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

Hello, everyone. Good evening. Good morning or good afternoon based on wherever you are joining from. Welcome to Mahindra & Mahindra Annual Analyst Meet FY '21. We are indeed glad to have you all on the call today. Hope you and your family members are keeping safe during this tough period. In terms of -- just before I start the meeting, there's a safe harbor statement I would like to read. 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 such forward-looking statements. I would like to welcome our senior management of Mahindra & Mahindra, and take the -- thank them for taking out this time for the call. We have with us today, Mr. Anand Mahindra, Chairman; Dr. Anish Shah, Managing Director and CEO; Rajesh Jejurikar, Executive Director.

Just to interrupt. There are some technical problems that Anand is having. There are some power issues there. So he will join in when he can.

Okay. Sure, thanks. Thank you. Mr. Rajesh Jejurikar, Executive Director, Auto and Farm Sector; Mr. Manoj Bhat, Group CFO; and also some senior management team from Auto and Farm divisions and also other group business leaders who would be there in the call today. We will start with the overview presentation by Anish, followed by presentations from Rajesh and Manoj. We will then open the floor for Q&A. I hand it over to Anish. Over to you, Anish.

Thank you, and welcome, everyone, to our annual analyst call. It's great to be here with all of you. I hope everyone is safe, especially in these difficult times. We have longer presentation today than usual. And reason for that is we've got a lot more information that is in here in response to the questions that you all have asked in the last couple of quarters. And we do have enough time for questions after that as well. So if you were to start with the key messages. Strong performance, as you will see or may have seen already from both the Farm and Auto businesses in a tough year. We did have a pressure on margins from higher input prices. What you will also see is the capital allocation actions that we've taken and that we promised are actually bearing the results that we expected they would and a very strong cash generation, which is really the highlight for this year. Let's start with the impact of capital allocation actions. If we look at the left-hand side of this page, it shows our profit after tax for both continued and discontinued operations. Discontinued here is essentially SsangYong. And what we see is a significant jump in profit from INR 127 crores to INR 1,812 crores. It's not just capital allocation in SsangYong though, it is also a strong operating performance. Therefore, as you look at the right-hand side here, we see a 36% growth in operating PAT, which is from continuing operations only. I talked about cash as a highlight. And we see why that is the case. We've had an operating cash generation of INR 10,000 crores this year, up from INR 4,500 crores last year. But I will also point out that INR 3,500 crores here is because of actions on working capital. The team has taken some very good actions, and that has really helped increase the cash generation. But this is not something that will recur every year. So as we look at cash generation on ongoing basis, I would look at the INR 6,500 crore number as a benchmark for an ongoing cash flow. So while the INR 3,500 crores additional is here, that's not something that will be repeated every year. And that has resulted in a strong free cash flow, which is up to INR 6,710 crores this year. So as we look back at F '21, there are 3 things that we're really focused on across the group. And while Rajesh will talk about our businesses later, what I'm going to talk about specifically is the capital allocation actions. And then as you heard prior also there's a good control on costs and then other actions we've taken in F '21 as well. But from a capital allocation standpoint, this is a familiar chart. You've seen this multiple times before. And happy to say that this is complete as promised by the end of the year. So 3 categories; A, B, and C, I won't repeat them. We've got a fair amount of restructuring done with MANA and Pininfarina as well, with sort of straddle category and B. And we've got Hisarlar and Erkunt, which were open items last quarter, put in category B for Hisarlar and Machinery and category A for Erkunt respectively. So this activity is completed now. Let's look at the results from this on the next page. Now here, if we look at the left-hand side, we see the profit after tax over the last few years. And we saw significant losses in F '20 and F '21 of INR 3,400 crores and INR 2,400 crores, respectively. This year, we expect that to go down to INR 300 crores and then get close to breakeven and profitable after that. As you also see, SYMC is a big part of that, but there have been others as well. And this is data again shared by specific areas as was requested last time. And similarly, if we look at investments, which was also a request from some of you last time. We look at a INR 1,500 crore investment in F '20. For F '21, if we were to look at it on an apples-to-apples basis, it's also INR 1,500 crores, but there was a debt repayment of INR 2,800 crores, which is essentially a onetime cleanup, and that helped get all the businesses robust from a net worth standpoint. And it's something that we will not plan on repeating again or we will not need to do again. So which is why we've broken that out separately. We do expect that investment number to go down to INR 1,150 crores this year and then go further down next year. You also see the categories of the investment. Auto in the light purple essentially refers to Automobilli Pininfarina, and the investments there have been for the Battista, and Rajesh will talk a little more about the Battista and where it is today. And what you also see here is MANA has had a fair amount of investments in F '20 and '21, continuing the debt repayment, and that starts going down significantly in '22. MAgNA and other farm subsidiaries have started to turn around and are on a very good trajectory. And therefore, as we go to the next page, we share specific numbers by subsidiary. Again, in response to your questions last time. And here, we got numbers for full year as well as for the quarter. And what we see is, first, a strong positive trajectory across the board, except for Automobilli Pininfarina , where there have been some costs this year in terms of getting the Battista up and running. But more than that, as we look at the farm subsidiaries, you see a very significant turnaround in almost all cases. And many of them are profitable for the year or for the quarter, and MAgNA, which is still negative for the year, is moving to a breakeven this year and profitability after that. On the Auto side, the change isn't as dramatic, but it is still fairly significant. And there Battista will really drive the fortunes of APF. MANA is restructured now, so we will expect a much lower set of losses and a better product set going forward. PMTC got hit essentially by COVID, it was on track for breakeven this year prior to that. And it had multiple waves that came through in Europe. But overall, the underlying business has strong performance, and we see that bouncing back. GenZe has been shut down. So while there was some numbers through the year from a shutdown standpoint, what you see is essentially a negative one in fourth quarter, and that will go away. So that's a set of businesses that we have, and we can talk about it more in questions that may come up. In terms of where we are focusing today, we have been extremely focused on keeping our communities and our associates safe. Beyond that, we have really pivoted to growth, and we'll talk about our core growth, growth gems and digital platforms. First, with regard to our communities. There's a number of actions we've taken including building oxygen plants, giving oxygen concentrators, having a large number of trucks with the logistics business, doing a program called oxygen on wheels, vaccination and various other things. In terms of our associates, we've also really gone and done a lot of things to keep them safe and secure, and that has been very well received. So these are activities that were important in this time frame. And we are very proud that our philosophy across the board, across all our companies really wants to go out and share with others and to help them get back safely and securely. As we talk about growth, first, looking at the core pillars. While Rajesh will talk about Auto and Farm in a lot more detail. I just want to highlight the fact that beyond more market share growth in tractors we are looking at a very exciting opportunity in farm machinery. And we do see a quantum leap in terms of revenue and profits there. Beyond that, product technology, global growth are all key drivers in farm. On the Auto side, with the Thar and the upcoming products, there is a very strong sense of momentum that we are seeing. The commercial vehicle space has been a strong one for us. And on the electric side, last mile mobility is here and now, and that's 1 that we will see a good growth momentum in the next couple of years. And we're essentially getting ready with the Born Electric platform for an EV play in a 3 to 5-year time frame. Second, on Mahindra Finance have a number of key growth drivers as well. And I can cover that in questions if you want to go through that in detail. We have restructured our growth gems, or restructure is maybe the long-term here. We have reconfigured the growth gems. What we realized is that we needed to have a specific monetary target around it around all of them. And what we have put forth is $1 billion market cap in 3 to 5 years as the aspirational target for each of these companies. And as we did that, we saw that smaller listed entities also have tremendous potential. So as we look at logistics, hospitality, real estate, each of them will grow 2 to 2.5x in the next 3 to 5 years and be able to get to a $1.1 billion market cap. And beyond that, there are a number of other entities that also can reach this aspiration. And therefore, that will really enable value creation for our investors. And then we've got our digital platforms. Car and bike is essentially Mahindra First Choice deals, which was a growth gem earlier, but we feel that the digital platform play can make it grow even faster. These are businesses where we would be open to moving from a majority to a minority stake to have a greater value creation. FirstCry, for example, is now valued at $1.7 billion, and that's something that we hope [ quarter ] follows. And then beyond that, Car and Bike and the digital [indiscernible] that we've started. So there may be a couple more that come across through the year, but these are the 4 that we're really going to drive in terms of value creation for our shareholders. So as we think about the next few years, we want to lead ESG globally. This is a space where the Mahindra Group has been a leader. It is part of our DNA, and this is something we feel that we should play a role in leading it not just in India, but across the world. In terms of customer experience, we want to go from good to great and even beyond grade to outstanding. And that's really going to be the focus. Technology and digital is going to be a key driver there. And you see us deliver 18% are multiple times before. What we are adding now is also a growth target for our companies. And which is a 15% to 20% EPS growth, that's at the M&M level, but it's really a target for all our companies to look at a 15% to 20% growth in their core businesses. Let me talk about ESG in a little more detail. We are trying to be very focused in terms of how we can establish leadership we have set a goal to be carbon neutral by 2040. Our businesses have taken science based targets, which really are -- is a big step in terms of understanding how we can get to carbon neutrality. We also have targets for 100% renewable energy, and we have committed to get to 50% by 2025, 100% improvement in energy productivity, where we will get to 60% by 2025; 100% site certified as 0 waste 0 water by 2030. And we already have India's first certified location at Igatpuri. But in addition to that, there are 21 other sites that we already have certified. Hariyali, which is our Tree Plantation Program has planted 90 million trees so far, and we will ramp that up to get to 5 million per year. So a number of activities around environment and sustainability that will establish us as a global leader in the space. On the social side, women empowerment is going to be a key area of focus with education for women as well as skilling and training for women, and we have target setup for both at 1 million a year. Governance has been a hallmark for Mahindra Group. And for us, it is about maintaining the gold standard that we've established and really evolving the next tender around cybersecurity, data privacy, diversity and inclusion. And with that, I will now invite Rajesh to talk about the Auto and Farm businesses.

