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

Good morning, good afternoon. Welcome to FY '22 M&M Annual Investor Meet. Very happy to see you all today here after a gap of 2 years. 2 years, we didn't have any physical meetings, and it's good to be back here. I think while pandemic had taught us to learn doing things in a different way, but it has also taught us to the importance of face-to-face meetings. So I'm happy that all of you are here today. Thanks for taking time, and being here. For those who are not able to be here, we also provided the online link. I think I'll welcome all those who joined to the online link also. Today, we have the entire senior management team with us here. We have Anish, Rajesh here. Manoj would join in some time. Before I hand it over to Anish, here is the safe harbor statement. Brian? Okay. I won't read it. I'll just leave it for a few seconds. Okay. After the presentation, you will have the opportunity to ask questions. Those who are attending through the online, you have a chat box on the screen. You can key in your questions at any point of time. We will take it during Q&A. With that, I hand over the conference to Anish.

Thank you, Sriram, and it's great to be here with everyone in person. I understand this is the first in-person analyst meet for the auto industry at least after the pandemic. So it's good to see everyone here in large numbers, and we look forward to a very engaging conversation. So let's start with what we said last time. And what we said last time was we had accomplished some things. We had a focus on a few areas, and we were committing to certain things for the future. Let's see what we were focusing on. Our road map for ESG, maintaining financial discipline, accelerating core growth and enhancing customer experience. Let's start first with the financials. And while you've seen all of these reported, I just want to set the stage with this, which is at the stand-alone level, we've shown a 26% increase for F '22 versus F '21. And at the PAT after EI level, it's a 5x increase, which is really a function of the capital allocation actions that we've taken to ensure that the impairments that we've had in the past do not really show up again. At the consol level, similarly, very strong numbers, PAT before EI is up 35%. And PAT after EI is up 97% or almost double. What are the drivers of this consolidated PAT? Let's take a look at this across the 4 key groupings that we would have at M&M. First is our core, which is auto and farm. Second is the core of Tech Mahindra and Mahindra Finance. There are growth gems and then investments. If you look at auto and farm, despite a very challenging year -- and I'm sure there will be lots of questions as we start on supply chain and how we've seen it and what we've seen in the last year. Despite all of that, it's a 15% growth in profit after tax for auto and farm businesses. This does reflect the slowdown in the tractor industry as well, which, as you will see, has been offset by a market share gain for us. Tech Mahindra has had obviously very good tailwinds from the IT industry. And Mahindra Finance has shown a very remarkable turnaround in this past year. And we'll talk about that in a little more detail. Our growth gems are contributing at a much greater level. The contribution to our profits has gone up from INR 45 crores to INR 280 crores. And all other investments were loss-making in the past at negative INR 189 crores, and that's up to INR 105 crores this year. So we've got all our cylinders firing very well and really contributing to the growth numbers that we've seen. In summary, therefore, the stand-alone level, revenue is up 29%, PAT before EI up 26%; after EI, up 5x. At the consol level, PAT after EI up 97%, ROE at 14.8%, which is greater than a 600-basis-point increase, 62% to be exact. And we'll talk more about ROE as well. And EPS, again, mirroring PAT after EI, up 97%. But beyond the numbers, let's look at what's really driving this. Leadership in auto and farm was one of the key commitments we made last year. And what we have seen through the year is 4 blockbuster launches, with 178,000 or 1.78 lakh open bookings. We are now a market leader in SUV in revenue market share in fourth quarter as well as in the second half of the year; and a market leader in electric 3-wheelers, with a 73% market share; also continue to be a market leader in LCV less than 3.5 tons at 43% market share. On the farm side, our share is over 40%, with a 180-basis-point gain. We launched a number of new products. And I know there were lots of questions in the last 2 years on international subsidiaries, and happy to show a very strong performance of INR 195 crores of PAT from international subsidiaries of farm alone. And these are companies that we had categorized as A and B. And what we are seeing is they are on their path to an 18% ROE for category A companies. And category B companies are delivering good financial results and good strategic benefits as well. Let's take a quick look at Mahindra Finance. At the end of the first quarter, GNPAs had risen to 16%, and we have taken a INR 2,500 crore provision. At that point, we had also committed that 70% to 80% of that provision would be reversed in 3 quarters and that we would see a business transformation that was initiated and growth that would again get back to pre-COVID levels. The business has actually delivered far more than that. 106% of provisions were reversed. The transformation is well underway because just the reversal of provisions is not enough. We have to significantly reduce the volatility in GNPAs. In the next crisis, we cannot go back there to 16%. We have to be at 9% to 10% at max. And there are a number of actions being driven to reduce that volatility to recharge growth and to really use technology, data and digital in a much bigger way into this business. We've completed 3 quarters of that transition. We have another 9 quarters or maybe 8 quarters to go. So 2 more years that we would look at for a complete business transition or transformation of Mahindra Finance. What we have seen in the short run is a 54% growth in disbursement in Q4 as compared to Q4 last year. We've talked a lot about our path to 18% ROE. That was our headline and only focus 2 years ago. And last year, we started pivoting towards growth. So let's talk about the last 3 years, first, in terms of PAT. It should actually be LAT, which is loss after tax. So we've had a INR 3,400 crore loss 2 years ago, INR 2,358 crores last year. And this year, we are at a loss of INR 191 crores. We had committed to a loss of INR 300 crores, so we are slightly better than that, and we should get back on the profit track as we go forward. As we look at return on equity, we are up from 0.3% to 14.8% for the year, but more importantly, in the last 3 quarters, at the consol, at the group level, we've achieved 18%-plus ROE. This is much earlier than we had expected. We had talked about a path to 18% in 3 years. And in 1 year, we've got 3 quarters with 18%-plus ROE. A lot will depend on commodity prices in the coming year. If they get back to reasonable levels, that's something that we will show, but the basic message is our businesses are poised for this. Now they have delivered this. And therefore, our path to ROE is something that I would put in our accomplishment column at this stage while we will continue to maintain the fiscal discipline that is required as we go forward. So what next? The pivot to growth is now firmly established, and we are accelerating growth in a very significant way. This will be driven by core growth in our 4 core businesses: auto, farm, Tech Mahindra with margin play and Mahindra Finance with the transformation play. And with value creation through our growth gems who have signed up for a clear plan to get to $1 billion of market cap in the next 2 to 4 years. We talked about 3 to 5 last year. We're moving into 2 to 4 now. Our digital platforms, we're looking at monetizing our investments and partnerships, which will create value as well. That will allow us to target a 15% to 20% EPS growth that we have talked about earlier. And beyond growth, we've also committed to lead ESG. And especially coming after a week at Davos, M&M is very well poised to be not only a leader in India on ESG but a global leader. And in various conversations we are there, M&M has been profiled as a company that is clearly in this leadership space. We are the founder member of the First Movers Coalition that has been led by the World Economic Forum and John Kerry. We're also the Co-Chair of the alliance of climate change CEOs for India and participating and leading a number of discussions at the global stage. Let's talk a little about our sustainability actions because this is not about commitments. We are moving from net zero in 2040 to planet positive, which is a broader picture. It includes being water-positive. It includes zero waste to landfill. And as we saw at Davos in the last week as well, the focus really is on actions, not on commitments. So our actions are first around greening ourselves. There's a lot that has been done already. We had set a target of EP100, or energy productivity 100%, by 2025. We are at 74% already. We had also set a target of RE100, which is renewable energy 100, by 2026. We are at 45% there and well on track to meet or beat that target. Our Scope 1 and 2 emissions are down 20% in the last 2 years. These are off audited numbers. F '22 numbers are not audited as yet. As they are, we will share them as well. There have been about 2,000 projects that have been done on greening ourselves that have resulted in these numbers. But beyond that, we are starting to play a more active role now in decarbonizing our industries. And let's take a couple of examples here. In the auto industry, it's driven by auto recycling, and also a path to net-zero Scope 3 emissions, which is the toughest one to crack. In the real estate space, we've just launched a residential net-zero carbon community in Bangalore. It was sold out in 3 days. So consumers are starting to feel that as well and want to associate with actions that are planet-positive. And third, on rejuvenating nature. We are driving an initiative around afforestation. We have planted 20 million trees already. They have an 83% success rate. We've been doing this over the last 15 years. And over the next 2 or 3 years, we want to ramp that up from roughly 1 million trees a year to 5 million trees a year. Actions around watershed management and regenerative agriculture, these are also helping significantly as we think about rejuvenating nature. So this is a set of actions, and there is a lot more to be done on this space. But individual actions alone will not meet our goals of reducing or pulling back the 1.5 degrees that we've got. It will have to be collective actions, and this is where we're playing a role on the India and the global stage to work closely with other companies, with governments to really make a meaningful difference in sustainability. In summary, with the results we've shown this year, it is fair to say that we have reignited value creation. We have delivered a strong financial performance in a very tough environment. The focus now is sharply on accelerating growth, and we're not going to lose the financial discipline we've put in. And we are taking a global leadership in sustainable development. With that, let me hand it over to Rajesh.

