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

Yes. [ Sandish ], do you want to read out the safe harbor statement and then I'll take over from there?

Yes. Hello, everyone. Welcome to Mahindra & Mahindra Q3 FY '21 Earnings Conference Call. [Operator Instructions] 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 in such forward-looking statements. I now welcome Mr. Amit Raje, EVP, Partnerships & Alliances, who heads the group mergers and acquisitions and Investor Relations function, to start the proceedings. Over to you, Amit.

Yes. Thank you, Sandish. Good afternoon, good evening, and good morning for all -- to all our participants from all over the world. It has been a very interesting and exciting quarter for us. And to elucidate the quarter first, we would be highlighting a presentation. But to make the initial remarks, Dr. Goenka, if you could make a few initial statements, and then I have the presentation -- I hand over the presentation to Rajesh and Anish. Dr. you're on mute.

Thanks, Amit. Welcome all to the third quarter earning call. Before I get into the performance of Mahindra, just a few sentences on the budget. All of you would have by now analyzed the budget left, right, center, up, down, inside, outside, and I think you'll all agree that India hasn't had such a growth budget in a long, long time. And uniformly, unanimously, this budget has been hailed by the industry as the best growth budget that we have seen. In fact, yesterday and today, the honorable Finance Minister had interacted with CK members and CII members. And in fact, the positiveness is getting even reinforced with the kind of response that we are getting from the Honorable Finance Minister in the interaction as well as senior officers of the finance ministry. Of course, not tinkling with the taxes also had been very welcome because that was one of the concerns that we had. The CapEx spend that had been talked about is also something that we consider very positive for the long-term growth of the country. So I think all of us today are very enthused with the budget that has come out. And hopefully, with the cooperation between the government and the industry, and that's one of the things that FM had asked for in her interaction with the industry, has to take the lead in the growth part. So I won't say anything more on that. If there are any questions that you have on the budget, as we have Q&A, we can talk more about it. Coming to our business, clearly the demand buoyancy in both the automotive and tractor sectors continued in the third quarter as it was in second quarter. There were some supply constraints, more or less, on the tractor side. We were able to manage it well. On the auto side, the problem continues a little bit, and Rajesh will go into more details of that. The turnaround of farm international subsidiaries, which had been one of the concerns that many of you have had in the past years, is now more or less done. And again, Rajesh will go into that in more detail, and I think we are now in the growth part of the international subsidiaries. And the capital allocation effort, which is one of the big things that we had announced in April, is now more or less completed. And again, Anish will give you more details of where we are and what little things are remaining on that. The 2 big concerns for the business, one is, of course, the semiconductor shortage, which is not a Mahindra concern, not a India concern, it's a global concern. I'm sure you're aware of that. And we don't know when this problem will be behind us, but Rajesh will give you some details. And the second one is commodity prices, which are perhaps increasing more than what I have seen in a long, long time. And that will obviously have an impact on pricing that we will have to do and what impact it might have on financials. We can talk about that a little more. So with that, I invite Rajesh to take you through the operational performance and then Anish to take you through the financials.

