MAHINDRA & MAHINDRA SCALES NEW HEIGHTS---Sunny Side Up

In a presentation made to stock market analysts and institutional investors, the company made it clear that it was on a roll on all fronts, whether it is utility vehicles, commercial vehicles, electric vehicles or tractors. On a consolidated basis, Mahindra & Mahindra recorded a total income of Rs 93,896 crore in fiscal 2017-18 (FY18) as compared to Rs 89,713 crore in 2016-17 (FY17). Even though it was a growth of 5 per cent, it saw a 103 per cent jump in profit after tax from Rs 3,698 crore to Rs 7510 crore during the period.

RESILIENCE: According to the company, the growth and profits did not come easy. It claimed that the financial year 2014-15 was a year of resilience wherein it saw a drop of 9 per cent in auto domestic sales and a 14 per cent drop in tractor domestic sales. But the company focused on cost control and while revenues declined by just about 3.5 per cent, EBITDA margin declined by just 1 per cent. The company, during the period maintained focus on product development.

MANTHAN: The fiscal 2015-16 has been termed as Manthan or churning. It was a tough year for M&M which was aggravated by successive monsoon failure. But the company went ahead and launched 14 new products in the auto segment and 2 new products in the Farm Equipment Segment (FES). This led to improvement in the tractor market share. The company maintained its discipline in cost and working capital.

ON THE RUNWAY: The 2016-17 fiscal has been termed as the “On the Runway”. The year saw FES turnaround with improvement in market share. The company’s small commercial vehicle market share improved while the utility vehicle segment had a bumpy ride. But it was the tractor that came to the rescue of M&M because as a result of bumper crop, tractor sales saw a 23 per cent volume growth.

Big ticket announcements

The company made some significant announcements during the last fiscal and early current fiscal. In April this year, Mahindra & Mahindra announced the launch of Automobili Pininfarina, the world’s newest sustainable luxury car brand. Automobili Pininfarina, promoted by Mahindra & Mahindra Ltd., will be based in Europe. The company will design, engineer and manufacture high technology, extreme performance, luxury electric vehicles for the most discerning global customers. Automobili Pininfarina will combine Pininfarina’s legendary automotive design prowess with Mahindra’s growing electric vehicle (EV) expertise gained from its participation in the Formula E electric racing car championship. Automobili Pininfarina plans to launch its first model, a ‘Pininfarina’ badged electric hypercar, in 2020.

In March 2018, Mahindra Group and Ford Motor Company signed five new memoranda of understanding (MoU) that further strengthen their strategic alliance and accelerate the development of key products for consumers in India and emerging markets. The MoUs, which are non-binding, mark the progress made by the two companies since announcing their alliance in September 2017.

The two companies will jointly develop new SUVs, and a small electric vehicle as part of several initiatives announced between the two companies. Under the initiatives, Mahindra and Ford will leverage their strengths in the utility vehicle space to co-develop a midsize sports utility vehicle (C-SUV). Built on the Mahindra platform, the new SUV will drive engineering and commercial efficiencies and will be sold independently by both companies as separate brands.

Mahindra and Ford also agreed to evaluate co-development of a compact SUV and electric vehicle, along with sharing powertrain portfolios, including the supply of Mahindra powertrains to extend Ford’s product range.

Building on the collaboration, Mahindra and Ford also announced plans to co-develop a suite of connected car solutions for consumers. Mahindra which owns a majority stake in Ssangyong Motor Company in South Korea, also forayed into the shared mobility space with investments in ride sharing platforms in the U.S., and is developing products like the GenZe - the world’s first electric connected scooter.

FY18 Performance Highlights

M&M can pat itself on its back for a stellar performance during the fiscal 2017-18. Its auto sector global volumes stood at 689,358 units, which is the highest ever for the company. The Bolero utility vehicle volumes crossed 1 million mark since its inception. The Scorpio utility vehicle registered the highest ever annual sales of 53,934 units. As for the pickups, they registered the highest ever annual sales of 149,119 units. The Mahindra Truck and Bus division recorded its highest ever annual volumes at 17,228 units. The company’s rural business grew by 14pc with 43pc penetration. As for the electric vehicles, its sales gained momentum with annual sales of 4026 units.

The company claims that its Trucks and Bus division is on the turnaround track. During the year, the company also launched the ROXOR sports utility vehicle in the toughest market in the world, USA.

Domestic Market Performance

The company said that the main growth drivers for the year included positive rural sentiments as a result of good monsoons, government’s push for infrastructure and construction and availability of affordable finance. But it said there were challenges too like rising crude prices, increase in commodity prices and competitive intensity.

CV Segment Performance

It is in the small commercial vehicle segment that the company continued to retain a dominant position with a 47 per cent market share. M&M grew in volume terms at 16.2 per cent in this segment compared to the industry growth of 11per cent.