Good morning, and good evening to all of you, and good to be with you again. I'm going to just recap the walk, run and fly phase, which we've spoken about a year back. And we feel good about having delivered on all the short-term outcomes that we had planned for. The management of cash, the management, the margin, the safety of our people, you see that up there. We've also made significant progress on the strategic actions that we had planned, and you can see those tick marked in yellow, and we'll talk more about some of them through the course of this presentation. Let's take a look at the F '21 revenues. And what you see here are the summation of the Auto and Farm segment revenues. We saw a 50% revenue increase in the quarter 4 of F '21, both on a standalone and a consolidated basis. Let's take a look at the F '21 financials, where you see a 36% PBIT increase in the year. Sai, my video is off. You see a 36% increase in the PBIT consolidated for this period of time. In quarter 4, you see a consolidated PBIT increase of 277% and a stand-alone increase of 92%. Let's take a look at the turnaround in the global subsidiaries of FES. What we see here is the significant turnaround from F '19, to what we've seen over the last 3 quarters of this financial year, where in quarter 4, we've shown a profit at a PBIT level of INR 29 crores. We firmly believe that the plans to turn around our FES global subsidiaries are well underway and we now have a strong base on which to start thinking about growth in the global markets. The next phase, which is where we are in right now is one of gearing up. And the reason we say this is a phase of gearing up is because of the second wave of COVID that has hurt us. The quarter 1, hence, is focused on the well-being of our communities and associates. We continue to ramp up production even though there are challenges on the supply side, because we are confident that demand will rebound between June and July. There's a focus on cash and systematic cost control in this period. Clearly, we see risks coming out of the semiconductor shortage, localized lockdowns and also commodity price inflation. But we are pretty sure as we move out from quarter 1 towards the rest of the year and beyond, it is a phase for us to accelerate to fly. It's a phase in which we will move from the walk and run to one where we can start accelerating. What we have tried to put together here for you are some critical levers which will help us build a strong growth momentum in the respective businesses. So I'm starting with the automotive business, where we will look at what could be the bold moves, which will get us the growth momentum we are all looking for. We've been categorized as being fitter, putting our brands in momentum, building strong brands, leveraging our platforms, launch 23 new products and to create a future-ready EV strategy. Let's look at what being fitter means by way of what we have accomplished in the last 2 years. In the last 2 years, we've reduced our fixed expenses in the automotive business by INR 900 crores. That has come through manufacturing, fixed expenses, sales and marketing and G&A. This is -- does not include variable expenses. This does not include personnel expenses. These are just your fixed expenses in the automotive business. We believe that this sets us up very well to drive a growth strategy as we've become fitter and leaner by way of our expenses. The next important part of the growth momentum is going to be about brands which are already in momentum. I'm going to talk about 3 such cases. One is Thar, where we continue to see a very strong booking momentum, our product continues to do very well, and except for the lockdown period, we have been getting over 5,000 to 6,000 bookings every month, even as the waiting period is 10 weeks -- or 10 months. The other product, which is doing extremely well is XUV300. For the last 6, 7 months, we've been getting bookings of over 6,000 per month, and we have a 12-plus week waiting period for this product. The 48% share of petrol in the bookings indicates that the product is getting very well accepted in cities and metros. Our conventionally strong brands, Scorpio and Bolero, continue to remain strong in their momentum. Combined sale of the 2 brands in the quarter 4 was over 10,000 per month. And in spite of that volume, they are on a waiting period as well. So we believe our current products are in a strong momentum. But as we think about our brand strategy for the future and we talk about what we mean by building a strong authentic SUV brand, really the brand idea is about exploring the impossible. And this visual brings that alive. What we mean is creating a sophisticated authentic SUV brand with unmissable presence, one which really reflects the Mahindra DNA and with advanced adventure-ready capabilities. Our endeavor is going to be to create a very strong product portfolio, but these are going to be based on platforms. What you see here are 2 body on frame platforms on which we will build the product portfolio. So you see the new Scorpio, the 5 door Thar and the all-new Bolero and 2 platforms, 1 which will carry the XUV700 and the 620 and then the other new platform, which will have a product code-named V201 and the all-new XUV300. You also see which of these will be electrified and then the Born Electric portfolio. So 9 new products by 2026 is what we are working on. As we look at our commercial vehicle portfolio, the proposition here is about the tough -- getting the tough going. And we are planning 14 new products to strengthen our #1 position. These include the last mile mobility products as well as products in small commercial vehicle range, a new urban pickup range, and new products in our conventional pickup range. So 14 new products by 2026 are at various stages of execution. The trucks and buses business, the proposition is going to be about guaranteeing prosperity. We have a very strong portfolio. We've just built a new ICV platform. Believe now with a strong portfolio and a BS VI, which makes us more cost competitive, we are well placed to start gaining back market share. On the international side, the launch of the Battista in early 2022 is something that excites us, as Anish mentioned, the product is coming out extremely well. We do have a video, which I'm not going to play today, but Sriram can get that for you to see. That is feedback from the European media on their early drive some customer events have also got extremely positive feedback. So we are looking at the launch of Battista with a lot of anticipation. At MANA, which is where ROXOR is housed, we are and have restructured costs. We look at launching the new ROXOR towards the end of this calendar year. South Africa continues to remain a strong automotive market, and we have very strong growth plans again with a refreshed Bangladesh growth strategy and strengthening