Mahindra & Mahindra Limited (MM) Earnings Call Transcript & Summary

Hello, everyone. Good evening, and welcome to Mahindra & Mahindra Q2 FY '21 Earnings Conference Call. We are glad to have you all on this call today. I'll begin with the safe harbor statement. Certain statements on this conference call with regard to the 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 in such forward-looking statements. Now I would like to welcome our senior management, and thank them for taking time for this call. We have with us today Dr. Pawan Goenka, Managing Director and CEO; Dr. Anish Shah, Deputy Managing Director and Group CFO; Mr. Rajesh Jejurikar, Executive Director, Automotive and Farm Equipment Sector; as well as other senior leadership team, including the IR team. We also have Mr. Amit Raje, EVP, Partnership and Alliances, who has joined us a few months back, and his portfolio includes mergers and acquisitions, and also Investor Relations report to him. I'm sure a lot of you would have an opportunity to meet Amit during our interactions. Amit, you are there? Your camera is on?

I don't see him connected yet.

Okay. Okay. So I think -- so now I hand over the call to Dr. Pawan Goenka for the opening remarks, which would be followed by a brief presentation by Rajesh and Anish. Over to you, Dr. Goenka.

Thank you, Sriram, and welcome to our Q2 earnings call. I'm going to just request, first, Rajesh to make a short presentation on the operational performance, and then Anish to make a presentation on financial performance. And after that, we will have enough time for Q&A. I'm sure you have gone through the press release and will have analyzed the results, but we will give you some more color in the presentations that we're making. Thank you. Rajesh?