Good morning, good afternoon, good evening, all of you. I'm happy to walk you through a short presentation on how this quarter has been for us. I mean, next slide, please. This is a slide we've used over the last few quarters, and this is just a recap slide. There are no specific update. It talks about the walk-around phase and the different actions we have set out for ourselves during the course of this year. I would give you an update on some of these, specifically how we've done on cash, margins, our focus on domestic core and the direction towards building a stronger SUV brand differentiation and, of course, the turnaround of the global companies. The Farm Equipment business has had its highest-ever PBIT of INR 1,236 crores; a PBIT margin of 23.4%, which was a 400 basis points improvement; the highest-ever quarterly ROCE of 242%. And this is the second quarter in a row and this is the first time that we've actually had negative working capital in Farm Equipment business, leading to very high cash generation. On the Automotive side, we've had a revenue growth of 12%, with a revenue of INR 8,300 crores; a PBIT growth of 18.9%. This does include a couple of exceptional items, which are onetime. One specifically is the investment subsidy of INR 90 crores and an insurance claim of INR 30 crores, which is a discussion that happened over quarter 2 claim that was not accepted. We've worked very hard on our fixed expenses and have got the fixed expenses down. Specifically on the rural growth story, we believe that the story is very robust. Kharif procurement has been very strong, has grown by 27%, as you can see, till December. And the rabi acreage is at its highest-ever level at 65 million hectares, which is 105% over the normal area sown. Next, please. A good indicator of rural growth is the use of agri credit and the rural deposits. Both of these have shown a very healthy growth. And this indicates the kind of cash availability. Rural deposits, we believe, have grown because of Jan Dhan accounts and direct cash transfers that have happened with bank accounts. Next, please. I'll now focus a little bit on the Farm Equipment side. You can see that domestic sales have grown sequentially. But as they've grown, and we have been talking and Pawan just mentioned, that we have continued to have supply issues. We had wanted to build inventory in our network and with us through this quarter. But we actually now have lower system stock than what we had at the end of quarter 2 and significantly lower than what we had at the end of quarter 3 last year. The index of 121.9 comes down to 85. And this is in spite of a very healthy rate of production through the quarter, but just a reflection of the very strong demand that we're experiencing. Next, please. On the left side, you see our strong ability to manage margins in respect of what happens to industry size and growth. The last 2 quarters, of course, have shown very, very robust margins of over 24.4% and 23.4%. Our market share has been under pressure mainly on account of not having enough stocks to fill in. This has improved in January, where our market share crossed 42%. And we hope that we will continue a strong momentum on market share. Our primary issue on the tractor side at this point of time is related to specific models. Example, 4-wheel drive, power steering, where we are having shortages and are not able to meet demands that have come in from specific state industries which have grown fast, very, very fast, examples out. Next, please. We had been talking about farm machinery being a huge growth opportunity. Happy to report back that quarter 3 showed a very robust growth of 36% with a revenue of about INR 150 crores. And the 9-month revenue has been 48% up. We are starting to build an export market. Several key enablers around leveraging attractive dealerships and bundling and financing are in place to enable this growth platform. Next, please. We have been talking a lot about the turnaround of the Farm Equipment global businesses. The tractor business in U.S. continues to show very strong, robust growth, and I have a slide on that in more detail, but retail grew 25%. The billings grew by 9% mainly on account of not having enough stocks, and that was impacted by the prioritization we did in India, where we had prioritized domestic demand until festival season near quarter 1. Next, please. The Japan, our tractor volume grew by 41%. That's more an abnormality because of a consumption tax that had gone up in Japan starting on quarter 3 last year, which had [indiscernible] our volumes to quarter 1 last year. So it's a base effect. But the business has done well overall. Tractors in Turkey, which are our contractors, had a very, very robust growth of 132%. The year has shown a very good uptick in the industry. And overall, Turkey is positive from profit point of view. Sampo continues to be positive, and profits have improved and the performance is robust. Both in Brazil and Mexico, we've gained market share of 380 basis points in Mexico