presence in Sri Lanka with our joint venture there. This is a look at the Battista. And like I said, please do take a look at the video, if you would like, Sriram will share a link of that separately. The EV strategy is to really prepare us for the short-term and the long term. In the short term, the immediate focus is on last mile mobility. We believe this market is ready for scale up. Some exciting tie-ups with Amazon and Flipkart are in place. We strongly believe there is a huge export and global opportunity in this arena. Following our partnerships like Amazon but even opening up new markets or last mile e-commerce mobility. You've seen the portfolio of products that we are planning. We are looking at a new portfolio of IC derived SUVs and the Born Electric portfolio as well. A lot of focus on driving partnerships to take us on the path of creating exciting EV portfolio in the SUV space. The new structure and the merger with M&M, we believe, will strongly enable this. On the farm equipment side, we are here to transform farming and enrich lives of farmers. We believe we have a very strong growth strategy and a growth opportunity, broken that up into 4 key areas. The domestic core, we need to grow our market share, and I'll talk some more about that. Anish spoke about the quantum growth opportunity in farm machinery and we really think that there is an opportunity to significantly grow the market through our actions. I'll talk about technology and global growth as well. On the tractors market share side, we've repositioned our 2 core brands, Mahindra and Swaraj. Brand Mahindra around toughness, and Brands Swaraj around josh and energy, which is Josh ka Raaz Mera Swaraj. A series of new products are in the pipeline. We are -- I'll talk about K2 in a moment. We've just introduced a plus series on the brand Mahindra side. We have a Yuvo refresh, which is coming up soon. And a portfolio of horticulture focused products as well. Krish-e is going to be the moat, which will drive differentiation. I'll cover some more about that. And of course, channel expansion to leverage the growth in the market and drive greater penetration and coverage. Our K2, we expect the first lot of models to get launched in our productionized in 2023, and you can see the dates of the entire portfolio. These are very exciting breakthrough products. They will be very, very comparable to the best-in-class and will help us leverage the global opportunity coming out of lightweight tractors. They'll come with IOT, implements, connectivity, all of that. Digital technology is going to be a very important part of enhancing farming and productivity. Krish-e is a strong farming as a service initiative, which will enable that. It will also create a strong connect with farmers building a growth opportunity for tractors and farm machines, apart from enduring relationship with our farmers. We've started piloting and growing Digisense, which is IoT-enabled kits. 3,200 plus technique plots are plots where we are piloting new age practices with farmers in a matched plot where they continue with their continued or existing practices. And through this, we are able to demonstrate a significant productivity improvement for them, the extent of more than 15% to 20%. Rental is an area we want to scale up further on. And you can see we have closed more than 200,000 hours of rental usage of practice already, plus farm machines. We grew 45% in farm machines in the current year, F '21 or the year just went by. This is an important growth engine with an opportunity to significantly scale up growth. We are moving into in-house manufacturing at Pithampur. We see an export opportunity, and we will also explore inorganic opportunities, get us the momentum and the growth that we are looking for. Strong product pipeline is in place, leveraging the global centers of excellence. As we've turned around the FES global entities, we now are looking at how can we move to growth trajectory. You can see that in North America, tractors grew retail over 30%. Mexico, less than 100 horsepower, we had a market share of over 10% in Brazil 4%. Turkey tractor volumes went up 97%. Hisarlar ag machinery revenue went up 90%. And Turkey is now overall profitable. Lots of restructuring actions in [ Nam ] which take us on a strong path, to now think about growth. Out of the 4 largest markets in the world, we are present in 4 out of the 5 largest markets in the world on this chart above. Next? So that was a brief on the Auto and Farm sectors individual key action plans. As we set to redefine the future, there are some key areas where we want to build capabilities to define the future. The first out of those is design. We believe we really need to significantly enhance our design capabilities. And towards that, we will be setting up a design center in the U.K. which will, of course, work around with the India studio and leverage Pininfarina in Italy to help create global design. It will include the entire Auto and Farm portfolio that we will ramp up on. Already spoken about the EV tech center, but that's a significant capability that we are planning to build, leveraging partnerships and laying out a strong road map for Born Electric vehicles. Digital transformation, especially in the customer experience journey, building strong software capabilities for human machine interfaces and new business models, also strengthening our supply network. And the other key capability is strengthening and bringing differentiated brand experiences. All our brands will have purpose-driven statements. They are WIP at the moment, and we will share them with you all at an appropriate time. Build really world-class customer experience on ground over and about the digital journey. And of course, wow products leveraging our platform commonality approach. So if I was to summarize the way we look at accelerating to fly, these are the 5 key things on the auto side and the 4 key things in the farm side. We believe we are very well placed, through these actions, along with the common capabilities that we are investing to build in and the approach towards ESG, to prepare ourselves for a very strong path, a strong world path to growth trajectory in the future. But before that, let me share with you the commitments that we are making for 2025 for Auto and Farm sectors. We're looking at a revenue growth of over 15% to 20% CAGR, leadership in the core SUV segment with a strong EV play, strengthened further our #1 position in the LCV less than 3.5 tonne segment, grow market share in tractors and a quantum term growth in farm machines. We had the top of brand affinity and customer satisfaction scores in the segments in which we play and deliver an ROCE of 18% plus plus. With that, I'd like to thank you all for being here, and we do believe that we are on a path for a bold and aggressive growth strategy. Over to you, Manoj. Thank you.

