As #Mahindra & Mahindra hits life high on the back of bumper Q4 results, MD & CEO Anish Shah talks to Niraj Shah, only on NDTV Profit.
Watch them discuss the quarter gone by and the company's new announcements. #Q4WithNDTVProfit
Also Read: https://bit.ly/3K7nS1k
Watch them discuss the quarter gone by and the company's new announcements. #Q4WithNDTVProfit
Also Read: https://bit.ly/3K7nS1k
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TVTranscript
00:00 On most line items, Mahindra and Mahindra's numbers beat Bloomberg estimates and therefore
00:07 the stock had done so well in the run up to the results and post the results as well.
00:11 The questions to the management are about not just what's happened in the quarter gone by,
00:16 but a lot of announcements they have made in the investor or investor call as well. Dr. Anish Shah
00:22 joins in to speak about all of that and more. Dr. Shah, great having you. Thanks for taking the
00:25 time out and congratulations on what appeared to be a very strong quarter.
00:30 Does it go largely as per what you estimated, not just the quarter, but the year as well?
00:35 Thanks, Neeraj. It's great being with you. Yes, things have gone in fact much better than we had
00:44 planned for the quarter and for the year. There were a number of challenges we faced, but very
00:51 proud of the team. They really stood up and delivered everything we said and more.
00:57 I'm going to start with maybe four or five auto questions, then go on to the console piece as
01:04 well. But when I look at the volumes for the auto business, very decent numbers out there.
01:10 Maybe I think you alluded to this in the call as well, that 27% volume growth is no
01:16 mean feat, but maybe slightly lower because you were waiting for the 300 to get over,
01:21 300 to get over. Now, do you sense a return to normalcy in Q1, especially with the kind of
01:28 response that 3XO has gotten?
01:30 We do sense further growth for us on that, Neeraj. 27% growth in an auto industry is very,
01:43 very strong. And with the 3XO coming in and the bookings, what we've seen, we will continue to
01:50 see growth. Now, remember that the base for us for F24 is much higher. And what we have committed to
01:57 is a mid-teens to a high-teens growth in F25, which again is probably 2X the growth that the
02:06 auto industry or maybe more than that the auto industry will see. And we do expect to be able
02:11 to maintain that growth over the industry and therefore are confident going into this new year.
02:17 Okay. Two questions on the 3XO as well, primarily because you've also alluded in the larger vehicles
02:23 that you don't like such a high waiting period. Now, my question is capacity, 8,000, 9,000
02:29 vehicles, you got bookings in the first one hour of 50,000 odd vehicles. So how do you ramp up to
02:35 meet these kind of demand for 3XO in particular? Part two of my question, you haven't spoken about
02:43 this. I don't know if I should ask this to you, but you've kind of done the unthinkable on the
02:48 pricing on the 3XO. And you've spoken about a lot of new launches in the ICE side as well,
02:53 more than the EV side too. Are you looking at even a more competitive price than the 3XO that
03:00 you've done in the next 12 to 18 months for the newer vehicles, any one of them?
03:06 So on the first part, we have capacity for the 3XO. We've already manufactured about 10,000 plus
03:19 vehicles. And by the time we start delivering on the 26th of this month, we'll have manufactured
03:24 a few more as well. Our capacity right now is 9,000, but what we also have said in the past is,
03:32 with a little more, with actually a marginal investment and fairly quick time, we should be
03:39 able to get to 10,500. So a combination of the vehicles that we will have before the booking
03:45 starts or before the delivery start, and what we can then manufacture per month, I think we should
03:51 be able to move through the bookings at a much faster pace than we could for the XCV700 bookings,
03:57 for example, because that was also a little constricted by COVID and we couldn't expand
04:03 capacity fast enough. So we feel that we should be able to handle this well and be able to manage
04:12 very meaningful wait times, be able to deliver cars to the customer quickly.
04:17 And that's been our focus. We want to bring down the booking timeline, and that's what we've been
04:22 able to do in this space. And then your second question, with regard to price points and
04:28 vehicles in the next 12 to 18 months, I will seek your indulgence to say we will reveal it at that
04:35 point in time. Right now, the next big focus is on the five-door Thar for us, and then post that,
04:41 the exciting range of Born Electric vehicles that we will launch.
