. Yes. So firstly, our OPM margins are the most competitive amongst all published numbers, if you were to compare them on the auto side. So while your question on margin pressure is very valid, it is the best in class margins compared to any other player in the domestic market in whichever segment that you look at. So I just want to reinforce that while there is margin pressure, we believe we have done very well to manage our OPM margins. The key levers that we will work on are as follows. One is there are Several projects on improved and reduced material costs through value engineering. There is opportunity and as we know Typically newer products have a greater opportunity because the older products have been already fully optimized. On the newer products, there is work a lot of work happening on the launches to optimize value without taking away customer benefits. So that is one critical project that is on, which we believe will yield us quite a significant. We did in the last May talk about a very substantial reduction in fixed costs that we've done through F 2021. We've completely redefined G and A and marketing costs, so on and so forth. We're learning to do Brand launches with very low budgets, you saw that on THAAR. You are seeing that on XUV700. All this excitement is being created Very, very little in the mainstream media presence. So that is the critical lever that we are working on. Certainly, operating leverage will kick in as volumes go up. And it is unfortunate that we're not are able to fully leverage the demand that we have for our products and we think that will even out in the next few months. So I think what we are First thing on is driving material cost down of the newer launches, focusing on managing our fixed cost very well. I the number we had shared last time was an 800 per order in action and on the auto business. And of course, mix does matter. And we are taking price increases appropriately. Hopefully, the commodity cycle will start in the down more than a year. I just want to reinforce again that our margins are well. Sure. Thank you. We'll just take 2 more questions. Kirak Shah of Edelweiss, can you please go ahead? Yes. Thanks for the opportunity. My first question is on the subsidiary farm subsidies. There is a significant improvement sequentially in the on the margin front. So how much of this is seasonality, 1? And how do we look at the margins that we have reported sequentially at 5.7%? What is the scope of improvement? Should I take that? Yes, go ahead, Harish. Yes. Chirag, hi. So firstly, it's a Trend, which is not just a coincidence, we've really worked very hard on restructuring each of these companies and each of these organizations. And in each of these organizations, we have worked on significantly bringing down the regulatory environment. Even in a company like Mitsubishi in Japan, where it is very uncommon to do restructuring and voluntary retirement schemes. We have very successfully done that in December of last year. Turkey has gone through significant manpower, cost and other business model restructuring. And a lot of work has happened in that now, where our costs have been cut down to make us very competitive and a key focus on bringing down take even points. We are seeing the effect of all of that. Now is there of course, there is an upside at the moment in demand in Some of the markets like Turkey. But let's keep in mind that Turkey had a huge fall on So if you go back 3 odd years, the industry side was in the tractor industry was in the region of 65, 70,000 odd tractors a year, It can fall on to as low as R20 or R1 1,000. So when we are now looking at growth on that, it's growth on a Usually depressed industry size that had happened 2 years back. So we don't think that this is a cyclicity. Of course, in every tractor market, there will be some highs and some Volatility is a part of the business cycle, but we think the efforts on restructuring our costs and strengthening our value proposition and what Great results. Jairam, does that answer your question or did you have Yes, this is Harshal. 2nd one on the automotive side, if possible, can you indicate the impact of negative operating leverage sequentially? Because is it possible to indicate how much is the negative which will come back as volume normalized for you? If you go back to Q4 levels, how much of this negative operating leverage will reverse? I'm not absolutely sure I've understood the question, Jirav. Are you saying what will be our operating profit if we were at quarter 4 level corrected for Argent depression because of inflation, is that what you are implying? Yes. If you look at Q4 to Q1, there is a significant drop in volumes. Okay. So that's there will be a negative operating leverage impact on various aspects of business. Yes. Can you just indicate how much that could be? So When things normalize for us, what is the right level of operating profitability one should look at? I'm not sure how to answer this question without giving a very definitive item. Mohan, do you want to comment on any thoughts? Let me just discuss one thing here because there are various variables there. So we can talk about it in the Sense of keeping everything else constant, but that might cause more confusion. So my suggestion would be, we'll have Sriram work with the off line Chirag To look through the various variables and be able to point out what's happened in the past, what has changed from there and that will give a clearer picture. Just one clarification. Rajesh, you mentioned that you indicated that in auto new models tend to have lower margins. I presume