Good evening, all of you. I'll take a few minutes to walk you through the Automotive and Farm Sectors' performance. So can we go to the next slide, Amit. This is a recap slide out of what I'd shown the beginning of the year when we had categorized our tasks into key phases of walk, run and fly. I'll try and give you an update on how we're doing on some of the key performance measures out of this chart. So we'll go to the next chart, which talks about how we've done in quarter 2. For the Farm Equipment sector, it has been our highest-ever PBIT. We did a PBIT of INR 1,180 crores; the highest-ever PBIT margin of 24.4%; the highest-ever quarterly ROCE of 197%. And for the first time in the Farm Equipment business, we've had a negative working capital, leading to a very high cash generation. All of you who track this category know that this is not easy to -- it's not easy to get a negative working capital in this business, and especially when you're in a season where typically stocks are high and outstandings are, hence, high, but these are different times, and we're really happy to see a first-time negative working capital. The Automotive segment has had a PBIT growth of 4% year-on-year despite a revenue de-growth. The 4% PBIT does include a onetime of INR 68 crores. Our operating margin has improved versus last year, again, in spite of a revenue de-growth. And there is a significant year-on-year reduction in fixed expenses, which is fixed plus personnel, and that's what has also played a role in enabling the margin growth. And again, a very high negative working capital. We do have a negative working capital normally in the Auto business, but this is much higher than we've ever seen before. Next slide, please. A couple of slides, I will walk you through on the rural story, and I know all of you track this very closely. But just to sum up, this is the third-highest cumulative rainfall that we've seen. Kharif output is estimated to be at record high. And we're also seeing a very good monsoon, which has, of course, led to a very good reservoir levels starting from last year into this year. And that, in a way, sets us up well even for the next season. In case there is some risk on the monsoon, at least the reservoir levels are good, which is very good for the segment. Go to the next slide, please. This is a slide which I've been sharing over the last few quarters. It's an internal slide in rural government spend index made by our Chief Economist. And you can see that there has been a very significant turnaround in the spend index over the last few quarters. And even though you saw a dip in the previous quarter, that number is still significantly higher than the same period last year. And we can see the effects of this on the rural economy overall because rural economy is, of course, agriculture, but a lot to do with services and overall income flows into the rural households. Next slide, please. This slide captures, in a way, what is happening in the business from -- and I'm sure all of you will have lots of questions around the next -- this and the next couple of slides. So we've seen a significant pickup in our tractor sales. The production, which is not on this slide, has been at highest-ever levels. So the quarter 2 has been our highest-ever production. October has been our highest-ever production. And in spite of that, you have the graph on the right, which is a system stock index, where the stock opening getting into season or the end of quarter 2 is lower -- almost half the absolute level of what it was at the same period last year. This is stock with us plus dealer. So you get a comprehensive view of stock not just with us but the total system stock. This, of course, has led to what you see here, which is the impact it has had on our market share. Our market share has come under pressure. These are, of course, billing market shares, not retail market shares, just to clarify. And even though we've had our highest-ever production in the last few months, we are still, as you could see from the previous slide, in very short supply. On the left chart, you'll see a chart we've shown consistently, which is how well the Farm Equipment sector manages its margins. And you can see that we've had a very healthy increase in margin, our highest ever, 24.4% last quarter. Next slide, please. We believe our market share has been impacted lesser because of the way we produced the last 3 months but more because of the way we were able to build up stocks in quarter 1. From a competitive stock build or a stock management point of view, which is what reflects in market share, a couple of things very unique to us has been a high Maharashtra dependence for the Mahindra brand of tractors. And Maharashtra did, as all of you know, have a disproportionate share of COVID and a very long period of localized lockdowns, affecting our supply chain quite significantly in quarter 1. We believe -- and of course, normally, our business model works around being able to prebuild stocks into season a couple of months at least in advance. This time, we didn't get any chance to do that. And -- which is why we are seeing the effect that low stocks have been and -- have been having on our market share. As we get post festival season, we hope to build back this inventory because, as you can see, we're producing now at record levels, and we should have adequate stock, we believe, getting into quarter 4. And the period, 15th November, will be used to do that. We've also deprioritized exports because of the domestic demand. And we will start servicing our export requirements as well post mid-November. Can we go to the next slide, please? This is, I'm sure, something which will be music to all your ears, something that all of you have been asking about, which is the turnaround of the FES global business. You would be able to see from the numbers that, in quarter 2, the FES global subsidiaries did turn in an overall positive number of INR 3 crores on the back of several of the businesses doing well. MAgNA market share improved by 80 basis points. Retail volumes were up by 41% in quarter 2. We've built much lesser than that because we have continued our endeavor to bring stocks down in the pipeline. And of course, some of it was because we've not exported from India adequately, so the MAgNA team was under pressure on availability. Brazil has done very well. Mexico has done well. And Turkey operations saw a turnaround in the quarter. Next slide. Moving on to the Automotive space. You can see that, sequentially, we've built up our sales quite strongly, and the chart on the right really says the story. These are indexed system stocks with the Automotive sector. And you can see that we are at still a very, very low level. This was