04:45 Okay, fair call. I understand that. But I have to ask this to you, 15 vehicles over the next six
04:52 years, that's essentially making M&M present, I would presume, across the value chain, not
05:00 something that you've done before, a very large car portfolio. So what's the strategy here, and
05:06 does that cover almost all the price points that you would want to be present in, in both the ICE
05:12 and the EV portfolio? So on that, Neeraj, first clarification is that we will continue to stay
05:21 in SUVs. We're not going to go beyond SUVs. Okay. What you see in that portfolio also is a range of
05:28 vehicles that will meet the needs of different segments and different consumers who want SUVs.
05:36 For example, our Born Electric vehicles will start with six SUVs, and each of them are distinctive
05:44 in their own way. And then as we go forward, we will expand the ICE portfolio as well. Some of it
05:50 is also vehicles that could be tailored for global markets in certain ways. And that's what will help
05:58 us build a very strong and robust portfolio that essentially plays upon the strengths that we've
06:05 been able to show across multiple launches in the past three years. Okay. Okay. Thanks for that
06:13 clarification as well. The other aspect is just breaking it into two. EV investments of
06:18 12,000 crores, if I'm not wrong. What are the timelines? How do you fund these? Because
06:22 if I just did the math of what you say or what you've done thus far on the fundraise and what
06:28 you might do, it still suggests about 75% of that 12,000 crores to be done by you. So I would love
06:34 to know how you think about this. So what we're thinking is that in fact,
06:41 the 100% of 12,000 crores will be from us. Okay. What we have gotten externally is 1200 crores
06:48 from BII. Temasek has invested 900, or rather Temasek has invested 300 and will be investing
06:56 a further 900 per the timeline we had set with them. So that's 2400 crores that will come in from
07:02 both of these investors. In addition to that, BII had contemplated investing another 725 crores,
07:09 and we're going to mutually decide over the next six, seven months, whether that's something that
07:14 they would want to do, whether it's something that we would need. But essentially the 12,000
07:20 crores is from M&M. In addition, the 2400 crores that's been committed from both of the investors
07:28 we brought in and beyond the 12,000 crores in ICE, in EV, we also have committed to 14,000
07:36 crores in ICE. So it's a total of 26,000 crores of CapEx from an auto standpoint.
07:42 And over the next three years, all of this is going to be self-funded by cash flows generated
07:48 in the auto business. And which is the reason why we're not looking at external investors
07:53 beyond what we have right now. Okay. Not for the fundraise, not for the valuation,
07:59 no external investors, I presume. That's at least as of now, that's the standpoint.
08:03 That's correct, because we believe we've got all the funding we need, and we will be able to
08:15 demonstrate a much higher valuation in a three-year time frame as we get a range of electric vehicles
08:21 on the roads and be able to meet the thresholds that we've promised in terms of conversion of
08:26 ICE to electric in our portfolio as well. Okay. Since it's the first interview of the
08:31 new year, if you will, New Financial Year, I would love to not just restrict it to autos,
08:34 though I've gotten enough about autos, would just want to dwell a bit more on the others as well.
08:39 Now, my colleague Puneet was telling me that since the time you've come at the helm,
08:43 M&M, the auto business has doubled revenues, debt has gone down 75%,
08:50 PAT has doubled in the last two years alone. And if I look at the console numbers as well,
08:54 it's been a very impressive rate. So, it's kind of a new M&M. Anand Mahindra kind of
08:59 referred to it in one of the tweets as well. I would love to know how you think about the next
09:04 three-year plan, because I'm looking at the last three years and what you've done,
09:07 and therefore, I'm restricting it to three years. You can extend it to five years as well,
09:11 or just talk about the year at large.
09:17 So, on that needle, I would actually say that M&M has delivered very well in the past as well.
09:22 And if we look at the timeframe from 2002 till 2018, M&M was the best performing stock in the
09:30 Nifty for 17 years. And this is something I do want to highlight because, yes, a lot of people
09:36 tell me that this is a new M&M, but I would like to point out that this is in our DNA. We have
09:42 created a lot of value from the past. And that's something we've been able to replicate in many
09:47 ways, because from April 2nd, 2020, which is when I got on the board and into a transition into this
09:56 role, our stock has gone up at least eight times, probably a little more after what we see today.
10:01 So, it's part of who we are at M&M. Our focus is value creation. And the plan that we have for
10:08 the next three years also focuses on essentially strong execution. Our approach is do less,
10:16 but whatever we do, do it really well, and thereby be able to create value for our shareholders.
10:21 And clearly, auto will not be the only thing out there, because if I pick up a couple of pieces,
10:28 like for example, what Mohit did with the statement at Tech Mahindra's end of the year
10:34 announcements, but just wondering, it's not an easy road out there, right? Tech in particular,
10:39 let's talk about that for a moment. We know that the industry is going through a period wherein
10:45 customer spends or discretionary spends may not necessarily be the best. How does one beat what's
10:51 happening in the industry and try and create what seems to be unthinkable right now?