Hi, good afternoon, all of you. Good to see so many of you here in person. I mean beyond the point, the Zoom thing and Webexes, never anywhere near the same as getting to see all of you in front of us. Breaking the presentation into brakes and accelerators, and just want to touch quickly on 3 things that we saw as brakes through F '22, many of which we believe are turning around. The first was rural stress. We saw rural stress coming out of 2 things, cut back in government spending in agriculture and rural and in favorable terms of trade for the farmer, where input costs had gone up faster than the increase in the inflation for the farm produce. We have seen this change quite a bit in the last 2.5, 3 months. And as we've seen often in rural, you can't always anticipate when it slows down, and you can't always anticipate when it picks up. Post Holi in March and going through the Navratri season, we've seen a tremendous increase in momentum and sentiment. And a lot of that sentiment was, to be honest, driven by the wheat exports, which started. It pushed the price table up for farmers and got into momentum. And also the fact that there wasn't off-seasonal rain in March this year, which has happened in the last many years and destroyed crops, even though people talk about the heat effect, the positivity of no rains in March, it was actually greater than the heat effect where, typically, we've seen harvest getting destroyed. All of that led to a very good momentum through April. We've seen that continue, a bit of a slowdown after the wheat export ban came in but still at a much, much healthier level than what we had anticipated. We expect to see tractor industry in a single-digit growth. That's our view at this point of time. It would change depending on how we see the next 2 months pan out, which is a more optimistic view than we had 2 months back. The second, and one which all of you are very [ seized ] with is the huge commodity inflation we've seen. It has been huge over 18 months and then again went into 1 more increase in Feb, March with the Russia-Ukraine thing kicking in. We see some positive news coming out of the actions. The government has taken cutting -- putting tax on exports is -- will cool the market, and we are beginning to see signs of that. We haven't been able to pass on price increases as fast as material costs are going up. That has put pressure on margins. On the auto side, that's what recovered through operating leverage. On the farm side, where we had a very, very strong volume growth last year, the operating leverage worked reverse. But hopefully, as we see tractor demand come back, that will kind of come back to some level. F '21, we would have to treat as in a year, which is an outlier year where everything was hugely positive because the material cost increases hadn't started kicking in at that stage. The third factor is the supply chain disruptions. We went through a very difficult time in August, September, October, November as Malaysia was into COVID shutdown, and our whole supply chain was disrupted. Things are significantly better. There is some impact out of the China situation at the moment. But hopefully, that will easen out as Shanghai is opening up now in June. And that was really a key bottleneck because logistics was affected as well. So those were 3 things that we felt affected us negatively through F '22. Many of them we're seeing as turning around. I change the focus of the presentation to accelerators that we saw through F '22 and play out a video for a couple of minutes for you to see some of the highlights of the year that went by. [Presentation]