opening October. And of course, opening November, that's gone down even further. We'll move on, and I'll talk more on this over the next few slides. This, of course, has impacted our volumes. We believe demand has been strong and can talk more on that in the Q&A. And we've had availability as a key constraint. Even though we've ramped up well, you can see that we've had de-growth in our key segments. Three-wheelers, of course, we were not ready with BS-VI and have just started BS-VI a few weeks back, which is why you see a very significant de-growth there. We are showing you a 2- to 3.5-tonne market share, but we would say don't read too much into market shares in this period of time because the supply side for every OEM is uncertain at this point of time. Next slide, please. So basically, the story of the automotive supply side is primarily because of a very, very low pipeline due to the BS-VI transition in February and March. So just to recap what happened. We were just about to start our BS-VI transition in Feb and March. In February, it got disrupted because of the global lockdowns, and in March, India went into a lockdown, and all the BS-IV was sold out. So when we opened post-lockdown, we actually almost had close to 0 dealer stock of BS-VI, and our whole pipeline was dry. We have a very, very high Maharashtra bias in the Automotive: Chakan, Nashik, Igatpuri and Kandivali are all Maharashtra-based manufacturing facilities. Maharashtra had a disproportionate share of COVID. And we had no stock to make up for that. And in the meanwhile, we were also transitioning to BS-VI, and there were many parts which were new because of BS-VI transition. We believe all of that is behind us. Production levels are at much better -- have much more stability at the moment. And again, post-festival season, we hope to build stock back, and we should have greater stability as we go into quarter 4 on our availability. Next slide, please. This brings out the Automotive financial performance. And you can see, even though we've had year-on-year minus 22% on volume, revenue has been down year-on-year minus 8%. Our PBIT margin still has gone up. There is a onetime in this, but we've still shown a very reasonable PBT of 3.6%. And when you look at it sequentially, of course, there is a big swing from quarter 1 of this year to quarter 2, which is visible on this slide. Next slide, please. We're going to touch on a couple of points around the run phase. And more specifically in the next slide, we will see in the next slide the 2 key initiatives that we had outlined. One was building on the Krish-e, and the second was the launch of Thar as a way of strengthening the SUV core brand differentiation. So I'll talk first on Krish-e on the next slide, please. So Krish-e is about providing a high level of engagement on ground activation to our farmers. We believe this will create a moat to our core business of tractors and farm machines through a series of services. There's agri advisory, which is both physical and digital; rentals; precision farming solutions; products, which is agri inputs and micro irrigation; and partnerships. So we're working on all of these and are now into a stage where we've done our pilots and are ready for rollout and have started rolling out. On the next slide, please, you will see the rollout of Krish-e going across 7 centers in Maharashtra in October and 3 more in AP and Telangana in November. We've got very good feedback. We are running something called Takneek plots. We have 1,000 Takneek plots across different parts of the country where we're demonstrating the farmers the productivity improvement that they're able to get so they create a matched plot which we were conversing what we have. And that is helping build very strong word-of-mouth as the effects of all the technology deployment on the farms is very visible to the farmers. Next slide, please. We've also launched the new Mahindra Plus Series. We had spoken about that the last time. This has gone through very well, significant improvement in the product offering. And it is -- it has been ramped up well. It did also go through a transition as the ramp-up happened in the middle of COVID, but it has gone through well, and we've stabilized at a very good level of volume. And this is in our core business of Bhoomiputra and Sarpanch. And we would see -- we would like to see high migration of the old product to the new. Quite a bit of it is done because this is a significantly better offering than what we've had earlier. Next slide, please. I'll talk a little about Thar as we go on to the next slide. The Thar, as you all know, has done very, very well. We've had more than 20,000 bookings already. We did a very interesting reveal on 15th August, connected it with the Freedom Drive. We've also done some very interesting events, pre-launch of 2nd October, one of which was the Her Drive, where we had several women protagonists who did an adventure drive at Igatpuri in Maharashtra, and you see some snaps of that there. And some very interesting things like Anand Mahindra's Thar playlist, which got a crowd-sourced in a manner of speaking as with 101 songs on it. Next slide, please. One of the very interesting lead-ins to the launch was the auction of the #1 Thar, the first Thar. We had more than 5 -- we had 5,500 registrations. 37 bids were above INR 50 lakhs, and 4 of the bids were above INR 1 crore. The top bid was for INR 1.11 crores, and we -- Mahindra contributed an equal amount, which got donated to Swades Foundation. Next slide, please. These are some key highlights out of the success story of Thar launch so far. We've had more than 20,000 bookings. You'll see more than 10-million-plus media reviews. And most interestingly, and I do remember some of you asked this question last time about whether Thar will attract a new type of buyer. You can see that out of the 20,000-plus bookings, 44% are automatic, clearly indicating that we are bringing in a very new buyer, a lifestyle customer, urban centric and very mainstream car buyer. 55% of them are first time and not engaged with Mahindra earlier. And of course, very, very good searches and excitement around the launch. Next slide, please. So just to summarize how we are on the walk, run, fly. You can see we believe we managed our cash very well. We managed our margins very well. We managed to ramp-up with safety. Strong focus on core domestic, a strong focus on turning around our global businesses. You've seen results of that on the FES side. And a lot of work happening on building, especially on our SUV core brand differentiation, which starts with Thar being the flagship and many new launches on there ongoing. With that, thank you very much for listening in, and over to you, Anish.