Thank you, Rajesh. So first of all, good evening, good morning to all of you wherever you are. I think what I'm going to try and translate some of the things which Rajesh and Anish have spoken about into some of the numbers and how they come about. So firstly, talking about Q4 F '21, I think, very strong revenue growth in both Auto and Farm, and that's something which is reflected in the 48% number here in terms of growth. From an EBITDA perspective, I think while the margin profile is different that farm actually increased margins and auto had a decline in margins. But overall, I think we showed a 60% growth in margins compared to Q4 last year on a stand-alone basis. And that's a very good performance considering the commodity cost pressure and some of the constraints we had on the supply side. Lastly, on the operating path side, I think our operating PAT before EI was up almost 3x from INR 323 crores to INR 1,003 crores. And then coming down to the EI box, the EI was actually down from INR 3,578 crores, which is what it was in Q4 to around INR 840 crores, which is a much smaller number. And from a perspective of looking at this, I think a lot of our capital allocation initiatives have been done very well through the year. And going forward, we do not expect significant elements coming through in this line. I think PAT after EI, of course, is just a reflection of that reduced EI and so there's a huge increase in PAT after EI. Moving on to the next slide. I think we have tried to build out how this change has come about. And I think clearly, if you trace it from last quarter -- last year of quarter 4, which was 323. The first 2 elements are about the domestic Auto and Farm businesses. So the farm business, as I said, had volume growth as well as margin increase. And so it has contributed significantly. Domestic auto has also contributed to growth. If I look at international subs, this is actually, since it's a stand-alone statement, this is actually just an absence of a cost, which was there in Q4, which was about certain valuation of certain options, which we had in one of our subsidiaries. I think the next line item is about a lower dividend. This is largely Tech M had a interim dividend, which was paid out in Q4 last year, which is absent this year. And the last 1 is the line item around tax. And last year in Q4, we had opted to go into the new tax regime and so that was a negative in that quarter, but that is absent today. So our tax rate today is normalized to a large extent. Can we move to on next slide, please. I think coming to the consolidated view, consolidated also, I think there's a strong increase in revenue about 32% led by Auto and Farm. Group companies contributed about 5%. And I'll talk a little bit more later. I think, again, coming to the operating PAT view on the consol side, I think there's been a threefold increase at the operating PAT level. And the significant decrease here is also in EI. So the EI at a consol level is only INR 321 crores. And as I mentioned before, this also signals that we are towards the end of the journey in terms of our capital allocation initiatives. I think the other significant thing is, I think we have classified SsangYong as a discontinued operation. And if that had been there, that -- which I've shown is as a note here, SsangYong would have been a INR 443 crore loss, which is not in the numbers in the continuing operations. Again, a build-up from INR 680 crores to INR 1,834 crores. The same 2, Farm and Auto have contributed positively, but I want to talk a little bit about what Rajesh said. I think there's a huge amount of effort, which has gone into changing the profile and the profitability of the international subs, both Auto and Farm. So that's been a significant increase in profitability, which we have seen. The swing is INR 670 crores. I think going on to group companies, again, a Q4 F '20, as you would all recollect, was a quarter where many of the companies in the group did change to the new tax regime as well as were hit by COVID and COVID-related provisions. I think we are normalizing back to normal level of profitability. And that's where we are showing that group company performance also come through. And the last one is tax. Again, here, in the last year -- until last year, we were taking a call until F '20. We were taking a call that there will be a deferred tax liability on income, undistributed dividend income in some of our subsidiaries. So I think that was a positive in Q4 F '20, which is absent today. So again, these numbers are normalized because that impact in this quarter is 0. But from a bridge perspective, it is showing up as a negative in the bridge. Can we move to the next slide? I think coming to full year, revenue is flattish. Auto de-grew by about 10%. I think Farm grew by about 17%, 18%. And EBITDA, again, because of the various initiatives around costs, around fixed cost, around managing variable costs as well as looking at how to increase operating leverage, we have been able to show a 10% growth in EBITDA. At the operating PAT level, it has gone to 15%, I'll talk about it. The significant thing here is on a full year basis, stand-alone, we took an EI of about INR 3,174 crores, which is a number which, as I said, might not repeat, and we have done most of the significant activities there. I think if I look at the bridge here, the difference here is on a full year basis, our farm continued to do well in terms of an overall profitability. From an auto perspective, 2 things have happened. It was really a 10-month year for all practical purposes, plus the supply side constraints and some of the commodity-led challenges in the later part of the year. I think all of them have contributed to a net fall in margin in the domestic auto business on an absolute basis. This is in line with the fall in revenue, as I mentioned, it was a 10-month here. From international subs, again, I think most of it is about the option valuation, which I mentioned, it's a small amount. Group company is because of lower dividends and taxes, again, related to the tax change. And then from -- finally consolidated, I think there are 2 or 3 things here, which I wanted to point out. From a revenue side, I think I spoke about the 10% reduction and a 17% growth on FES. At an operating PAT level, there's been a strong increase of 36%. If I look at EI, on a full year basis, is about INR 1,262 crores and PAT after EI actually grew about 40%. SsangYong, which is discontinued, was an impact of INR 1,535 crores, which we have disclosed as a memo item. The bridge here is pretty similar. Farm was positive, Auto was negative. But in this view, unconsolidated, again, it comes through strongly on what has happened in the international subsidiaries. So a huge increase in profitability on the full year basis. Our group companies were there or thereabouts on a full year basis because I think many of them were also impacted by the pandemic in the initial parts of this year and tax we have spoken about. So this was the bridge. Can we move to the next slide. I think group companies, I won't spend too much time considering we are 45 minutes into the call. But clearly, each of them is poised interestingly. Tech M. If I look at the last 4 quarters, I think, increasing profitability, deal win momentum is there. I think in terms of cash conversion and free cash flow, I think we have seen some of the -- one of the best years in Tech M. From an MMFSL perspective, I think the highlight here is the 773 number, which you see as profitability. That also includes a provision of about INR 1,300 plus crores, which they took to go down to level of 4% in terms of net NPA. So I think that's something which I think there is a lot of efforts on to improve on the overall NPA position. So I think we should look at improvements coming from there. The other businesses, I think, are at various stages of recovery. I think MLL, for example, has seen most of the traction come in the last 6 months. If I look at Mahindra Holidays. I think Q4, I think occupancy levels were higher. And I think going into next year, I think the European business also could turnaround. And MLDL is also something which Q4 was very good. And I think that's something which is momentum, which we hope we can continue going into the future. The other perspective, I wanted to give was cash flow. And this might not tie back 100% to the books, but I think it's a representation, which we thought would be useful for all of you to have. I think from a perspective, operating cash flow, it's about INR 10,000 crores of operating cash flow. This INR 3,312 crores is the CapEx for the domestic Auto and Farm core business. And then the INR 1,639 crores is what we have invested in the Auto and Farm subsidiaries, which is both domestic and international. So this is the bucket, which is the core Auto and Farm. The next bucket is about the other group companies. So we got a dividend from various sources of about INR 525 crores year. We have invested INR 1,935 crores. Out of which, the big one is the Mahindra Finance investment of INR 1,641 crores. If you leave that out, I think the rest of the investment is less than INR 300 crores. So I think from a perspective of the dividend, it could actually have covered the investments, if not for the MMF, Mahindra Finance investments. What we use the cash for is also this year, as Anish also alluded to, was to get the -- many of the subsidiary companies to the right position in terms of their debt equity structure and their capital structure. So we actually repaid debt in many of our subsidiaries to the tune of INR 3,300 crores. And our own borrowings, overall, we did this at the beginning of the year at the peak of COVID and we had shored up our cash reserves. So that's something which has gone up by INR 3,700 crores, and the last line is of dividend, which we paid during the course of the year. This is another cut. And on the left-hand side, you see the cash generation. Now this includes the operating cash flow plus the dividends, which we have got during the course of the year. So these are in other words, what is the cash which has flown into or come into the company. And out of which INR 3,457 crores was -- the source of the cash was working capital management, better working capital management in the course of the year. As we go forward, I think we don't see that repeating. So I think what our inclination would be that you take the reference point of the lower number, which is the INR 7,000 odd crore and see how do we go from there and try to improve cash generation as we go forward. From a utilization perspective, we have just bucketized it into 3 buckets. The Bottommost one in F '21, which is INR 3,300 crores is the CapEx. The investment -- this is the investments we have made in both domestic as well as international subsidiaries of about INR 3,600 crores. And then the debt repayment, which I alluded to, which is more about correcting the capital structure. So clearly, we see that topmost bucket not repeating itself in any significant manner going forward. So our cash utilization will also be lower. And lastly, I think we had said we would give some visibility on the capital deployment plan. So if you look at this, what we are saying is about INR 9,000 crores in auto CapEx, which includes EV of about INR 3,000 crores. And then the farm CapEx is about INR 3,000 crores. And Auto and Farm investments, now these are investments in subsidiaries of Auto and Farm in various parts of the globe as well as in domestically. I think that will be about INR 1,500 crores. And then finally, group companies, which will be the growth gems, and they are in various stages of evolution. So over a 3- year period, we are talking about INR 12,000 crores of CapEx and about INR 5,000 crores of investments, which will eventually the end-use might even be CapEx again. But I think from our perspective, we are calling them investments. So that's the capital plan or the cash utilization plan for the next 3 years. So overall, I think I would like to end it here since we are already almost 50 minutes and open it up for questions. Back to you, Sriram.