Yes. So that was a whole bunch of things that happened through the year. We're not covering all of them, just focusing on some key ones here. This was the highest revenue year for us, quarter 4 and F '22. You all have these numbers. I'm going to just quickly run through them. So you've seen them. You've seen we've had very strong stand-alone and consolidated revenue growth. You also have the profit numbers. So we did have a reduction in quarter 4 in our farm profit. It was on a very high base. And even with this reduction, it's still the third highest quarter 4 PBIT for farm. So when we compare the farm profit, we have to think of last year being an abnormal and an exceptional quarter 4, with INR 1,000 crore-plus of profit. Very strong exports. FES had its highest-ever exports of 66%. And auto had a 77% growth in exports. You have the numbers up there. South Asia grew strongly, and we had the highest ever sales in South Africa, Brazil and Australia. We launched the XUV300 in South Africa as well. We gained 1.8% market share on FES for the year. And we're back to that 40%-plus level, which we would like to be at. And we spoke about the FES international subs. This kind of gives you a quick look at what's happened around the world. Mitsubishi in Japan did -- created a positive profit for the first time. Both the Turkey companies were positive. Brazil is very -- is profitable and growing very well, gaining market share in a market which has all the key global players present. And the U.S. continues to be strong. This is how the numbers look when you see the profit turnaround on the FES side. It's been 7 consecutive quarters of a positive PBIT. The last-mile mobility in electric has seen very good momentum moving in top tier, and these numbers play that out. In the last quarter, we've seen average sales of over 2,000 a month. We have 73% market share. We think this segment is very well set at an inflection point for very rapid penetration of the ICE market. At the moment, even these numbers are coming out of constraints on capacity mainly linked to procurement from China, impacting the cell availability. So you see the highest number there in March. It was 2,300. Talking about the SUV legacy, I'm going to focus on this concept which you're hearing today, which is the revenue market share. I'll talk a little around that, and the 700 and the 2 new things which are under a huge amount of anticipation. These are the volume market shares coming out of SIAM data. You can see that we are, in quarter 4, in the top 3, which is a very close top 3, with a very small gap with the other 2 players, and #3 even in the second half. But we thought it's an interesting perspective to think about -- since our portfolio has a much higher average selling price than the rest of the market to think about revenue market share as well. And you can see both in quarter 4 and the second half, we were #1 in revenue market share. The way this is computed is number which comes from JATO Dynamics. All of you are familiar. JATO is a well-known data body for the auto community. It is based on the SIAM SUV classification of what is an SUV, with the average selling prices that JATO collect based on their model-wise data. And based on that, we have a revenue market share, which is #1, as you can see in quarter 4 and the second half. We think this will get stronger as we launch the new Scorpio-N. And hopefully, it will put us on the top of the table. The 700, as all of you know, has done extremely well. It continues to do very well. With the waiting period of -- even with a waiting period of 18 to 24 months, we are getting more than 10,000 bookings every month now, quoting that as a waiting period. And we still have 78,000 open bookings out of what we have done so far. We will be revealing our Born Electric Vision in Oxfordshire, U.K. on the 15th of August this year. We will start to build up with more information as we go towards the 15th August. We've been starting in July. So watch out the space for more, it will be a very, very exciting reveal of how we see our Born Electric Vision portfolio play out for SUVs. Many of you may have seen these films, but I'm just going to show you what we internally call the making of Z101. This film has all Mahindra employees as actors. So take -- let's take a quick look at that. [Presentation]

So that was the first teaser that we put out. And as you may have guessed, we have Amitabh Bachchan as the voice brand ambassador. And we have Godfather as the music. And that's the brand reveal film, which is playing currently. [Presentation]

So a huge amount of buzz and excitement around the launch of the Scorpio-N. We're already seeing that buildup in social media, with views on these videos. And a whole series of shorter version videos will play out as we lead into June. We are pretty sure we'll presell this before the 27th of June, and let's see where that goes. But right now, we see that this is another big blockbuster that will come from our portfolio. Some key levers on the FES side: build a fortress in the domestic business, we will work to improve our market share further; aggressive growth in farm machines, we've spoken about this earlier; global expansion, now that we've got our global subs under control, we would like to see growth from India and there; building the ag tech platform through Krish-e; and to reinvent cost further. On the auto side: build a strong brand value; develop platform and EV strategy; transform customer experience; derisk our supply chain, a lot of actions taken but more to be done in F '23; and of course, again, optimize costs for margins. We have put this out as our 2025 commitments. And I'm just going to give you a very quick update on how we are doing. 29% growth in F '22, so we should be on track of 15% to 20%-plus CAGR. Leadership in SUV segment, in revenue, we are at that place. LCV 3.5 -- less than 3.5 tons, we are #1 with 40.3%. Growing market share in tractors and a quantum growth in farm machinery, we should see a lot of that play out in F '23. We are #1 in brand power in quarter 4 in F '22. This is a study we do with Kantar, a reputed research firm, and that's in the SUV segment. And reduced cost as a percentage of revenue is something we had put out during the course of the year. We are on track to that. And deliver ROCE of 18%-plus, plus, we are on track for that. With that, I'll hand over to Manoj.