Thank you, Rajesh, and a very good evening to everyone. Let's start with the main headlines or messages for today, which really is centered around the Farm business. A very strong performance for Domestic Farm, highest OPM ever, and not just the Farm business, but if you look at Auto as well, it has an industry-leading OPM. International subsidiaries, we have seen a very positive trajectory for Farm again. And that will help us a lot in terms of solving all our issues around international subsidiaries. I'm sure you'll have many questions around that, and we can talk about it as well. And just a very strong cash generation for this quarter. So overall, a great story in terms of coming back on track. Key definitions first, which you've seen before. We have broken out international subsidiaries of Auto and Farm separately as we are tracking that very closely. And besides that, we have Domestic Auto, Domestic Farm and Investments that makes up everything else. First, to start with stand-alone results. Revenue up 6% and operating PAT down 3% to INR 1,311 crores. You see the OPM highlighted there at 17.8%, and you also see the highlight with regard to the PAT after EI, which is down at INR 162 crores, and we'll talk about the impairments that really bring it down from INR 1,311 crores to INR 162 crores. But before we do that, on the next slide, let's look at operating PAT and the key drivers, focusing on the left-hand side, first. Domestic Farm, the star of the day or of this quarter, is INR 892 crores in terms of PAT, up from INR 418 crores the same quarter last year. Domestic Auto, more or less flat, about INR 15 crores lower than last year. International subsidiaries don't impact much at the stand-alone pre-EI line. And investments are significantly lower, and that's essentially as a result of dividends being lower at Tech M and at Mahindra Finance. So what we see on the right is, as we walk from last year's INR 1,355 crores to INR 1,311 crores this year, the 2 key drivers are the uptick in Farm and the downside in dividends, which has impacted us by INR 502 crores. If we go next to the impairment, it is significant. And this is part of our efforts to essentially take care of all the issues with regard to our international subsidiaries. We have promised that, by the end of this fiscal year, we will have taken care of all the issues. We're on track to doing so right now. And these impairments result in our INR 1,311 crore of PAT before EI coming down to INR 162 crore after EI. As we look at the consolidated financials, revenue up 2%. PAT before EI is up significantly from INR 326 crores to INR 906 crores. Let's take a look at that on the next page. And what we see there is, again, Domestic Farm driving a significant variance there. What we also see for the first time in a few quarters at least, is international subsidiaries of Auto and Farm driving a positive uptick between the same quarter last year and this year, up at INR 95 crores, and that's again driven a lot by the Farm subsidiaries that Rajesh talked about, and that's results in INR 906 crores. And as we look at the walk from INR 906 crores to INR 136 crores, these are entity-level impairments for assets, in line with what we saw on the stand-alone side. So the same entities have taken impairments at the asset level, and that's resulted in a lower consolidated PAT after EI. Looking at our listed entities. Tech M came in with a reasonably strong performance, up 3% from a revenue standpoint, down 5% from a PAT standpoint. Mahindra Finance did exceedingly well in a very tough quarter. Income or PAT is up 34%. Holidays obviously got hit with all of the COVID-related issues. Everyone in hospitality has been impacted. But because of its model and its timeshare approach, we see a lower impact overall, where revenue is down only 13%. I say only because that's compared to other players in the travel industry, and PAT is actually up 3%. Real estate business is the worst hit amongst the lot, and that is really a function of the real estate industry in the post-COVID time. We're starting to see some green shoots there. But as we see this for the last quarter, we do see a significant impact. So in terms of our action plan, this is consistent with what we've talked about earlier. Stay firm on capital allocation; drive growth; continue our improvement in international subsidiaries. We have Farm for this quarter but we need to do that across the board; and come back with a very clear narrative on Auto, which includes our strategy for electric vehicles. Work is underway on that. And again, as we've done for the international subsidiaries, by the end of the year, we will have a clear narrative on Auto that we would present as well. So the slide that, I think, will gain a lot of attention as it has over the last couple of quarters, the path to 18% ROE. We have one more company that is on this now, which is GippsAero. This is our aircraft business that made 8- and 10-seater aircrafts in Australia. And while we say exit announced, it's actually gone further than that. We have shrunk the business down now. And we have moved it to a service model where we will just meet our obligations for the next couple of years for the planes that we have sold. And after that, that will be shut down as well. So that obviously has some impact on our impairments, as you saw earlier, and we are continuing our efforts on all of our international subsidiaries, and I will repeat that, by end of this year, we will have a clear view on all of them. Moving next. On growth, you've seen our 10 gems before. What we wanted to highlight this time was the revenue and profit numbers for each of these. This is looking at our F '20 numbers right now just so that we can see full year in a reasonable year, which is not COVID impacted. What we see is these 10 businesses make up INR 10,000 crores of revenue and INR 172 crores of PAT. So these are substantial businesses as a whole. Each one of them is well positioned in its market and has the ability to scale, some maybe 2x, some maybe 5x, but we feel that this set of businesses will give a huge fillip to growth over the next few years, and that's what we will continue to drive. And with that, I would say that Mahindra is very well positioned to be the gateway to the largest and fastest-growing themes in India. And back to you, Pawan, and we'll open it up for questions soon after that.