Yes. Thank you. Thank you, Manoj. So we have already a few questions lined up. I would request each participant to ask only 1 question as there are lots of questions, a lot of participants are waiting in the queue. Yes, before being, the first question is from the line of Pramod Kumar of Goldman Sachs. Pramod, you can unmute yourself and ask the question.

Thanks a lot, Sriram, and before I start off with the question. Congratulations to Anand, Anish and the management team for a significant turnaround in group operations and taking investor feedback on board. And my only question is on the supply chain. Basically, it's no secret that Mahindra has been the most impacted due to the semi shortage, primarily because of your large exposure to a single vendor. So I just wanted to understand what are we doing to mitigate this risk? Because it's kind of hurt us twice in a matter of 12 months or thereabouts in terms of supply chain disruption, right, from BS IV to BS VI and now in this fiscal as well. And by when do you see production normalizing for the auto business? And is there any risk or a tail risk of even a further delay to our launch pipeline? If you can just help us understand this.

Rajesh?

Yes. Pramod, thanks for your feedback. And I can say I'm glad the question is on supply and not on demand. It's an easier problem and will get solved as we go along. Demand is always a harder problem to solve for. So Pramod, we have 3 types of issues related to semiconductors. One is the ECU, which comes on the engines, and that's the single source. We also have a semiconductor issue impacting some of our infotainment systems. And we have an ECU issue impacting airbags on some of our products. So there are 3 types of issues. And of course, the engine ECU affects a large part of our portfolio and that in a way makes us decide which brands we want to produce or not produce. So we have been prioritizing, as the numbers show from an ECU availability, brands which are in strong momentum. So Thar, Bolero, Scorpio and XUV300. We have the next com pickup and the small commercial vehicles have been getting the least priority. And other SUV or UV products such as Marazzo and XUV500 have also been very low priority. In fact, we are hardly producing products like Marazzo because of the overall ECU constraints. I can't say the situation is behind us at all. We were earlier having only 1 issue. Now, like I said, infotainment is an issue. And so is the airbag on 1 of the products. We think the situation will get better by July, August, not to the level that we expect by way of demand. And demand, as you saw from my slides, even on these key products that I spoke about is much higher. We don't intend to delay the launch of XUV700 because of the chip shortage. We think that's very important to driving our brand perception and our brand story and creating excitement around our portfolio. So we will be going ahead with that launch as we had planned. There are couple of weeks of delay because of slowdown in Maharashtra and so on, but that was COVID linked. We will go ahead with the XUV700 launch as planned. So I can't say that we are behind the semiconductor availability problem, unfortunately. We are doing everything. We're working with Tier 2 stocking directly to chip manufacturers. So we're doing everything possible. We put out 12-month requirements. We will start picking up inventory as needed. So everything that needs to be done is being done, but we do have to overcome the short-term issue. Pramod, does that kind of answer your question?

Yes. And anything on diversification of the supply chain, given the lesson what we learned? So will that be a strategy which you'll adopt? Or do you see this as kind of a one-off?

So in my list of areas that we have to work on, I have spoken about agile supply chain networks. Clearly, it's a top priority for us, Pramod. Many, many learnings that have come out of the last year. The answer may not be as simple as to diversify the supply chain, but there are many learnings, for example, picking up weak signals early. Many, many OEMs, including us, were not watching the semiconductor situation at all. We were totally blindsided when it hit us. Many OEMs on the Eastern part of the world had seen it coming, and they had started stockpiling. So we are putting many fundamental processes and systems to make our supply chain stronger and more robust, right from how do we pick up weak signals. Based on that, where do we start building inventory, including the point that you're raising about how much should we work with single vendors and in which areas versus not.

Pramod, I just wanted to add on a lighter note that over the last few years, this is the easiest question that I've heard you ask, which means we're doing something right.

That's why I was happy to hear the question is supply and not demand.

No, no, I think it's good to say this. And before I kind of bid goodbye, just 1 feedback. It will be great to hear more about the defense business in more detail because I believe you have already kind of very close to $1 billion order book on defense orders. And that's quite sizable. And it will be great if you can talk a bit more about the defense side of the business as well for investors and us. So but congratulations and stay safe.

Thanks, Pramod. We will take a note on feedback.

Nitin from Axis Mutual Fund, Nitin Arora.

Anish, my first question to you is, CapEx plus investment now INR 17,000 crores for the next 3 years? That is correct, right?

So just to clarify, you're right about the INR 17,000 crore number in total. CapEx would be INR 12,000 crores. Investments is INR 5,000 crores. This was in response to a question asked by one of your colleagues last time, which is, give us a sense of the number of investments as well over the next few years. So CapEx is broken as under INR 6,000 crores for core auto, INR 3,000 crores EV, and INR 3,000 crores tractors. And investments are estimated at this point is INR 1,500 crores for auto and farm international subsidiaries. A lot of that would be this year actually for APF. And the second one is INR 3,500 crores for group companies.

So Anish, my question is that last 1 year, we talked about -- I think our earlier guidance was somewhere in the range of INR 12,000 crores CapEx plus investment, which is now up by almost INR 5,000 crores. And in the presentation --

Let me interrupt, just to clarify, the guidance earlier was only on CapEx. We had not given any guidance on investments, which is why we added it this time.

Hello? Am I audible?

Yes. I was just saying that the guidance we had given earlier was only for CapEx. Not for investments. And investments is something that we added this time based on the requests that we received earlier.

Okay. So let me put it the other way. So in the last 1 year, Anish, your commentary has been even until December quarter that, look, we will do where -- what our strengths are. We are an SUV player. We will try to generate free cash flow. We will be -- capital allocation perspective, we will try to control it. Now what we look is CapEx plus investment number is a similar number, what an old Mahindra had 3 years back continuously. And here, a new CapEx comes up, which is essential, obviously, an important part of EV, where the products will come after 3 years. What really changed in the 3 months in terms of announcing such numbers? And my FCF becomes any which way negative for next year. So if you can throw some light, what kind of a risk you avail because it's a very -- EV is a very dynamically changing thing. Because earlier our stance has been that we will try to partner someone. We will -- it's not something we would like to put up big CapEx to it. That's my first question. And second, now Mahindra Electric, Mahindra Retail, everything comes into the stand-alone business. So what I am thinking -- what I was looking in FY '20, we had a I mean it was a loss of, I think, INR 75 crores, INR 80 crores on that business. And FY '21, I'm assuming could be higher. What kind of a dilution to an EPS because of that, if you can throw some light? Just want to understand SsangYong capital allocation good, and now the whole number has blocked up very high. So just want your guidance on that.