Thank you, Rajesh. So first of all, thank you all for joining. I think it's wonderful to see you all here and in person, and I'm sure we can interact more after the event. I think some of the elements around the performance, Rajesh has already covered. So some of those things I'll probably cover quickly, but after the presentation, feel free to ask more questions. I think this, we covered, I think, a 28% revenue growth led by auto, 53% growth in Auto. And a decline in farm, but of course, April is a much improved book month for farm. We covered the reasons for PAT before EI, a 17% growth. I think while the absolute farm numbers were down, auto compensated for it. So in a way, the volume leverage on the auto side is playing out despite the commodity cost pressures, which we are seeing. And PAT after EI, I'm not going to talk about Q4 F '21 because we had a lot of capital allocation actions. But in the current quarter, there was a positive INR 125 crore of EI in the quarter. If we look at the consolidated numbers, again, mirroring that led by auto and farm. But clearly, many of our group companies are showing improved performance. So if you look at businesses like Accelo, businesses like our used car tech business, all of them have shown growth in addition to Holidays, in addition to real estate. So I think we are looking at a strong quarter of growth across the group. And that's also translating into profits. I think we are seeing good profits coming from MMFSL, Tech M, so on and so forth. So multiple group companies contributing to PAT before EI. And overall, I think at the consolidated level, there's a positive EI during the quarter. This is just a representation of that in terms of how it builds up. So as I mentioned, domestic farm was down at a PAT before EI level. Our domestic auto was up. international auto and farm subs are doing well. I think they have contributed positive INR 59 crores. And then the group companies, this is largely led by MMFSL and Tech M. I think those are the 2 big contributors. While the other businesses have contributed as a percentage or as a contribution level, it's much lower. Looking at the full year, again, 43% growth in auto. And farm grew -- while the volumes were flat, farm grew about 8% or so. So I think that's the story on the stand-alone side. And the profits, again, farm declined. Auto increased. And on the EI side, of course, F '21 was a year where we took a lot of capital allocation actions. I'm happy to report that many of those actions are in the past now. And if you look at the net EI impact, it's about INR 200 crores negative for the year. And that's something which we will try and see how we can keep it to that level as we go forward. On a consolidated level, again, the same pattern across the group companies, we have seen strong growth. If I look at the profitability, I think Tech M was a strong contributor, MMFSL. Then we had multiple other business contributing to that 35% growth in consolidated PAT before EI. And PAT after EI is a small positive number at the consolidated level and a growth of about 97% in PAT after EI. This is a representation of that. Again, farm and auto have covered. International subsidiaries was about almost INR 500 crores positive during the year. And this used to be one of the areas where we had taken up as an item to do work on and make sure that the performance improves, and that's being delivered. And finally, if I look at the group companies, again, the same contributors, the major contribution is coming from Tech M and MMFSL, and then we had some of the other businesses help in terms of this growth of about INR 1,178 crores. I'll spend some time on this slide. I think what we have done here is there are 2 columns. One is what I would call our core business, auto and farm, and the group companies. This is a stand-alone cash flow. So we started the year with an opening balance of about INR 10,950 crores. If I look at the inflow column -- I'll first talk about auto and farm. Our inflows from various parts of the operation was about INR 7,483 crores. And if you remember, last year was -- it's more than INR 10,000 crores. And we had highlighted, working capital was one of the elements which we will not expect it to repeat in this year. So that has happened during the course of the year. But even otherwise, I think if I look at that number, it's a very healthy, strong number, INR 7,483 crores. And then the next row is the CapEx, which we have invested in our core auto, farm. This is in the M&M stand-alone kind of depiction, and that's about INR 3,186 crores. And then we had the auto, farm subsidiaries. And MEML is a subsidiary in this depiction. So INR 772 crores are -- is the capital deployed there. So if I look at auto and farm at a net cash flow level, it's INR 3,525 crores for the full year, F '22. Now the other column is the group companies. So one of our initiatives, and we have spoken about it, is looking at our various investments and thinking about shareholder returns as a parent company. And that's one of the things we have focused on, is increasing dividends and monetizing some of the opportunities. So that number is about INR 1,998 crores, almost INR 2,000 crores, which is significantly up now. Obviously, there is an element of the Tech M share sale, which we did. But even if we exclude that, I think it's a very healthy increase from where we were last year. And then the capital deployed in the group companies was INR 661 crores. And so the net -- from a group company perspective, as we look at -- as a parent company view, it's a positive of about INR 1,337 crores, which we have got during the year. So our net total F '22 cash flow from that perspective is about INR 4,861 crores. The next line item is subsidiary debt, which we have repaid. That's about INR 828 crores. Now within that is -- what we did, we had given guarantees for SsangYong, and that's included here. So about INR 460-odd crores is what we paid the banks. So if you take out that number, this is a much lower number. It's about INR 360-odd crores is the debt repayment number in the course of the year. And then since the cash generation was strong, I think we repaid debt at the M&M level, which is INR 1,796 crores, and the dividend payout last year was about INR 1,089 crores. So our closing cash balance is about INR 12,099, and our current debt position is about INR 6,300 crores. So we are in a very comfortable position from a liquidity perspective, and we kind of are in a position where we can continue to invest, and which is going to be our next slide on CapEx because I'm sure many of you are very, very interested in that element of that. So I think that's the kind of view of the stand-alone cash flows and how we think about those cash flows. If I look at deployment, again, the first column is what we had said last year, which is INR 9,000 crores overall in auto, including EV. Farm was INR 3,000 crores. Auto and farm investments, which is the group companies of auto and farm, INR 1,500 crores. And then the other group companies was INR 3,500 crores, totaling up to INR 17,000 crores. So what we have done in the first segment is, I think Rajesh alluded to it, the demand cycle is so strong that we have budgeted extra capacity creation, which is about INR 1,900 crores over the next 2 years. So this is the same period of 3 years, which we are using as a comparison. It's an update on the number we gave you. So that's INR 1,900 crores additional. If I look at farm, again, we are setting up a new factory, so capacity addition and some of the newer products. So both of them, put together, is adding up to a INR 400 crore increase. On the auto, farm investments, there's no change. I think many of these companies are turning around, and I think they should be able to take care of their capital needs very, very strongly as we go into the future. And then finally, group companies' investments, we had budgeted INR 3,500 crores. I know there was a lot of questions around this. And I'm happy to report that we are actually reducing that number by INR 800 crores because many of the group companies are self-funding growth. And that's something which we hope will continue to be a trend. So that's the number which is reducing. And the last column is what we call monetization and partnerships. Now this could be a combination of multiple things. We have many, many unlisted investments. We have listed investments. We have, of course, listed companies, which could go public. All of that, put together, we are budgeting for INR 2,500 crores, which is a demonstration of the value creation, which we are creating as a group and where they are hidden kind of in our balance sheet today. And that's something we want to bring out very, very clearly. So we have put it as a goal. Out of this, about INR 500 crores is already done. So the next 2 years, we are looking at an additional INR 2,000 crores coming through. So if I look at M&M level, for the CapEx needs, I think we'll maintain it at INR 17,000 crores of cash. The source might be slightly different because its monetization is coming through. But that's the way we are looking at it, that given what's happened in the course of the year, given what we are seeing in the market, I think we are investing for CapEx, investing for growth. And that's the big, big change from probably some of the commentaries about the last time, where I think we were going into a year with relatively less visibility. And today, we are in a strong position, and that's where we are increasing the overall CapEx guidance over the next 2 years. And finally, I think Anish mentioned it. I think one of the themes was about value creation. I think we started the year saying we will reignite. I think if you look at most of the measures, whether it's the financial measures, whether it is around making sure that we execute on monetization, whether it's making sure that we are getting our group companies ready for self-funded or IPO path. I think all of those are happening. I think -- so from our perspective, this part has been executed, and this will continue to remain a focus. But I think the reignition has happened, and we hope that we can continue going forward. Thank you so much.