So thank you, Rajesh and Anish. Please come in with any questions that you may have. Sriram, did you receive any sort of questions prior to the session. Do you want to read 1 or 2 of them that you're getting?

Yes. No, sir, we have received questions, but also, there are some people who are already ready. [Operator Instructions] The first question goes from the line of Nomura Securities, Kapil Singh.

Hello, can you hear me?

Yes, Kapil.

Kapil, if you can speak up a bit that will be helpful.

Is this better?

Yes, it is. Thanks, Kapil.

Okay. Sir, first of all, congrats. I think it was a great set of results. I have a couple of questions. Firstly, on your cost side, you have seen pretty strong performance this quarter. When we look at the business in a more normalized kind of environment going ahead, how much cost reduction do you think you would have achieved? How much of this savings, for example, in categories like other expenditure or employee costs will sustain? And there was some mention of a one-off item as well. So that's the first question. Second is on -- I'm pretty happy to see the disclosures that we are improving on the Investments. Could you also share on the cash flow side. We've seen almost INR 2,800 crores of cash outflow for Investments. So what is your guidance for CapEx in Investments? And where has this money gone? These are the 2 questions, actually.

Rajesh, would you take the first one and Anish second one?

Pawan, just to be clear, the first one you want me to take is on what are the costs we'll be sustaining?

That's right. What are the costs that are sustainable?