Yes. So first, just to clarify, the guidance we've given in the past, the numbers we've shared are all on CapEx. So if you were to look at it broadly from a CapEx to CapEx standpoint, we had a INR 15,000 crore CapEx for the prior 3-year period. And we then had a guidance for INR 9,000 crores for the current 3-year period because a number of programs were put in place, and we did not need more CapEx for that. That INR 9,000 crores was increased by INR 3,000 crores for electric vehicles. And that's something that we've announced a couple of quarters ago. In addition to that, the amounts that were given for investments were not something that were put in the CapEx number at any point in the past. So what you will see even now is the investment numbers we are looking at going forward are far lower than what they had been over the past few years. And therefore, we should see a much greater cash generation on that basis. So that's the guidance in our slide that we have presented as well. We expect that going down to INR 1,150 crores this year and then going further down over the next couple of years. So that's for investments in auto and farm subsidiaries. For group companies, the amount we put there for INR 3,500 crores is going to come from dividends and income from group companies, and that is really around value creation. So we have 9 businesses that have $1 billion market cap potential. Those are the businesses that we're going to invest in to create that potential. Now if we reach it for all 9, we've created $9 billion of value. Not exactly $9 billion because some of them have value today. So it's basically the incremental value, but it would be safe to say that we've created $6 billion-plus value. So that is what we're looking at in terms of where that investment is going. What we are also doing is tracking all investments very closely, setting a high threshold for both ROE and EPS growth. EPS is probably the wrong word to use for businesses, but ROE and profit growth for businesses. So we are tracking it very closely, putting investments where it can actually generate value. So if you leave that INR 3,500 crores aside, which is really to create $6 billion-plus of value, the rest of it is much smaller than what it has been before.

But Anish, don't you think putting INR 3,500 crores even in the non-auto business -- I understand the growth targets there. And we are putting INR 3,000 crores in EV, which I think was never communicated, where the strategy was to be asset-light, which will not generate any cash for the next 3 years. So any which way we are negative FCF, and it's more of R&D spend, which will keep on increasing in this kind of an EV business. We have seen the global players who tell us of the EV R&D they do. So I just want to understand, is it fungible also? When we see okay, look, this is not working, let me increase. Because this EV business, nothing goes on the lower side when you start investing. Everything goes up. So are also some strategic player talks are going on? Where someone can come and we can do a partnership just so that our balance sheet or the FCF doesn't get deteriorated beyond FY '22 as well? That's my last question.

So the answer to that is yes. There are a number of talks and thoughts around partnerships because that is something that is essential in EV the space. And also to add, these are, at this point, directional numbers. If we don't see the right set of returns coming from this investment, we're not going to make it. So all I would say is we've kept the bar very high, and we're going to ensure that we get a strong set of returns from the investments we are indicating here. Also 1 more thing I would add is, even from a cash flow standpoint, if you look at our cash generation and the profile, we are not really likely to be at a negative free cash flow. We may be closer to breakeven this year. But as we look ahead, I think you will see a much stronger cash generation profile compared to a cash use profile.

Amit, I just wanted to clarify 1 point to Nitin. Nitin, if you remember on the January 1 meeting that we had when we had announced, not going ahead with the Ford joint venture. We had indicated at that time that roughly over 3 years, we would have had to invest about INR 3,000 crores in the Ford joint venture. And we felt that really that money needed to go into the EV investment. So just recapping that conversation for you that, that is the first time we had indicated that we would invest the INR 3,000 crores meant for the Ford joint venture into the EV space. As Anish has mentioned and I covered in my presentation as well, a lot of the work on EV will be about -- around partnerships, and we are not going to be doing fundamentally EV development. That being said, we still have to create products, right? So if you're saying you're going to create a brand electric platform with products, there is product investment that will be needed in those. So when we say EV, it includes the products that come out of the EV space, not just in battery management systems or so on. Talking about investments in products, just wanted to clarify that. When we say EV, it's not a pure EV investment, its EV products, which are in the core SUV space.

I got your point, Rajesh. We can have a discussion on that further.

I'd be happy to do that.

Kapil from Nomura.

Congrats to the team for a great quarter. My question is on guidance. So firstly, we have talked about 15% to 20% CAGR revenue growth. This is over what period? And similarly, Anish, you've talked about 15% to 20% EPS. So is it annual targets that you have? Or is it a CAGR? Secondly, on some breakdown of this 15% to 20% CAGR revenue growth because 1/3 of the top line is coming from the farm business. And farm business, typically, we expect a CAGR of 7%, 8%, right? So how do we break it down to 15% to 20% growth? Will auto be much higher than this? Or will farm also grow at 15%, 20%? Just some color on that.

Kapil, thanks for your comments. I want to first add that this is not meant to provide guidance. We have shied away from guidance for many reasons. And what we don't want to do is start providing guidance. Let me outline the purpose for this and what this really means. The purpose is that as we look at all our businesses and all our investments, what you have seen is an ROE target so far. What we have talked about also in various analyst calls and with investors that we're looking at both ROE and growth. And therefore, what we wanted to put as a threshold for growth. So when our businesses look at what they're doing or when we look at new investments, our threshold really is, are we getting into a space where we can generate an 18% ROE and a 15% to 20% growth. So that is 1 aspect here. To your question on whether it is CAGR or whether it is annual. What we would want to get to is where M&M, on a consistent basis delivers an 18% ROE and a 15% to 20% growth. At this point, I would not want to give guidance in terms of exactly when that happens. But that would -- I would look at as a directional number right now. And when we are ready to give more details in future, we will think about whether we really can give that guidance versus give a directional number, and we'll come back with more details then.

Yes, Rajesh, can you also talk about just the breakdown of this revenue growth that you've talked about for AFS, 15% to 20%, how you're thinking for the auto and farm business?

Yes. Kapil, so building on Anish's point, first, you don't read it as a guidance. It's a direction that we want to work on. We do think auto is on a very low base at the moment, especially when we look at the year that's gone by. So we would think auto would lead a lot of this growth. As I also mentioned in my presentation, we have been very conservative on the global path for FES because we wanted to make sure we turn around from a profit standpoint, all the investments that we have made. And that has involved a lot of actions. It's involved putting cost structures in place, revisiting management teams, processes, so on and so forth. That now being in place, I mean we do want to look at getting back to a growth momentum. Just to take Mahindra Tractors North America as an example. We are still significantly lower on our [ building ] compared to our retail over the last 12 to 15 months. And a part of that, of course, has been because of supply chain challenges where we've prioritized domestic markets and not been able to supply products to international markets through last year. And the dealer stocks are now at a level much, much below what we would want them to be. So significant scaling down of inventories have happened. And we do think with all the actions we've taken there, we have to come back to where we were, even we are -- even our revenues are much lower than where we were in F '19. So we do want to bring international markets back on the FES side. Tractor, like you rightly said in India will go through a certain cycle and cyclicity with a CAGR of -- over a longish period of time of 8%, 9%, some years high, some years low. But there is a growth opportunity on the farm machinery space, which we want to fortify. So that's why we're saying over a 3- to 4-year period, we would want to drive farm machinery growth global businesses and also through the multiple initiatives that we have spoken about.

The next is from Jinesh. Jinesh of Motilal Oswal. Jinesh, can you unmute?

Am I audible?

Yes. Jinesh?

First question to Rajesh is on the tractor business outlook given rural areas are equally more -- equally impacted, if not more, in this wave of lockdown. So what kind of tractor industry outlook do we see for FY '22?

Jinesh, our current outlook is low single digits for the industry for the year. We do want to gain some market share, which definitely something will aspire for. As you know, we have lost market share last year mainly on account supply issues. So when we are seeing single-digit growth, I'm talking about the industry. Just to add some qualitative color to your comments on rural markets. Clearly, yes, they have been affected more this year than last year. In the last few days, we are seeing a change in sentiment and more than, yes. And as the tractor buying season, because that's when the land preparation will start now, starts -- is starting to pick up. There is clearly a momentum building up on tractor buying, which wasn't visible for the last 3 or 4 months. So a combination of tractor buying season, along with what these people are sensing. Is it declining or receding over cases. And rural is -- gives us confidence that we will see some kind of a rebound in June compared to what it has been over last 4 to 6 weeks. From thereon, of course, it will depend a lot on how the monsoon and the rest of the sentiments play out. But overall, as I'm sure you have all the information as well, all the parameters in rural India are extremely strong.