The SCV segment achieved its highest ever volumes of 1,99,574 units. The segment has the widest range of offerings through three brands of Jeeto, Supro and Bolero pickups (0.6 tonnes to 3.5 tonnes).

In the heavy commercial vehicle segment, the company achieved sales of 9,484 units. From a level of 3,299 units in FY15, the growth in this segment has been very steady. In FY17, the volume stood at 6,715 units with a market share of 4per cent. The commercial vehicle portfolio of M&M consists of the Alfa L, Jeeto, Supro Mini Truck, Bolero pick up, Supro HD, Imperio and the LoadKing in the load segment up to 7.5 tonnes. In the heavy commercial vehicles segment, the M&M portfolio consists of the Blazo series.

The passenger commercial vehicle offerings consist of the AlfaL, E-Alfa Mini, the Jeeto Minivan, Supro Van, the Tourister and the Excelo.

Launches Galore

The company also launched several vehicles during the year in India and abroad. These included the Plush new XUV500 in the premium SUV segment and several commercial and passenger vehicles in international markets. In the electric vehicles segment too, the company witnessed increases from 1021 units in FY17 to 4,026 units in FY18. The growth in electric vehicles was attributed to several factors that included the EESL tender and tie ups with taxi aggregators like Ola, Zoomcar and Uber.

To continue its growth moment and increase in market share, the company has identified several focus areas. These include strengthening its Utility Vehicle portfolio with the launch of U321, S201 and Y400 coded vehicles and strengthening its CV portfolio with the launch of ICV range. ICV stands for Intermediate commercial vehicle and it is a platform where the Gross Vehicle Weight falls in the range of 8 to 15 tonne.  The company will also be strengthening its EV portfolio, increase capacities, meet BS VI and safety norms and also focus more on its gasoline engine portfolio.

Mahindra Tractor Business

Mahindra & Mahindra maintained its leadership position in the tractor industry with sales of over 3 lakh tractors in FY18. The company achieved its highest ever annual tractor sales and registered a growth of 22% in the domestic market, in FY18. It also achieved highest ever tractor exports, crossing 15,000 units.

The largest tractor player by volume, Mahindra sold 304,019 units in FY18 in the domestic market and 319,468 units in total (domestic + exports) in FY18, registering a growth of 22% and 21%, respectively. Currently, Mahindra holds 42.9% market share in the Indian tractor industry and has held this leadership position for the past 35 years.

Mahindra’s success can be primarily attributed to its focus on technology and innovation, resulting in smart tractors such as the Jivo, Yuvo and Novo. In April 2017, the company launched the Jivo - a new age, superior technology small tractor platform in the sub 25HP category, best suited for row crop and horticulture farming. The FY18 sales volume for this product stood at 6,156 units and it gained 4.9per cent share in the 20-30hp category.

In February 2018 it also launched the Swaraj 963FE  which incidentally was Swaraj’s first ever model in high hp segment. The tractor is available in both 2WD and 4WD and promises higher productivity, reliability, durability and ease of maintenance. The year also saw the launch of Mahindra Novo in the 65=75hp range. This is a multi-application tractor suitable for emerging applications like power harrow, rotary tillers, banana mulching and TMCH (Tractor Mounted Combine Harvester).

The earlier launches of the Yuvo in April 2016 and the Novo in August 2014 have also contributed immensely to the company’s growth. Launched in April 2016 and built on a new platform with a unique and industry first 12F+3R full constant-mesh gearbox in the category, the Mahindra Yuvo is extremely versatile and can be used across more than 30 different farming applications.

Currently, Mahindra has a comprehensive portfolio in tractors ranging from <30 HP up to 75 HP and spanning basic, advanced and smart tractors.

The key brands include Mahindra, Swaraj and Gromax Trakstar. The latter came into being after Mahindra & Mahindra’s joint venture company with the Gujarat government, Mahindra Gujarat Tractors was renamed as Gromax Agri Equipment. The naming revamp was part of its strategy to compete on a standalone basis. Gromax Agri Equipment is a 60:40 JV between Mahindra & Mahindra (M&M) and the Gujarat government.

Mahindra has expanded its business vision to move beyond tractors, to the larger arena of facilitating productivity improvement in Indian agriculture and to drive agri-prosperity. Its vision is to drive farm prosperity by pursuing the cause of doubling farmer income and contributing to the era of Farming 3.0. Towards this, the company has pioneered various innovations including Samriddhi, MyAgriGuru and Trringo, as part of its commitment to deliver Farm Tech Prosperity.

The company’s farm machinery revenue also increase to Rs 280 crore in FY18 from Rs 219 crore in FY17. The company will now be focusing to establish its third brand of tractors –Gromax. The company is also into backhoe loaders where it saw increased sales. It successfully launched a grader during FY18.