Yes, cost reduction, yes. Kapil, thanks for your comments and your questions. The -- there are some changes we're making fundamentally in the way we are running our business, learning out of COVID. We believe that many of those will be sustainable. For example, the role of digital marketing can actually be a sustainable saving, and we've done a lot of that in the case of Thar, to take an example, where we've created a lot of excitement and achieved the kind of response we have without actually almost not going mainstream on advertising. So that's one example of using digital. We've done several launches, including in tractors, the whole Plus series, all launches had happened digitally. Customer meets are happening digitally. All of these are very -- we believe, very sustainable changes in cost structure. The way we are communicating with our employees, people, customers, so on. So that, I think, is one bucket, which is certainly sustainable. We think also a lot of the travel cost reductions will -- at least half of it, will be sustainable. So there are changes in the business model, which certainly, are going to, we believe, be sustainable, and we would -- we are not doing a lot to make sure that we institutionalize these changes. And as we even do budgeting going into the next year, these go in as targets coming out of a well-documented learning out of everything that we have out of managing these times. That being said, there are things which are not completely within our control, and one of that is commodity price. And we are seeing at this point of time pressures in quarter 3 on commodity prices. Last 2 quarters were benign. So there is an offsetting of improved fixed cost structure with some risk on the commodity price, some risk on ForEx, to some extent, on any small imports that we may have or our suppliers may have, but these are unknown. I'm talking about these are things which we can't control. The other area, especially on the tractor side, which, I think, has been very favorable. It is a good price realization, coming, of course, out of benign commodities but also a situation where demand has been much more than supply. It's again an external factor. And while you know that we don't do anything unreasonable by way of discounting, the -- right now, we -- because the supply situation not had to worry about a competitive context at all. So when we do start worrying about a competitive context, there will be -- there could be some pressure on pricing beyond what we have right now. So I think we have to balance the upsides and the downsides, but our endeavor will be to keep delighting you all with strong performances on margins and costs.

Kapil, before Anish comes to the second question, I just want to add to this because this is a question that is on mind of many people. And when I'm speaking, I'm not speaking specific to Mahindra but general for the industry and perhaps for all industries. There are a lot of things that we were doing earlier in the way we ran our business, which we now wonder why we were doing it that way. And the opportunity of saving cost, fixed cost, especially is plenty. Rajesh talked about a few things. I could add to it. We -- everybody is questioning why we need a number of offices that we have around the country. We are questioning why do we need to do the events that we do -- a number of events that we do and how much money can we save and how much time can we save by reducing the events? How much inventory we need to run the business, both the dealer at our plants also has been questioned. So that there are -- almost every part of the business is getting relooked at, simplified and made more efficient. And therefore, in fact, the few things that have happened in these last 6 months, which may not sustain like Rajesh mentioned. But there are a few things that we have not yet done which we are in the process of doing, which would perhaps bring us even more cost savings. I don't know where the final balance will come out. But I think if one thing that COVID has done for us positive is made us rethink almost everything that we're doing as to why we're doing it that way. Anish?

Yes. Kapil, I'll just add to that before coming to your second question. I wouldn't expect cost reductions the way we have done it this year is we have people put costs into a category of must have, nice to have and we can eliminate. Now what we can eliminate is not going to come back. As we look at must have and nice to have, while this year was only must have costs. Next year, we're going to look at that again and say, why does some nice to have need to become must have. And that in itself will create a cost benefit as well. So I wouldn't expect these costs to come up. As Pawan said, this crisis has created an opportunity, and that's one thing that has benefited us. If I come back to your second question, INR 2,800 crores of cash has been spent in essentially 3 areas. The first one was the largest. We have publicly announced the Mahindra Finance Rights Issue, and that was INR 1,641 crores. The second is to reduce the debt at some of our international subsidiaries. Some had higher amounts of debt, and we've converted that to equity in line with what we felt was prudent. And the third was operational from an international subsidiary standpoint largely and some of our other subsidiaries here as well. So those are smaller amounts, but that's really where that's gone. And therefore, yes, we would see that number coming down because Rights Issue at Mahindra Finance is not going to be repeated again, and the conversion of debt-to-equity is not going to be repeated again as well.

Sir, what is the overall investment target that we have for this year and next year?

So on that, Kapil, what we will do is come back with a clear way of that once we have the international subsidiaries situation behind us. Because there, as I said, last time, we are looking at the 3 categories: A, B, C. And we will then know which companies continue in Category A. And based on that, we will be able to come back and say, here's what we're going to put aside in terms of allocation for funds to them.

Okay, sir. And the INR 68 crores one-off?

Sorry, could you repeat that, please?

INR 68 crores one-off?

That is -- Rajesh, on the Auto OPM IPS.

Yes, that's the IPS. The Investments subsidy. There was a backlog of something which was carried over after the GST change.

[Operator Instructions] The next question is from Hitesh Goel of Kotak Mahindra.