Thank you, Anish, Rajesh and Manoj. We'll now open the floor for Q&A. Before that, I request to those who are attending online to post your questions, and we will take it after a few questions from the audience -- participants here. Okay. First question is from Kapil.

I'm Kapil from Nomura. Thank you for the presentation, and many congratulations to the management for setting these bold targets, and they are tracking well. My first question is for Rajesh. It looks like you have a big problem on hand. There's a lot of a huge order book. And looking at the new Scorpio, it looks like the problem is going to get bigger. So how are you preparing in terms of production capacity? Also, a slightly larger question is you're having a very sharp focus now on SUVs. It's a very coveted crown because everybody wants to make SUVs today, even the small car companies. So in your vision, how are you going to retain that position? How you're preparing the organization for more premium customers who are walking into your dealerships with product design, customer service and just the overall vision of how you will retain this position?

Yes. Thanks. Thanks, Kapil. So the first question is -- I wish I had a good answer. There is no easy answer in the short term because at the moment, the constraint is not so much our own manufacturing capacities. It is through a combination of things, including suppliers and semiconductors. So they all play out together. We've been -- got 700 to about 5,000-odd, which is lesser than the 6,000-odd capacity that we have. So we haven't even yet been able to get to where we are. We are, as Anish said, investing in capacities to prepare us for this huge upswing that we are seeing. And you're right that we will see a strong upswing again with the new Scorpio-N. So I think in the short run, the critical thing is managing our customer experience and being able to communicate well, communicate commitments, which we are realistically able to meet. That was very difficult for us in the first 5, 6 months because we had a huge disruption on semiconductors, much beyond what we expected. So we did struggle with meeting deadlines. We are at a more stable level now. And hence, it's easier to communicate to customers. Our sense is that customers who are booking now on -- have a better expectation of when they'll get the vehicle compared to those who booked in October -- or October, November, right? So when people booked in the first phase, nobody thought they will get a waiting period of 18 months, and that was very hugely disappointing for anybody who weighted up to book on the first day of the bookings open. But today, when customers are walking in, and they're getting, like I said, more than 10,000 bookings every month, people know that the waiting period -- what the waiting period is when they're booking. Cancellations are in the region of 10% to 15%. So they are very, very reasonable. And this is now over a very large data that we have over 100,000 bookings. So I guess, people are willing to wait for a good thing because the value proposition of 700 is so strong that people are trading off INR 40 lakh, INR 50 lakh [ cards ] or products or SUVs for something which is less than half the price of that. So you are getting people coming in from the premium segments as well as well as people who are wanting to upgrade from 1 step lower. So you have both and both see a huge value here. So I think we're going to live with the shortage situation for some time from the standpoint of all of you who are analyzing how we are doing. You will see an upward curve because we are going to be doing better than what we did. And we think the trajectory is positive. We don't think the waiting period is going to come down very dramatically. It will come down, but it's not going to come down very dramatically because the 70,000, just to take 700 as an example, you have more than 70,000 open bookings, and you're getting twice your production rate every month as a new booking. So unless we cover the open bookings and we are able to produce at twice our current rate, the waiting period is not going to come down dramatically. I mean it's just simple math at the moment, and that's going to take some time. On your second question, I really think if we hit the sweet spot like we've done with these 2, 3 products where we are differentiated, people want to buy us for who we are, our true DNA, which is why -- what the essence of the whole SUV strategy is. There is no reason why we will not continue our leadership. We are now the only body-on-frame player, by the way. So there's nobody else offering body-on-frame vehicles, which is what the Scorpio-N is about, and the Thar and the Bolero. So that space is completely ours. But we also have a very strong monocoque offering with 300 and 700. So it's a very well-balanced portfolio. And with Born Electric coming in, there are models which are going to be cutting edge on design with the new design center in U.K. I don't want to say more, but we are super excited about what we're going to reveal in August, where you will see the whole portfolio and platform strategy.

Kapil, I'll just add one more thing to that, on your last question. What we feel good about is the fact that we've started moving back to #1 in SUVs, and we have done that already in the second half of this year. But even more important than that is the fact that the XUV700 was developed indigenously in-house. And that's just a function of the capabilities that have been developed now for us to have a car like this, which is clearly a world-class car, and far ahead of any of the others in this space. And to do that in-house gives us a lot more confidence about the kind of cars that we can produce, not just on the ICE side, but also on the electric side.