and 50 basis points in quarter 3 in Brazil. Next, please. So this is the -- some update for you. This is index data on MAgNA retails and MAgNA billings and what's happened to plant and dealer stocks. You can see a very robust increase in the retails through this year, which is 15%, 42% and 25% across the 3 quarters. The billings have been lower than the retail by quite a significant part. And that reflects in the huge stock correction, more than what we would have wanted. But you can see the extent of stock correction starting quarter 1 and next -- of '19 at a level of 100 is down to 44. So there's a huge correction in both the dealer and plant stock. We have been talking about this over a period of time, that we are very focused on making our pipelines absolutely agile and lean, and that has been achieved. In fact, now there is an opportunity for us to build back. We have a lot of pending orders and that we do have that upside as we've owned stock more than we would have wanted to. Next, please. This is a Farm Equipment standalone versus consolidated results the way you would see them. The standalone grew 49%. The consolidated PBIT grew 95%. The table at the bottom show -- the chart at the bottom shows you the movement of losses to profit or the 3-year quarter 3 data, which is a loss of INR 284, crore reducing to a loss of INR 197 crores. And we are happy to say that this is second quarter in a row where we have a positive profit, a positive performance in the PBIT level on the FES international subsidiaries. Next, please. Moving on to the automotive space. You can see sequentially our domestic sales have gone up quite significantly. We had said we will be able to build stock back in, but actually, it's worsened quite significantly. Last year same time, on an index, if we were at 49.5, we are half of that. We are lesser, again, quite significantly than we were in quarter 2, where -- and just to clarify for all of you, when we say system stock, it's stock with us plus stock with our dealers. So there's a huge reduction if you look at the data from F '18 of 123.7. And it's not like the 100 in the auto business was never overstock. So there is a good opportunity for us to fill back these pipelines as the supply situation improves. Over, please. The UV volumes grew 11% in the quarter. Total numbers went down. Quite a significant part of the drop was on account of 3-wheelers but also prioritization between portfolio. The revenues grew 12%. The PBIT grew close to 19%. Our earnings [ grew at ] 1x, and the PBIT grew by 40 basis points. Next, please. I'll spend a couple of minutes on Thar. We're very happy what the Thar response has been. It's touched a sweet spot and created a high amount of passion and energy amongst people. We've crossed 39,000 bookings, 45% of which are automatic transmission, clearly indicating a completely new type of consumer coming into our fold. We have got the NCAP's 4-star rating, which makes it India's safest product. Very positive feedback from the customers who bought it with retail now around 6,000 numbers. And we've got a reasonable number of awards and hopefully more are coming. The positive momentum on bookings continued even in January. We had last time indicated to you that we had 6,000 bookings even in December. So we are seeing a continuing rate of about 200-plus bookings per day, which we think is a very positive sign when waiting periods are large and long and customers are still willing to come in and book while there are long waiting periods. Next, please. XUV300 has been a very strong performance. We've seen a robust booking through the last 3 months of over 6,000 a month. The retails grew by 41%, and feedback on the product is extremely good. And the dealer stock here is in just 3 digits. So there's very, very little dealer stocks in the system, indicating that demand is very strong and we're on a reasonable amount of waiting period here as well. Over. First, to summarize. We believe we've done well on managing cash. A lot of focus on core working capital and optimizing CapEx. We managed our margins very well. Brought in a lot of focus on succeeding in our domestic core. Prioritized all the investments. We see a good growth opportunity in the way farm machinery business is ramping up now. And we think with the new launches in the pipeline, we are assuming core differentiation strategy will really play out over this year. And we are very optimistic of a very strong Automotive performance as we go forward. We have focused on turning around the global businesses. If I was to talk about one significant worry, Pawan spoke about that in his opening, it is around the shortages that are there out of the semiconductor crisis globally. It has impacted us, and we do expect the issue to be constrained over the next 3 to 5 months, maybe till June or July. We are doing our best to manage the situation and be as agile and responsive because the outlooks are uncertain and we have to manage real time with what we get. So with that, Pawan, back to you.