Congratulations to the management for a very good set of results. My question is actually on SsangYong Motors. Anish, you had specified that by end of this fiscal, you'll have -- you'll take care of most of the loss-making subsidiaries. So what does it mean for SsangYong Motors? Where are we right now in terms of bids that is coming up for SsangYong? And what is the bids come through? What is the game plan on it? So if you can give us some more color on SsangYong Motors.

Anish?

Sure. So there, what I'd say is that we continue to stay firm with our view that we're not going to invest anymore. SsangYong is looking at a potential investor. There have been discussions that SsangYong is having with them. Once there is a clarity on that, we will come back with details. SsangYong will publicly -- make public those details. As I said before, we stay firm with that. We're not going to invest more. And we will have to look at -- in many ways, the situation will resolve itself in the next few months. We are hoping that it resolves itself in a way that's beneficial for everyone.

Okay. And can I just ask, Rajesh, what is his outlook for the tractor segment for FY '21? Because last time we had talked about a single-digit growth, but most of the industry participants are now talking about double-digit growth. So can you give some outlook there, Rajesh?

Yes. Yes, Hitesh. It is low double digits for the industry for F '21.

We would state that up until now, the industry has grown about 12%, right, Rajesh?

Yes.

YTD October is 12%, and we would think similar growth for the remaining year.

The next question is from the line of Gunjan Prithyani from JPMorgan.

I just had a follow-up to the first question on the cost side. Now on the Farm segment, you did point out, these are the record margins that we've seen. Now as some of the costs come back and the supply side normalizes, what is the range that we should keep in mind for this business? I mean typically, in past, you've guided to somewhere in the range of sub-20%, but we have exceeded that by a mile in this quarter. So any color on that?

Rajesh and Anish, you want to take that?

Gunjan, thanks for the confidence you have with us, and I'm glad that you see us beating our estimates, just keep counting on that. We don't give a specific guidance on margins, but...

We'll let you do your own math.

Yes.

We have given you pluses and minuses, so you do your own math.

Okay. Got it. Let me just then move the conversation to the capital allocation. Now, I mean, it is good to see the aerospace, you've taken a call on that. If you can just give some -- if I look at the financials for aerospace, there was about INR 300 crores of loss that this business had. So it's fair to assume that incrementally, there are going to be no losses from this subsidiary? And the large part of investment writeoff which we have seen in this quarter is coming because of Aerospace. If you can clarify that as well?

So Gunjan, Aerospace has 2 parts to it. One is aircraft, which was GippsAero business; and second is aero structures. The aircraft business has been shut down. There have been losses in the past. And there will be no losses going forward except for a very small amount, which is as a result of a service arm that we have to keep open to meet our obligations for the next couple of years or so. So that's going to be a very small amount. And we will see in future numbers as well, but I would -- really would not rather say that is a significant amount. On aero structures, that's a business that gives a longer sub-term -- business, a long cycle business that's essentially making parts for Boeing and Airbus and its Tier 1 suppliers. We're actually very well positioned in it now. We are one of the leading players in India for this business. And we've got a very good reputation with the Tier 1 as well as with Boeing and Airbus directly. All the hard work is behind us for this. Any new part there takes a long time for it to get certified as well. We have a number of parts that have been certified already. And we see a lot more upside in that business going forward. But that will be in sort of with a 3- to 5- or 5- to 7-year window. That is not a business that takes up a lot of cash either. So in -- after that clarification, just to directly answer your question, yes, we see all the issues for both aircraft and aero structures behind us.

Okay. And the sub-writeoff is largely the INR 900 crores coming from this -- or is there anything else besides this, the impairment?

Yes, we have not been sharing the details every quarter. So what I will do is, at the end of the year, we will come back with all the details in terms of this is what was impaired and where. But we will, at this point in time, prefer to stay with our current approach, which is not sharing the details every quarter because there can be some pluses and minus there.