Anish, if I may ask you one question. You've set very bold targets since you've taken over. And it's something that requires -- to achieve those, it requires to push the whole organization very hard, maybe on things like target-setting, decision-making, accountability. So what kind of changes -- and maybe Rajesh and Manoj, if you want, you can come in as well. What kind of changes are you bringing in on people management and the -- how the organization does some of these things? We'd like to get more insights on that.

So thanks for highlighting that, Kapil. We had set a bold target of 18% ROE. And I know when we did that, there were a lot of skeptics looking at us and saying, really? Why would you set 18% ROE when you've gone through all of these issues. And we've actually hit that far earlier than what we expected. Similarly, as we've set targets for profits as well, 15% to 20% EPS growth is what we put out a few quarters ago. This time, we achieved a 97% EPS growth. So if I were to look at it for the 3-year horizon, we sort of achieved that 15% to 20% CAGR already, but we're still staying with 15% to 20% going forward. So for us, it's important to make those commitments, and really have a plan to get there. So it starts with that. So for each of the commitments we have, there's a very clear plan as to what each business needs to do, what each function needs to do and how do we get there. The second thing we've done is really got back to the fiscal discipline that we had in the past. We've talked about that earlier, and that is a very important part of driving these commitments. It's not just fiscal discipline in terms of businesses on a path to ROE, it's also in terms of cost. While we put that on the slide, I don't think we emphasize this too much. There was a very significant reduction in fixed cost that has taken place as well, and a strong management of cost at all levels, which is also helping in the results because you wouldn't see these kind of results with the commodity prices and margins being where they are right now. It has to be driven by other things. The third thing that we've done is really build a culture that goes back to, again, where we were in the past of a lot more collaboration. And one way we will be in the future of a lot more agility. Large companies are generally not agile. And in an environment today where in many cases, there are much smaller companies that come in and challenge incumbents, it's important for us to be agile. So the behaviors that we put out there are collaborative, agile and bold. You're seeing the bold already. Collaborative and agile is what's helping enable that on a foundation of our values.

Thanks for this presentation, really, really commendable throughout last year. It's good to see all the targets being achieved. I had a question on the EV business. Now you do lay out pretty aggressive plans, Born Electric, Leadership and Last Mile Mobility. Again, this business will need a lot of investment as we look forward in addition to the capacity ramp-up that we're talking about in the UV business. So how are we thinking about long-term funding of this business, these strategic partnerships around the electric mobility?

So I'll just start with that and then hand it over to Rajesh and Manoj. So first is, as we saw our F '22 to '24 numbers, our EV funding is already in there. We've taken it up slightly from what we had said last year. We said INR 3,000 crores EV, INR 6,000 crores ICE. And as we've increased it by INR 2,900 crores overall, which is a INR 9,000 crores going to INR 11,900 crores, INR 1,900 crores comes from capacity, some element comes from EV and then some from other things. As we think about the future, we're going to have more of our CapEx going EV because our product line today is, in a sense, the best positioned in the industry with 5 new launches right now. We really don't need a significant amount of CapEx going into new product development on the ICE side. So a lot of that will go into EV. So at this stage, we're pretty comfortable in terms of being able to maintain our CapEx requirements. Also, as we think about the cash generated, if we look at the last 2 years in Auto and Farm, the inflows were INR 18,000 crores. And as we look at our trajectory going forward, in some ways, I'd expect that to go up as we have more capacity come in -- serving greater demand, et cetera. This is INR 18,000 crores in 2 very difficult years. So given all of that, at this stage, I'd say we are fairly comfortable in terms of what we need from an EV standpoint in terms of funding. Rajesh, Manoj, anything to add?

Just build on what Anish said by saying that we're also setting up the ICE. You saw that in my presentation as well on platform concept. So we basically -- focusing our portfolio on working out of 2 body-on-frame and 2 monocoque platforms, and everything else that we'll do going forward will really build on that. So the cost of any new ICE introduction will be significantly lower, and that will allow us to move monies to the EV. And even on EV, we've -- since we are doing ground up onetime rather than evolving with time, we are going to set up the whole thing around platform and high level of commonality and configurability. We'll talk more about that, which would relatively bring down investment using partnerships like the Volkswagen one we are talking to and so on. So there's a very good balance of areas in which we will want to bring in expertise and excel, and where we will leverage partners. So we're not going to try and do things which others are doing better than us and try and reinvent the wheel.

Just the second question from my side is on the margin for Auto. Now when I look at the delivery this quarter, really, we're almost touching 6% with commodity where it is right now. And we do expect that some of this commodity aspect to ease going forward, and there's a lot of operating leverage and cost efficiencies, which are yet to play out. You all had laid down this 7% target sometime back for the Auto segment EBIT. Is -- given the launches that we've had and the pricing power, do you think that there is a case to surpass these margin guidance that we've laid out? Or how should we think about from a medium-term perspective, the margins in this business?

Manoj, do you want me to start, and then you can chip in. So multiple factors are at play here. The first, I just want to refer to the point you made on pricing power. It's very easy at this point of time to leverage that pricing power, but we are very mindful that we [ shouldn't ] because we don't want to kill the golden goose so early, right? So we have a great momentum going. We need to build that. We need to get customer confidence back, get many more vehicles on the road. So we have been very mindful of not getting into that mindset where we lose humility and say, okay, we [ 24 wait ] period so let's -- we can charge another [indiscernible]. We have taken aggressive price increase, but that's for commodity and some margin improvement, but really not trying to take advantage of the situation, and we don't think we're going to do that in a hurry. We will build our business back with 4, 5 very strong brands before. And we know in time when the brands get strong, the margins go up. We've seen that in the past with all our successes, Bolero and the Scorpio, 500 had extremely good margin structures, and so will this portfolio products. That then comes down to what are the other levers to improve margin. Operating leverage will kick in, and you're already seeing the effect of that in quarter 1 that a lot of that is operating leverage. The commodity front is a little uncertain at this point of time because when we say it's going down, it's going down relative to what? Because we've seen go up, go up, go up, and we thought that's the end of the story in Feb and March. And then we saw another huge increase of 5%, 6% that happened just with the Ukraine crisis. So how much is the cooling off and relative to what base is something that we need to wait and watch for. We had also put out a target, which is more salient in my mind, which is that we'll improve our cost as a percentage of revenue by 3%. And we had said we are on track for that, and we are on track for that. There are lots of actions we've taken on optimizing our material cost, which has nothing to do with commodities. So when we take material cost targets, internally in the organization, they're always without commodity impact. It is basically through renegotiation of value engineering. And a lot of work has happened on our key models on that, which has significantly improved our margin. The full effect of that we will start seeing in the F '23. Because in F '22, it happened through the year, so you don't see any full impact of that. So I would -- without giving a specific target, unless Manoj chooses to, I would remain optimistic on the margin uptick on Auto.