Thanks, Rajesh. Anish?

Good afternoon, good evening, good morning, everyone. We've talked about reigniting value creation and tried to present results today that are on track with what we promised in the past and in some cases a little earlier than the time lines we've given as well. So the key messages, if I were to start with that, are a strong performance for domestic farm. We've continued to maintain an industry-leading OPM for both auto and farm. Capital allocation, which has been front and center for us for the last year or so, is almost complete. We'll share a lot more details about that and talk about what is that almost part that needs to be completed next quarter. And that essentially allows us to put that behind us and go forward. And as we do that, we are starting to pivot heavily to accelerating our growth focus and identifying different areas that can help us drive growth because we need to give both returns and growth. So while the return story is in very good shape, the growth story is developing now and will be in very good shape as well. So moving forward to the next page, just starting with the definition first just to make sure we are all on the same page here, is domestic farm includes its subsidiaries, same with domestic auto. International subsidiaries of both auto and farm, we've kept as a separate group because we've seen higher losses in that area and, therefore, it requires a greater focus. And then the rest are group companies, listed and unlisted entities, which exclude auto and farm. Looking at our stand-alone financials first. Revenue increase of 16% at INR 14,000 crores. This does not include SsangYong. SsangYong is now in discontinued operations for us. And I'll spend some time explaining where we are on SsangYong as we go further in this presentation. If you look at operating PAT, up 78% to INR 1,745 crores. And we've seen an OPM grow by 220 basis points from 14.8% to 17%. And PAT after exceptional items is INR 531 crores. And the exceptional item there, again, is largely leading to SsangYong, but I'll come back to that point. First, before we go there, the key drivers of operating PAT are domestic farm, which show an increase of INR 341 crore versus the same period last year; and our group companies, largely driven by dividend from Tech M for this quarter. And that results in a INR 1,745 crores impact -- or INR 1,745 crore net outcome for us for this quarter. And moving to the next page then. It is where we see the impairment I spoke about, which is INR 1,214 crores. The impairment that we have taken for SsangYong is INR 1,210 crore. And this is a right opportunity for me to just spend a little more time on where we are. The deal that we've talked about with the potential investor is still moving forward. It is looking at a different process though. It is looking at the P-Plan, or the prepackaged bankruptcy process, as compared to ARS earlier. The economic implications for us from Mahindra's standpoint are largely the same. What we have done is taken the INR 1,210 crore write-down because the balance, we believe, we can recover, and we should be able to complete that in the next quarter or so. Where we also are in terms of SsangYong is because it filed for bankruptcy, it is not consolidated on our books anymore. And it is shown as a discontinued operation for this quarter, and we will not be getting any further losses from SsangYong from next quarter onwards. Moving then to the next page. On a consol basis, revenue is up 11%. Operating PAT is up 57% to INR 1,410 crores. The key number for us here is the PAT after EI, which goes up from INR 200 crores to INR 704 crores. And that's one that we are seeing a significant jump in for a variety of reasons. As we see here, domestic farm, again, as in standalone, helps on the consol side. And the big factor here, though, is international subsidiaries of auto and farm. Now this number does not include SsangYong for the reasons I mentioned earlier. So if you look at the table on the left, last year same period, international subsidiaries had a INR 465 crore loss. That has now been reduced to INR 86 crore. So we see a significant turnaround in many of the entities. In some cases, a restructuring or a shutdown as well. And we are -- have to take an offset from other group companies driven largely by Mahindra Finance's results, which has a negative INR 251 crores. But besides that, a very strong story on all other fronts. And as we look at impact on consolidated financials, there is an impact from SsangYong as we've had to take a certain amount of consolidated loss for this quarter. As I said earlier, next quarter onwards, it will not show up. And there are some other asset impairments of INR 142 crores, which also relate to international subsidiaries, and therefore, that's been shown in the numbers here for a net number of PAT after EI of INR 704 crores. Now this is one that we have promised for a while. We've talked about 3 categories earlier. Category A, entity with a clear path to 18% ROE; B is quantifiable strategic impact; and C is an unclear path to profitability and, therefore, an exit. Now we had said that we would come back with this at the end of the fourth quarter. We've done most of the work and therefore we thought we will share that slightly ahead of time. And we've categorized all our loss-making subsidiaries here with the exception of Erkunt and Hisarlar, which had some work that still need to be completed. So we'll come back with that. That's the almost one component I talked about. But for the rest of the entities, we'll talk in a minute as to why MAgNA and Peugeot make it to the A category. Mitsubishi and Sampo are not on a path to 18% return, but they are on a path to profitability, and they have a quantifiable strategic impact. And then we've got SsangYong, Gippsaero, GenZe and MFCS in Category C. The other part that's not there but in fact should be there is the MANA/USPS project, which we decided not to bid on. So it wasn't an exit from the standpoint of exiting something we are in already but from the standpoint of not doing a future investment. And what we also show there is a restructuring for MANA and for Automobili Pininfarina, both of which have been completed. With that, they will be on a path to profitability with a good strategic impact as well. Now they're not on a clear path to 18 percentage yet. We need a little more work before we can put it clearly in Category A. So at this point, it sits between Category A and B. And all of these are being monitored very closely with 6-month milestones, and we'll make sure that they're on track or we will have to look at corrective actions as we go forward. Let's show why we