Okay. Just last question, if I can squeeze on the tractor segment. Clearly, supply chain issues, we've kind of lost some market share. But as you look at the remainder of the year, which is not going to be as peak a season, do we expect to recoup the market share? Or we should assume that for this year, our growth is going to lag the industry growth on a full year basis on F '21?

On a full year basis, we will lag the industry because it's -- there isn't enough volume left to recoup what is lost, unfortunately. Because as you know, bulk of the industry happens in May, June, July, and then October, November. So bulk of the industry volume is at that time. Jan, March market shares typically can't outweigh. We may make something back, but we can't probably make up everything that we've lost. That would be our current input right now. But we don't see this as a fundamental loss because we -- our brands have been in very, very strong demand. And it's just unfortunate that we haven't had, as you saw on the index stock chart, enough tractors on the ground to convert them into sales. So we don't see this as a fundamental loss at all in our positioning.

[Operator Instructions] So the next question is from the line of Shyam Sundar from Sundaram Mutual Funds. Shyam you are on mute.

Is Shyam on mute?

Shyam, we're not able to hear you.

We can go to the next question, and then come back.

Okay. So the next question is from the line of Amyn Pirani from CLSA.

Yes. Can you hear me?

Yes.

My question was more on the tractor cycle. If you look at all Automotive categories, tractors has had the shortest down cycle, and we are already in a growth stage this year compared to other categories. So given a lot of things that are happening on the Farm side in terms of regulation, I know it's early days, can you give us a sense as to how this tractor cycle will -- could it be like the tractor cycle which we saw at the start of this decade? Or will it be like a short cycle that we saw 3 years ago? I mean, is there any initial sense of what's happening on this?

Amyn, thanks for your question. The one thing we believe we have not really been able to predict is when exactly tractors will see growth and when it won't, and many things drive that. When I'm saying that, I mean, in a -- with a specific, next year, will there be growth or not, and if yes, how much? That's why normally we'll wait until a later stage, and as clarity emerges before committing to it [indiscernible] growth rate for a given coming year. Though we do what we do always reinforce for all of you is that irrespective of the slight ups and downs that happen in the tractor cycle, the common thread that you will see is an 8-odd percent CAGR. And whichever way you split it, you'll see a negative-odd percent CAGR, and that's something I do believe that we should build into the way we think about going into the future. We also believe that it is normally a strength that all of us have by way of building agility in supply chains. In non-COVID era, we've been very good at it to be able to respond to quick increases or reduction in demand either way and manage our margins very well in an up cycle or a down cycle. So it's very hard to say how long a cycle will last and what triggers it or not. And of course, part of the issue is that the [indiscernible] will look at are all billing numbers and not retail numbers. So there is a limitation in an industry of this kind, is only at billing numbers to project growth. Of course, we have our own econometric modeling, which is at literally a Tehsil level based on multiple factors that happens at each Tehsil District, and we build that modeling up for the entire country. We don't do a top-down econometric modeling. We do a very, very base-level econometric modeling, something we call geonomics. So -- and that has a reasonable level of accuracy. But I would just suggest that the best thing to do in tractors is think about a CAGR on an ongoing basis rather than whether 1 year will be very good or very bad. Too many variables come in, which affect the short-term performance of the industry. I don't know, Amyn, if you want to -- I know Sriram has a restriction on a number of questions, but if you have a follow-up on that, I'm happy to take it.

No. I appreciate that. And just very quickly, we've been talking about the implements business for a long time in terms of mechanization. Is there any new launches that we're having there? How are the existing products doing in terms of uptake? If you can give us some update on that?

We're seeing a very, very good year in the Farm machine business. In fact quarter 2, we had actually 90-something percent growth in farm machines. Every part of the portfolio is doing well. Rotavators, harvesters, some of the new and pioneer products that we've launched, rice transplanters in Punjab. So the whole spectrum of farm machine -- farm machinery business is really picking up and has seen very good momentum in Q1 and Q2.