No. So I don't have a specific target. I've never given one ever. So I'm not going to start. But I think just 1 point to add. I think there is a model mix because there are a lot of new launches in the mix, which are driving the growth. And countering that is the value engineering piece on that. So as volumes build up, I think, as we optimize the cost per vehicle. I think that's the counter. Now timeframe-wise, I think we can't predict whether it will happen in H2 next year, et cetera, but I think directionally, the statement we made in the medium term, I think we will target a certain increase in margins that will stay, and I don't think we'll change that guidance higher. But from our perspective, the initiatives, the key kind of levers are already -- there are teams working on it, and there's a comprehensive plan. And maybe as we go into the future, if we see a different outlook, we will do that. But currently, I think the thing we said in the last quarter around improving margins, the time frame might have changed a bit here or there depending on commodity prices, but that's something we'll kind of stick to.

I just want to take a second to add on a point which Manoj spoke, which is model mix. That's been very favorable, we've seen with 700. And that's one of the reasons why we were struggling so much to ramp up because we just got 5% of the total bookings on MX, which by itself is a very strong model. 95% on AX, which is another one with a big screen. And 65% of the total bookings on AX7, AX7L. So -- which is where we have more than 200 semiconductors in that model, everything needs a semiconductor, the lights, the wireless charger, the power seats, everything needs a chip. So -- which is one of the biggest challenges in being able to ramp up because of model mix, but obviously, the margins there are also more favorable.

Raghu, here sir, from Emkay. Thanks for the opportunity. Congratulations for a good FY '22. I had 2, 3 queries. So firstly, Anish, sir, on the growth gems, where are you seeing traction? And how do you see that ROE road map towards that 18% in those entities, eventually leading towards monetization, which Manoj had talked about? Secondly, Rajesh, sir, on the tractor side, the year started off on a good note. And despite whatever government restrictions on export, even May seems to be reasonable. So how do you see the full year outlook given that the monsoon expectations are on the positive side? And one last question to Manoj, sir, if you can talk a bit about impairments that have been taken and if you can indicate where it has been taken.

So first on the growth gems, the way we've defined it is to set a target of $1 billion of market cap that needs to be achieved in a specified time frame. That specified time frame last year was 3 to 5 years. It's 2 to 4 years now. And we have 7 businesses who are on track to do that. Three of them are our listed entities, Holidays, Lifespaces and Logistics. And there are 4 others. Of the 4 others, there will be at least -- 3 is my sense that will go to an IPO. And again, in the same time frame. So that's really what's going to drive the value generation from there. And which is where we feel good about an 18% ROE target as those are monetized as they go to an IPO. We will likely see them contribute very well from a returns perspective. Rajesh?

Yes. So tractor demand, Raghu, is -- like you said, April has been very good, much higher than what we thought. May is much higher than what we thought. It has slowed down a little bit after the ban, but not significantly for us to be worried. At this point of time, our view is single-digit industry growth, but we'll update that once we see more through June. Typically, we like to do a calibration end of June or so as we get a better feedback on the monsoon and cash flows in rural areas and so on. But at this point of time, we'll talk about single-digit, which is higher than what we had thought about a few months back. Manoj?

So Raghu, on the impairment bid, I think, just a little bit of background here, right? So if you look at impairment, it's based on the current view of the business. And the current view of the business, we keep looking at it again and again. We have put in a process where it is multiple-level checked in terms of -- it goes through the company, then the sector and then we take a call at an overall level saying does this -- kind of how does it link back to what's happening in the market and so on and so forth. So what you see here is a net result of it. So splitting it is actually -- I mean if I go to split the [ 125 ], it's going to be a long journey. So I think instead of that, I think what you should look at and take comfort from is the process -- for example, I can tell you in one of the subsidiaries, we took write back this quarter because when we did it the last time, I think the market situation was very, very different. And we said we would rather be more conservative and take a market-based view on that. And then as the situation improved, we looked at the projections again and we took a write back. So there are multiple puts and takes in that number. But the broader message from our perspective, which I was trying to convey is, F '21 was a year of big impairments. And the big EIs elements. I think that kind of year is in the past. So from a tracking perspective, it should not be a major factor as you go forward. That's one. The second is, as I talked about monetization, some of that could lead to EI gains, also. So I think that will also come into the picture. So I think there are multiple puts and takes. So that's why if you get into the detail of EI, I think it's probably more distracting for everybody. I think that's why we are probably not disclosing that.

I'll just add to what Manoj said, Raghu, which is if the businesses are performing, there should be no impairments. And what we saw in a period where we sort of had a number of businesses that were nonperforming, the impairment section was very long. And those were the numbers that we had in terms of losses as well. This year, it's sort of more or less at par. And that's what we would expect going forward as long as the businesses continue to perform. EI really shouldn't be a factor in the business. Profit after tax before EI and profit after tax after EI should be more or less the same.