believe MAgNA can get to an 18% ROE. What we've seen here is a very strong trajectory from the losses we've seen in F '19 and F '20. F '21 will still be a INR 130 crore loss, but we look at a breakeven in '22 and then back to a good level of profitability to get to an 18% ROE by about '25. There are various actions that have been taken from a turnaround standpoint with regard to its portfolio, margins, fixed cost reduction and managing inventory. There is a good ride to win. There's a very good pull for these products for the dealers as well and a strong retail growth momentum. On Peugeot, this is a business that we had looked at very closely over the past couple of years. What we see now is a business that actually started doing very well. And again, you see this trajectory here from a loss standpoint, and we expect that to get into a profit segment very soon. A number of turnaround actions. But more importantly than the turnaround actions, EV is a huge driver for Peugeot. Peugeot has electric 2-wheelers now and a good portfolio that's been developed as well. The personal mobility demand in Europe has been very strong. And even in a tough year, Peugeot has been able to meet a lot of the commitment it's made. It's also seeing strong growth in China. And we are seeing a lot of strong investor interest in Peugeot. And at this point in time, the business is very well positioned, and we feel that this is one, with EV focus in particular, can really get on a different trajectory, and -- which is the reason why we put it in our Category A business. So what does this mean for us? The number that we have focused on very sharply through all our capital allocation efforts is losses from international subsidiaries. And we had seen losses of INR 3,429 crores in fiscal '20. We will expect close to INR 3,000 crores this year, again largely driven by SsangYong in the first 3 quarters. And that changes substantially as we get into F '22. Our estimate right now for F '22 is INR 300 crores. And that really is the function of all our capital allocation efforts, and -- which is where we feel good about, in a sense, declaring victory on that front. Yes, a little more work to be done, and we need to continue to stay vigilant, but what we set out to do in terms of eliminating losses from international subsidiaries has largely been done here. And by F '23, we expect that in the positive category. That allows us to really pivot towards accelerating our growth efforts, which will come from 3 key aspects. One is what we call our pillars for growth, which is the farm business, the auto business, our core SUVs as well as our listed entities. These are businesses that will be self-generating in terms of cash. There are growth gems, which are high-growth sectors and industries. We've talked about that before. And we will give 2 specific examples today. And third is new-age platforms, where, in effect, we are leveraging other investors to get money in, but we've created something that was meaningful. We're leveraging entrepreneurs as well who want to create scalable ecosystems. And M&M often has started something, but there will be a strategic investor and allow that company to grow. And we'll talk a little more about that as well. So first, if we look at the pillars for growth. These are the 7 core pillars, again self-funding. The key drivers of growth are for -- tractors and implements for farm. For auto, its core SUV and our electric platform that we're looking to develop now. Tech M is CapEx on 5G as well as next-gen tech. Financial Services, we're looking at setting up a digital finco within micro finance and focus on semi-urban as well. Hospitality, real estate and logistics are all very well positioned in their industries, and those can be significant growth drivers for us. Let's talk about 2 of the growth gems this quarter. One is Susten, which is an EPC/IPP, a solar tech player. The focus area for us for Susten really is around partnerships for EPC and IPP, where we don't need to put more capital or we don't need to take more debt and to be able to scale up solar tech, which is around distributor of solar and O&M services. Accelo is India's largest independent steel service center network. It really focuses on specialty steel, a market leader in electrical steel processing. And it's investing in high-end, technology-driven products in both automotive and electrical steel segments. The big bet for Accelo are Cero, which is recycling. Depending on how the scrappage policy finally comes out, that could be a huge growth momentum for this. And the second is electric vehicle motor cores. So Accelo is again well positioned for significant growth. It's generating good cash today. Depending on the level of investment required, it may not require a lot more from M&M because of the cash generation that it has inherently. And then finally, we talk about our new-age platforms. FirstCry is a unicorn today. It started with Mom & Me in 2009. Then an acquisition of BabyOye. And at that point, soon after that, we saw a great entrepreneur who had set FirstCry. And rather than continue that business on our own, we decided to merge. We became a minority shareholder, the largest single minority shareholder. SoftBank, came in after that with a strong -- with a large investment, which diluted us further. And today, we are at a much smaller shareholding but of a company that has great value, and the value creation journey has been a strong one for us there. Porter is in a much earlier stage than FirstCry is. We started with the launch of Smartshift, which became the second-largest player in its industry, which then merged with the largest, which is Porter. And what we are seeing today is a business that is positioned very well for intra-city load transport and can grow at a 10x pace, which is what the business is planning for in the next few years. And then finally, First Choice, which is our used car platform. We've got a lot of the key aspects of a used car transaction. With Car & Bike, we've got a customer interface now as well and now looking to scale that up. We will look for investors to come into that as well and really be able to bring a much larger new-age platform in that space. There will be more that come over time here which really would look at incubation from a micro standpoint, and then bringing in external investors to be able to scale up those platforms. So with that, we basically conclude by saying that -- as we move to the next page, please -- by saying that Mahindra continues to be the gateway to the largest and fastest-growing teams in India. We are very well positioned and on track to reignite value creation. And we open it up now for questions.