11:00 I think it comes back to clarity on where we play, how we play, what is a value add we have,
11:08 and therefore, what is our right to win with our consumers or our customers in the Tech Mahindra's
11:15 case. And we've been able to demonstrate that across multiple businesses in the group.
11:20 Tech M has had various challenges, and we've got a new team in place in Tech M. They're very
11:27 focused on very strong delivery right now and being able to get the margins up to the levels
11:33 of our peers, which is what we were lagging in in the past. We've got the strengths from Tech M off
11:38 the past, which is a very strong customer focus and a business in many segments of the market
11:46 that has been built very strongly. So I think leveraging those strengths, addressing some of
11:50 those weaknesses is what's going to help Tech M actually get back on track and perform much
11:55 better. That was laid out by the new CEO, Mohit Joshi, just a couple of weeks ago and very well
12:02 received by investors and analysts as well. So we feel pretty good about the path we are on,
12:07 the leadership that we have there and the ability to deliver. It is going to be a two to three year
12:13 turnaround. It's not going to happen overnight. And that's something we've said of Mahindra
12:18 Finance as well. And Mahindra Finance is well on its path in terms of that turnaround also.
12:24 OK, what a few people have told me that they need slight more clarity on,
12:27 and maybe you have provided, but people might have missed it. I have missed it too,
12:31 is two pieces, M&M Defense and Aerospace, particularly the aero structure business.
12:37 Would love some clarity here. You've spoken about it a bit, I believe, on the investor call,
12:42 but would love to hear from you about how do you think about these two over,
12:46 say, 12 months or 36 months?
12:52 So both are very small businesses and both are very different. In defense, we are very careful
12:58 because we want to play only in very specific areas that are transportation and security related.
13:04 From a value standpoint, we do not want to get into anything that is what we call on the offensive
13:10 part of defense. That includes ammunition or any other things related to that. So in the transportation
13:18 and security areas, we've been doing a lot with armored vehicles, with security systems for
13:24 defense, with the ALSV that is being supplied to the Indian Army. And we're very well positioned
13:32 there today. That's a business that has a lot of strengths along with the trucks and buses division,
13:38 will benefit trucks and buses as well as the manufacturing and procurement strengths we have
13:43 in auto overall will benefit our defense business as well. So this is a business where we will play
13:49 in a very select manner, but there again, in areas that we play, we will deliver very high quality
13:55 products at a very compelling price point for the Indian defense and be able to grow that business
14:01 well. AeroStruxures is literally a very long-term business. It takes time to build it because
14:08 every new part that is built takes one to two years for getting all the specs right, ensuring
14:15 the quality is right before we can deliver it. We have graduated to become tier one suppliers
14:21 for the large aerospace companies around the world. And we've been positioned very well in
14:28 their supplier ecosystem because of the quality we've been able to deliver and the timeliness
14:32 we've been able to deliver it with. And that is creating a much greater momentum for this business,
14:38 but this is one again, that I would look at as a long-term business. It is not going to
14:42 multiply overnight and one where we've got a very strong DNA and having built it,
14:48 and that will help us grow this business successfully over the next decade.
14:53 Okay, enough clarity and thank you for that. I just have one final question. I've done 14 minutes,
14:59 just one final question. In terms of numbers or the guidance that you gave, and again, correct me if
15:04 I'm wrong, but 15 to 20% EPS growth, 18% ROE for FY25. Did I miss the revenue growth number or you
15:11 do not want to lay it out right now? That Neeraj, we haven't laid out because
15:18 the guidance that we've given for both ROE and EPS is consistent with what we've said over the last
15:25 three years as well. That is a target we have internally that across the group, we need to
15:30 maintain 18% ROE and we need to deliver at least a 15 to 20% EPS growth on an annual basis. As I
15:38 mentioned to our analysts just this evening, over the last four years, we've achieved an 84%
15:44 annualized EPS growth. What I did tell them was that does not mean that next year's target is 84%
15:52 as well. We stay with the 15 to 20% target and we strive to over-deliver.
15:57 Well, you're certainly doing that with Panache, Dr. Shah. Keep that up. Thanks
16:02 so much for speaking to us and all the best for yet another successful year ahead.
16:06 Thank you so much.
16:11 The pleasure is ours and viewers, thanks for tuning into this conversation.