that is EBIT level and not necessarily EBIT balance because of higher depreciation, the EBIT margin would be initially lower on the New launches. Is that the right assumption? It depends on the pricing strategy, Chirag. So I won't want to give a generic answer. There are products which we price very aggressively in And there are some where we don't need to do that. And so the answer will vary depending on how strong a pricing stance we need to take to break into. Yes. So basically, sir, that's not a generalization because as Rajesh said, pricing strategy is also temporary because it might be aggressive for the 1st 6 months or the 1st 12 months And then catch up again. But in general, it would not be fair to say that new products have lower margins. It will depend on the pricing strategy and for what time to date. Yes. Thank you. Thanks, Jairaj. To give you a perspective, we held on to tar prices because we didn't want to put up customers who had a very long Meeting period, right? That's a conscious call to talk to all the commodity increase because it could have really upset customers who had booked when we were launching and then got a meeting period of 6 months, 8 months, 10 months. We normally don't do that, but in the case of how you decided to protect the huge demand that had happened right at So these are things that do have effect and varies from product to product and time to time. Yes. Thank you. Okay. We have the last question from Nitesh of Jefferies. Nitesh? Yes. Hi. Good evening and thank you for taking my question. So first question is, if I look at the gap between the consolidated and the standalone profits Between the Q4 and the Q1. So that seems to have contracted, Yvonne, excluding the Mahindra Finance issue. While you mentioned that pretty much all subsidiaries have seen an improvement in profit sequentially, Is there anything which is dragging your subsidiary contribution on a QOP basis or am I missing something This is essentially minor finance for this quarter. And if you take minor finance out, then consolidate it goes up significantly. And there as we said, it's what the Mahindra Finance team believes is a short term issue. But is there something else beyond that that I'm missing in your question? Yes. So I meant excluding the Mahindra Finance, so let's say, we knocked off Mahindra Finance impact on your consolidated profitability for the quarter. Yes. And then broadly, what it seems is that the implied profit contribution of subsidiaries is down from about INR 800 crores or so In 4Q to about $400,000,000 $450 this quarter. And you have mentioned on the slides that in most of subsidiaries, your Profitability are going to hold sequentially. So I just wanted to understand, I mean, I mentioned something here, is there something which you're not like to like or What would explain this? So if you were looking at standalone after EI, there will be some impairments in the past which are not there right now. So that is one thing that takes that makes that margin narrower. Also, even if we take microfinance out, we're assuming 0 profit from microfinance at 1304 level. That's a little bit about $13,000,000 versus $934,000,000 or $841,000,000 You typically have a minor finance profit in there as well. So that would extend it further. Anish, just to add to that. I think from Q4 to Q1, there are several businesses Which did decline because of the COVID impact. Is that what you're referring to in your question? Yes, possibly. So I mean is there anything specific which kind of No, I think my only commentary there would be, I think if I look at many of these businesses, whether it is hospitality or real estate or logistics, I think a little May were bad. June was better. July is even better. So I think it's just a normal curve. I wouldn't read much into it. As Anish mentioned, the Financial Services business is the biggest impact. Okay, understood. Thank you. And my second question is, how are you thinking This counting in the factory industry, I guess, FY 2021 would have been a very good year given it was a supply constrained industry. And now we are probably getting more balance from demand and supply. So is there a case for discounting to get a bit more normalized versus maybe last year? You mean will discounts go up? Yes. So I think it was last year. Yes. So, Nitish, I think there are 2 things at play here. 1 is the discounting and the other is the price increases, right? So everybody, each There will follow a different mix of how much in price and how much in discount. So potentially, somebody may take a higher price increase And pass on something more by discount and some others. Your point on the fact that supplies are better for As we get into the season and hence the level of competitive intensity will be higher than last year. I think That is the correct situational analysis. How that will play out is something that we have to watch. But I think I don't see it going out of hand compared to what was in F 2020. F 2020, we do believe is an aberration by way of Very low discounting and very, very good level of debtors. And next we, as you know, had Quarter, several quarters of negative core working capital, which never happens in the tractor business. So these we think will be outliers. Okay. Thank you very much. Thanks for taking my questions. Thank you. With that, we come to the end of the conference. Thank you, everyone. Anish, back to you. So, yes. So, I just want to again thank everyone for making the time today. And we'd be happy to follow-up 1 on 1 if there are more specific questions that we have not answered today. Thank you.