Got it. And the second question pertains to this auto business fixed cost reduction of INR 900 crores and almost 70% reduction in sales spend. This is entirely sustainable? Or as auto business recovery happens, you expect some of these sales spends to come back?

So the -- I'll just focus Jinesh, on the specific of sales and marketing. There were 3 components in that INR 900 crores reduction. So your question I'm taking is specifically on sales and marketing, I'm combining the 2. This does not include pricing and incentives. This is what we call fixed expenses. So fixed expenses, a combination of things like brand spend and travel, conferences and multiple other things that go into fixed expenses. We believe that through combination of COVID and the digital evolution, many of these will stay and will be held systemic. We also think that when we get our product proposition right, clearly, we don't need to spend big bucks on brand building of the kind that we've done before. We spent a negligible amount of launch expense on the launch of Thar. And we have lots of learnings that have come out of that on how do we leverage key influencer groups using digital and so on and so forth. We've almost not run -- in fact, we we've not run a mass media campaign on Thar at all. Even though we made a theme television commercial, it's never seen the light of day. And we don't honestly know when we can bring it on air ever. So I think if we get our launch strategy right, hit the sweet spot, we don't really need big bucks. As you also see from our focused SUV brand strategy, we are advertising lesser nameplates. And that's a fundamental systemic change in the way we are approaching brand-building brands. So only a few brands are going to get the brand support that's needed. And we believe that will make us look bigger and more effectively and more efficiently. So I would treat that as a systemic improvement in the way we will do business.

Got it. And can you clarify how big is the domestic farm market business in FY '21? Sorry, if you can share that.

Jinesh

Sharma?

I'll just -- I'll take 30 seconds, Sriram.

For us?

Yes, for you.

For us, it was close to INR 500 crores.

Thanks, Jinesh. I request everyone to stick to only 1 question. We have quite a few people who are waiting for the questions. Okay. The next one is from Chirag Shah of Edelweiss.

My question is for Anish and it's likely a different question. It's more on listed subsidiaries. So 2 parts. One, what is the role that M&M plays in the CapEx? You are more focused on dividends or you are also focused on operational performance and related benchmarking? And if there is a change in where you are looking at the listed businesses? Because when we look at M&M, there is an embedded value of the listed entities and their performance and their market caps do matter. So traditionally, how it was looked and how you will look at it going ahead? If you can share something.

So Chirag, we have essentially increased the benchmarks for performance for these entities. And that's where I go back to benchmarks for ROE, benchmarks for growth. And what we're telling these entities is that this is the kind of benchmarks you need to achieve. All of them have the potential to do so. The logistics industry is a very strong one, and the business actually is well poised. In hospitality, our business actually is also very unique and can grow quite significantly from here. In real estate, we have a lot of potential, haven't realized it as yet. But in terms of the actions taken over the last 6 months, we're starting to move in the right direction. So our role essentially is to set the operational benchmarks. And to provide the support that these entities may need in a variety of ways to help them to grow faster.

But do you also play a role in evaluating the executive performances over there? And also a question in there because some of the subsidiaries have not delivered to the potential for a variety of reasons. I'm not saying that. But so how do you -- is there a change in protocol that has been introduced over there?

So there is a change in protocol. And you're right that we do need to see a set of companies that are listed really live up to their full potential. And the general protocol really is around how our Board nominees operate. So these are listed entities from a governance standpoint. Their boards essentially oversee the companies. So the Mahindra Group does not look at performance evaluation of those companies or management teams, their Board does. But what the group does is the nominees that we have on the Board are asking much tougher questions, in terms of where are we playing? Why are we playing there? What is the right to win? What is the growth rate we are seeing? And that is the change in protocol I refer to.

Congratulations for a wonderful presentation and walking the talk on capital allocation.

The next question is from Jay Kale of Elara Capital.

So my first question is on the tractor business. I mean we've seen -- apart from 1 year of blip of FY '20, prior to that, we have seen 3 years of upcycle. And then '21 also, we've seen a decent growth. How do you look at the tractor business the following 2 to 3 years in terms of growth trajectory? The reason I ask is because in '21, you were constrained on capacities. And you have mentioned about INR 3,000 crore CapEx on the tractors business. So how would that split up between capacity expansion and -- or the normal maintenance CapEx? So just wanted to your view on the tractors growth story in the next 3, 4 years because that will decide your capacity expansion strategy as well on the tractors side.

Sriram, I'm not sure I got the entire question. I just want to summarize and make sure I understood the question. If not, just correct me because I couldn't hear very clearly what Jay was saying. So 1 is about the future of the tractor industry over the next 3 years and what kind of industry growth you could expect, connecting that with our market share aspirations and what implications does that have on capacity planning? Is that right?

Absolutely. That's right, Rajesh.

Okay. Jay, the -- basically, we have, in the past, looked at multiple types of modeling on what will happen to tractor industry growth. And looking at farm productivity, what has been the penetration levels and how much machine capability is needed for what kind of land preparation at different times for different types of crops, et cetera. We do believe that there is enough headroom yet for a CAGR of about 8% over the next 3 to 5 years for the industry. Of course, there will be years which will be what we've seen in F '21, and there will be years which will be suppressed. And that is the nature of the tractor industry, and we don't see that changing into a flat linear or a linear growth curve. So our guess is over a 3 to 5-year period, there will still be a CAGR of 7% to 8% in the industry. We do have to grow market share. First, gain back what we lost last year due to supply constraints. And then through the multiple actions that we are working on to go beyond where we were 1.5 years or 2 back. So we would expect to grow faster than the pace of industry. Towards that, we are looking at additional capacity in Swaraj, which we are working on. And of course, significantly enhancing capacity of many of our suppliers. On the brand Mahindra side, which is on division, as we call it, we have enough capacity over the next 2 to 3 years. We need to add shifts. So we just have to increase line capacity. But we are taking actions to improve and enhance supplier capacity. And the cost of capacity addition in tractor, as you know, is not that high. And that's all built into the INR 3,000 crores number that we've given over 3 years for FPS as a CapEx -- to meet capacity needs.

Sure. Just 1 clarification. On Slide 7, you've mentioned that the investments in '22 and '23 should be INR 1,150 crores and then further going down -- INR 1,150 in FY '22 and then going down in FY '23. However, if I look at Slide 60, where the total investment is INR 5,000 crore over the next 3 years, which implies a INR 1,700 crore odd run rate per annum. So just wanted to check, am I looking at 2 different numbers? Or how should I reconcile those 2?

Yes. Let me clarify that. There are 2 separate parts. Auto and farm investments are INR 1,500 crores. And what you see on Slide 7 is only for auto and farm. And therefore, what you would see is INR 1,150 crores this year. Going down next year, and then it would have to go down much further the year after that or be close to 0 for it to be INR 1,500 crores over a 3-year period. So we're seeing a bulk of that INR 1,500 crores come into this year. And which is why my earlier comment also was we will see a lower trajectory for investments going forward. The INR 3,500 crores is for our group companies. And they will essentially be focused on the growth gems that we have and to some extent, on the digital platforms. So that we would look at as a separate investment, if we can generate the kind of returns there. So that hopefully explains the question here on why Page 7 is different from -- the INR 1,500 crores plus INR 3,500 crores.