Thanks, Anish, and thanks, Rajesh. I think multiple initiatives that the company has taken in these particularly macro times. We have dealt with the COVID impact well. We have walked our path well. And hopefully, over the next few quarters, we start running a bit more and taking further initiatives. Overall, farm equipment and agri, we have shown a decent amount of growth, and we have shown good amount of profitability. As far as capital allocation is concerned, again an area where we have sort of definitely done the bucketing. And now the focus is on the 3 vectors that Anish has identified of EPS, free cash flow and ROE.

Opening up for -- opening the conversation for questions, the first question from Kapil Singh of Nomura.

Congratulations to the entire team. A great set of results. And also, thank you very much for this excellent presentation. Gives us a lot of details, which we had been asking you for. Sir, firstly, I just want -- I had a small clarification. You mentioned that there were some INR 90 crores and INR 30 crores one-off items. Can you just clarify where are those taken? And what are those for?

INR 30 crore that we referred, Kapil, is an insurance claim that came in regarding the auto business. And the INR 90 crores, just give me the context of what -- where are you getting the INR 90 crore from?

INR 90 crores is the investment intra-subsidy that we get. So this is an accumulation over a period of time. We had one last quarter as well. And so this is one -- I mean, we do get investment subsidy all the time, but this was an accumulation. And we've just highlighted that separately. That comes into revenue, our net variable margin. We're just, in the spirit of transparency, highlighting that as a onetime, but it doesn't come as an exceptional. Pawan, do you want to add anything on this? To the insurance, it was basically an insurance claim that had got rejected previous quarter, and we had taken that as an exceptional cost at that time. And then that got settled and we brought it back as exceptional item.

Yes. So this is fine. I mean, basically, the IPS that we get on the Chakan plant from Maharashtra government, investment promotion subsidy. That was accumulated post the GST. They had not clarified the rules. And once the rules got clarified, then all of that accrues to us and got accounted for. And as Rajesh said, every month, we get a certain amount. So this is not that amount. That amount is a recurring amount. This was addition to the -- what we get every month.