Next question is from Vimal Gohil of Union Mutual Fund. Okay, then we'll move to Amyn Pirani from CLSA. Amyn's question, and then we'll come back to you.

Can you hear me? Sorry, I was on mute.

Yes.

Yes. Yes. Just going back on the farm machinery performance. So obviously, this year, it has grown really well. And I think you mentioned around INR 490 crores, INR 500 crores of revenue this year. What is the kind of outlook that we have here, especially on which categories are doing well? Because I remember that around a couple of years back, you had an event related to the farm business where you had shown India spec products on rice transplanters and a lot of other products for the horticulture as well. So which categories are driving this kind of a growth? And was it a one-off year for 45% growth? Or is it something that we should expect very strong double-digit growth here over the next few years as well?

We would want to deliver very strong double-digit growth, I mean on-farm machinery. The specific categories which are growing and where we see growth momentum to continue are rotovators. And I'll talk a little bit more on that and Hemant, if he's in the -- on the host side then.

Yes. I am here.

If you want to add on Hemant, then please come in, let me just open it up and then you can add on, if you like. So the way we categorize our farm machinery portfolio is in basically 3 broad areas. One is what we call commodity-led products, right? So products like cultivators is in that space. Here, innovation is limited. What we need to do is get the cost structure and supply chain and logistics costs down so that you are able to compete with localized players. It's a huge opportunity. I'm just taking cultivator as 1 example. Almost every tractor will go with a cultivator, but often they are locally procured. The second are for evolved categories where already penetration is at a reasonable level, and those are categories like rotovators. And as more and more labor shortage comes in to the farms, rotovators are becoming very commonly used in land preparation. And the category will grow, and we have an opportunity to grow our market share as well. We are not leaders yet in this category. The third area where -- and I would add harvesters as well to that. It's an established category but opportunity to penetrate and opportunity to gain market share. And the third are pioneering products. And in a way, rice transplanter is in that category. We are seeing very good momentum on rice transplanters. In the past, I think many will remember that we've shared that the total size of the rice transplanter industry in India is 2,000 numbers a year, 2,000 to 3,000 numbers a year. And China, which grows lesser paddy than India is over 100,000, 150,000 numbers a year. So a lot of work that we are doing to places through our initiatives like Krish-e is to create awareness about a different kind of farming practice, nurseries and so on, which will enable use of products like a rice transplanter. So we're not going to get growth in that category by pushing through the sales network. It needs fundamental work on changing farming practices. And hence, we call them pioneering category creating products. Vegetable transplanters would come in that category as well. So basically, our strategy is operating on these 3 axis.

The next question is from the line of Saksham Kaushal from Philip Capital.

My question is again on the farm segment. In your earlier remarks, you've indicated that the tractor industry will register a mid-single-digit growth. However, given the industry's current inventory situation, which roughly is around 90,000 to 100,000 units. This gives us very little headroom in pumping more inventory. And for me, we take the industry to be somewhere around 40,000k to 50,000k. Remaining months, we are looking at a monthly run rate of 80,000 run rate just to get to flat. And wholesale has to match up with retail because given the inventory situation, don't think so, this can -- there's any more headroom left. Apologies if my understanding is wrong, but this kind of monthly run rate for retail for such a sustained period hasn't happened before. Secondly, compared to last year, the impact of COVID has been very severe. So -- and certain channel partners for the industry has also been impacted. So can you please help us? What factors will enable this mid-single-digit growth that you're referring to?

Actually, I didn't say mid, I said low. Of course, that's not very different than mid, but just to clarify, I didn't say mid, I said low. So different interpretations on what's happening on channel inventory. And so -- so clearly, as I said, April has been slow. May has been slow up until the last 2 weeks or so. What is giving us some renewed confidence is what we are seeing over the last 4, 5 days. And it's very early days, so let me be honest that all the factors that you are raising are real issues. I'm just giving you a feel based on the latest view that we are picking up from our network that they are seeing a very positive demand outlook generate over June. To be honest, till a week back, that was not our view of what will happen in June. We are -- we share all the concerns that you are seeing or have mentioned on what's going to happen in rural economy in the short term, including, will people really postpone their land preparation and sowing from June to a later time. Right now, that doesn't seem to be happening. We are seeing farmers get into the mode of doing their land preparation at the usual time because they are seeing monsoons come in on time. That's giving them hope. So also, a lot of manufacturers, and we had led it, have put out various initiatives to mitigate the risk of putting margin money in case medical expenses come up. So we run farmer protection schemes, which facilitate their buying through either life insurance, medical expense coverage, that kind of thing in the event of an eventuality, which will also help farmers overcome barriers. Finance companies have created more enabling packages as well to mitigate risks for buyers. So you may well be right. We all, having been in the FES business for a long time, and you having tracked it for a long time, know that this is an industry which can surprise you either way. None of us, when we started last year, expected that the industry will end up at 20%-plus growth after 1.5 months of being in a lockdown. So we wait and watch what will happen. But just now the mood that we are picking up is that all the rural fundamentals are very strong. And if that were to be the case, we would see buying kick in. But one has to wait and watch and see how it plays out.

And just a second question on this. Commodities, especially for the farm segment, you've seen margins for 24%, a bit, now 22%. So given where they are and whatever pressures -- last year, you had a bumper year as for the 0 discount through the fiscal, no -- not many incentives. This year around, we know where the inventory situation is and how the drought situation is. So you see the pressure on the margin coming from the incentive side as well. And lastly, the product mix was very favorable, close to the higher SP side last year. Do you see any change happening on those terms and margins getting impacted?

Clearly, the pressure of commodity prices, we and all of you tracked it and you know then there's a significant inflation that's happened through the last many months not just now and that's continued. We have mitigated that with better cost management, passing on most of the commodity prices. But that being said, to maintain margin, one has to also pass on not just the actual material cost increase, but the margin that you are making, right? So when in a very high inflation situation as we are facing now, one has the added pressure from material cost pass on plus the margin on the material cost, which does create a margin pressure. So we are doing everything possible to mitigate it, but there will be possibly some lag effect by year how much money we will be able to pass on there to [ short ]. Sriram, back to some issue...

Yes. So there's one -- I think we are almost towards the end of the time. But there's one question from Vimal Gohil with -- Vimal, that's the last question.

Yes. My question was on the INR 3,000 crore EV investments that are going to happen over the next 2 years -- 3 years, that is. I just wanted to understand the areas that we are going to invest in. Will it be battery manufacturing capacity platforms, et cetera? If you could just give us more sense on that.

Yes, Vimal, it's going to be primarily on creating our product portfolio. As [ Anand ] said and -- said that earlier that we will go in for a lot of partnerships. We will not go and to try and create core capability in things like battery management system. That will be through partnerships. What we're really talking about creating an exciting and a well thought portfolio of the kind that we showed you. So some of the SUVs will be electrifying, our IC offerings like XUV700 electric and this [ H2-11 ] electric version and so on. So some of the investments are towards that. And some of it is towards creating the brand electric platform, where we will -- have yet to decide what's the make versus buy. But when we are putting out a number, that's at the moment an early thought process by way of what we intend to do. But we've not yet firmed up that make versus buy now. But the emphasis will be on buy.

Thanks a lot. There are a few more questions, but we have completely run out of the time. And I'm sure we will have more opportunities to interact in future. So thanks a lot again for taking the time and being here. Thanks, Anish, Rajesh, Manoj and the other senior leaders, and have a good evening, good day. Thank you.

Thank you, everyone.

Thank you, everyone. Stay safe.