Okay. Sir, firstly, on the business front, what we see is -- Rajesh, you've talked about UVs. But even on the LCV front, we noticed that there is a substantial market share gain, at least directionally, Rajesh, in retails, which is not fully reflecting on the wholesales probably. So could you talk about what is the success story over there? And also, in case of UVs, I mean, 6,000 per month bookings for Thar with more variants coming. Could this go on to become your largest selling model next year?

Well, thanks, Kapil, for your questions. Just let me clarify your first question. When you're talking about LCV in this specific case, are you referring to pickups or which part of the LCV portfolio?

So as SIAM classifies, up to 7.5 tonnes category.

Okay. So the way we look at it is less than 3.5 tonnes and more. Clearly, on the pickups, pickups is a key driver for us in the less than 3.5 tonnes. That's where you would have seen a very strong retail momentum. The -- but there has been -- we -- like you rightly said, we have not been able to convert that into wholesales at all. The system cost, as -- to just give you an indication as a reference, is probably system cost as [indiscernible] plus dealers. On the pickup portfolio is in a very -- I mean, just about getting to 1,000-plus. So it's a very, very insignificant number of stock that we have right now in pickups. And that's the reason we're not able to convert that into wholesales. But the retail momentum is very, very strong on pickups. Maybe your question is why is that, and I can answer to that, is very strong goods movement and last-mile intra-city. And that's mainly an intra-city segment, which has been very strong. And of course, our brand and product is very strong in that segment.

I...

Sorry, Pawan. Right, go ahead.

You may be, well, also questioning whether -- why our market share is down, and that is because we are not able to make enough vehicles. Even the pickup is also affected by the sorters.

Yes.

Was that your question?

Yes. So I think he has picked up that there's the retail -- there's a retail growth. He must have looked at the registration data for that.

Yes.

But the wholesales are impacted by a shortage. That's why I was just sharing the specific numbers, Kapil.

But there is supply constraint on pickups also. And if you could make more pickups, we can sell more pickups.

Kapil, can you just repeat your second question? I might be -- on the pickup.

Yes. On Thar, just...

Yes. Sorry, on Thar, yes.

You're thinking of more variants also. So...

I don't want to get around to saying that 6,000 per month should be our largest-selling product. So I certainly don't want to say that. And I hope we will have many products which sell more than 6,000 a month. Certainly, Bolero right now is already one of them, Kapil. So we do a large number of Boleros, and we are sure that, that will stay robust. But we are also very confident of our 2 new launches that are coming. So I hope all these products compete for the 6,000-plus slot.

Thank you, Kapil.

I mean, just one...

Kapil. Kapil, Kapil, we need to have -- get to the questions, yes, and then come back in the queue. Shyam?

And I think just -- sorry, Rajesh, just to probably clarify that we have no immediate plans to ramp up volume of Thar to 6,000.

Yes. Yes, yes, I should clarify that. So just right now, we've started at around 2,000 a month. We are currently at 3,000, and we hope to ramp up to 4,000 a month by -- I think it'll be April, May. But if there's anything going beyond that and if you see this booking momentum continue, we will then look at what we need to do to go beyond 4,000 a month. Right now, the plan is for ramping up to 4,000.

Yes. Thank you. Shyam?

Yes. This is Shyam Sriram from Sundaram Mutual Fund. The first question is on tractors. We are seeing southern markets growing much faster from an industry perspective given the weak base there. If you can share some perspective on the regional -- region-wise trends, the channel inventory that we have at the moment and your thoughts on our market share loss there and how can we recoup the loss. And how are you seeing FY '22 tractor demand given the haulage demand for tractors may pick up with higher CapEx spends happening? This is the first question, on tractors.

Okay. So you are right, the southern states have done very well. Chandigarh but especially Telangana, [ Ipli ], which, like you rightly said, were on a low base. But Tamil Nadu also had a very good pickup through that season. Karnataka has done decently as well. These are all markets where -- which need slightly higher horsepower. They use a greater level of mechanization. And they also need power steering. And we were a little short on power steering, and we ran short on high horsepower in the mix. So we did get impacted by a specific model availability, especially in the South. The northern markets haven't been as buoyant overall. Everything -- as you can see, the market is on now on an extremely strong track. But southern states are, like you rightly pointed out, very strong. We do believe that a lot of the market share we lost is a billing-based market share. That's wholesale market share. We have not lost as much at retail levels, though our dealer stocks have come down, as I showed you on the slide, quite substantially. We did pick up market share in January, crossing 42%. And we do hope we will do reasonably okay going on from here, though the supply situation is not completely behind us. But -- and we've not been able to build in the stock that we would need. We are now also starting to export because we start those markets almost by, 6, 7, 8 months. So we do have to start prioritizing exports once we start it. Going into F '22, I don't want to guess -- hazard a guess on the full year at this point of time. We like -- we normally go to see how the monsoons look like, although the reservoir levels, as you know, are at record levels, which is a very positive sign. Looking at the rabi acreage and the positivity of the positive levels of the reservoirs, subsequently we do see up to -- getting into quarter 1 definitely the demand will be robust. That's getting into the incoming season that there will be marjoram. After that, we will wait for the monsoons to give our point of view. But whatever we do, we have to keep in mind that F '22 is going to be on a very high base over F '21.

And I just want to add, Rajesh, that F '21 is likely to end as the highest growth that we have seen in 1 decade.

Yes. So it's 20-odd percent is our current view, and it could be higher. So the highest was, I think, 21.5% or 22%, so.

Yes. So that's close to that.

Yes. Correct.

Sure, sir. No, I was more coming from the fact that haulage demand for tractors may also pick up next year. So I was just trying to get your thoughts on that. But hopefully, we'll wait and see on that.

Yes. Yes, yes. And that's a segment in which Mahindra is very strong, and that has been relatively slower this year. This year's demand growth had been very strongly agriculture.

Understood. Understood. One question on the profitability. I think we are seeing a very sharp increase in the commodity inflation. We have also taken price increases across various segments. So that is one point on that. And secondly, other expenses for us are down 300 basis points on a year-on-year. Even on an absolute basis, the other expenses are down 14%. How do we look at both the margins both from a -- from these 2 perspectives, both on the -- from a commodity inflation? Are we to worry over the fourth quarter? Are we to expect more pressures on the gross margins? And on the other expenses, how do you see that unwind, sir? do we expect more normalization of the other expenses going forward?

Yes. So clearly, commodity price increases are at an unprecedented level. We don't remember seeing last when we saw this kind of commodity price hike. So nothing -- I mean, it would be absolutely inappropriate for me to say that's not a cause of concern. It is definitely a cause of concern. We have been taking price. We have taken price increases, and we will take more price increases in quarter 1 if we need to if this trend continues. The best way to mitigate is a combination of levers. So clearly, expenses -- all kinds of expenses are one. And we are trying to do all the -- take all the right actions to ensure that we are able to capture all the gains that have come out of new ways of working around the last 8, 9 months through the pandemic. And we would factor that kind of way of working as we go forward because we think we've learned a lot out of it, and we must not lose the advantage of what we've learned and executed. We are also, of course, always looking at material cost, value engineering. So through a combination of management of fixed expenses and material cost and some price increases, we would mitigate some but maybe not all. And typically, Shyam, you would know that when there is a very high increase in commodity prices, you are not able to pass on the margin on the cost. And that creates an effect which depresses the margin just on a numerator/denominator effect, even though if you are able to protect the absolute unit margin. Is the last point clear?

Yes, sir. That is well understood. If I may squeeze one question on the subsidies.

Yes. Yes, Shyam, Shyam, Shyam. Come back in the queue, please. Thank you. Okay. Raghunandhan from Emkay.