This is Pramod from Incred Capital. So first question is to Jejurikar. So considering the recent tie-up with the Volkswagen, want to know, considering last 2 decades of your experience of hits and misses with the type of global OEMs, what made you to go now with EVs, especially in the context that you have very low design cost? And is it more to do with the supply challenges you see in the EV component? Or is it more to do with the capital allocation restrictions you have, and hence, you need to look for this type of tires, one. Second to Anish, this is regard to the capital allocation, especially with the -- there are some of the subsidiaries, which were -- or the companies which were struggling to meet your threshold, and you are trying to give them a time and come up to there. So where are those stand? Are they -- some of them falling apart? You need to push them out? Or you feel all of them will go through to meet the deadline?

So first, before Rajesh goes, there are no capital allocation restrictions on EV. We feel that's a space that we are very well positioned, and we're going to be very successful in. So EV will get all the capital it needs.

You want to take the second question?

You didn't answer your first one. On the second one, we had classified companies as A, B and C. C was companies that will not meet the threshold of 18% or do not have a clear quantifiable strategic benefit. All of those have been actioned. On companies in category A and B, the vast majority were international Farm subsidiaries. And as you saw from the presentation, they are on a very good track of performance. We had Sampo in Category B. We had Hisarlar in category B as well. Hisarlar, actually, we went ahead and kept only the strategic part, which is implements and sold the rest. So Hisarlar was 1 company that sort of straddled B and C. Well, that action is completed also. And the ones that are in A, which was MAgNA, which is a U.S. Farm business, a Brazilian Farm business, they're actually doing very well on a very good part, faster than we expected, which is what's contributing to our ability to get to an 18% ROE even faster. So as far as we are concerned, the A, B, C chapter is now closed.

So Pramod, your first question on our history with the tie-ups and Volkswagen, where does that fit in? Firstly, we strongly believe that in every tie-up, we've learned a lot, and we've gained a lot. We may have lost some, but we've gained a lot. We've learned out of it. Volkswagen is not an equity tie up. It's basically a supply agreement to buy components, which will enable us to be successful. Everybody is buying from somebody. If you look at all the announcements in India in the EV space around, people are buying some core part of battery cells. Motors, you either buy from an OEM-type supply or you will buy from a normal supply. So these are all things that the whole industry is buying. The EV space is about collaboration and partnerships, and there are several around the world. So it's a very neat, clean supply of components agreement, which will give us greater assurance on quality and a relatively faster go-to-market. And we, hence, don't see any risk, and I don't think you can -- one would bucket it with any of the past tie-ups because this is a pure supply agreement.

This is [ Sri ] from [ HDFC Life ]. So a few questions, taking over from Pramod's line of questions actually. So 2 years back, we had an agreement MOU with REE Automotive [indiscernible]. They also had a stable platform, if I understand correctly. So where does this VW thing fit in? And in addition to that, we could have bought the whole MEV platform, which is what Ford did in Europe, but we chose to use our components and not the platform. So is there something that we have in mind what we want to do in-house? Similarly, on the battery side, that being the biggest cost, do we have anything in mind in terms of how we are going to go about? I understand VW would be having tie-ups with -- right, from the lithium miners' level. So are we going to take batteries from there? Are we going to make it enough? Whatever you can answer would be fine.

Yes. So the REE thing was, firstly, not for the SUV space. It was for commercial vehicles. It was an agreement by which they could access us for any engineering manufacturing support they would want out of Mahindra in India, for what they would do for their global customers. would have the option of using it for our Indian customers, if we wanted. Broadly, that was the contour of that. REE right now has a different set of priorities, and we haven't really progressed much on that. If at any time they want to leverage us and use either our product development capability or manufacturing capability, that's possible, but that has nothing to do with this because that was for commercial vehicles. And a lot of what they are doing is for the very large trucks around the world and so on. So they're not really India market product offering. We are -- we would want to, and we have wanted to develop our own Born Electric platform because that's the future, right? And we would like to control what we do with the platform, and not really be buying out an entire platform from someone else. Buying out components gives you flexibility. When you buy out a full platform, then you're kind of much more locked in. We have a platform which we think -- which we have developed, which is very relevant for our kind of vehicles and Indian usage conditions. So we've gone that path of developing our own platform. I'm not going to say more about it because we will share all the details about this as we lead up into 15th August. We will be fully sharing the details of what this platform is, and what's going to come from there on it. Tying up with people like VW does help us secure the battery chain. You're absolutely right. VW has a very strong presence in this area, they're amongst the largest investors in the world with more than $40 billion. And they have gone all the way up to tying up mines. Supply chain in EV is going to become a very big -- is a big issue and it's going to remain a big issue for some point of time. So having a secure supply base will be an important part of the strategy. So all of that has gone into the decision on what kind of tariffs we should look at.

Can you share the cost and CapEx implication of that tie-up? Or...

Sorry, cost and CapEx?

Yes. Like will it be coming at a very competitive cost to you? Anything on that?

Well, you know the game we play, it's about creating value. So we will not tie up with anybody, which is not competitive.

Is there any exclusivity in that tie up or not really?

I can't talk about the terms more than what I've said. Thank you.

Okay. Now I'll take a couple of questions from the online participants. This is from Devanshu Sampat, Yes Securities. Question is for you, Rajesh. The question is on CODE. What is the game plan here? It's touted to be a tiller killer, but with the tillers being subsidized, how will it allow the same? How is it price versus tillers? And what is the value proposition performance?

Actually, Devanshu, I love the term tiller killer. We haven't come up with that term before. So if you invented it, we love it. The initial response to CODE -- so CODE is probably one of our most innovative products. And Sriram, can you just help Harish with the mic, because I want to get him to take a part of the question. It has been one of the most innovative concepts that we've created. It's a horticulture company farm mechanization solution offering developed by Swaraj, it's hence, CODE by Swaraj. It will -- it has some very interesting features like you -- the seat turns direction, you can change the ground clearance, so and so. I thought since Harish is here, he's the CEO of the Swaraj business, maybe he wants to talk a little about it. We've got a very, very good response, just launched it in 3, 4 states, but a very, very good initial response. Harish?

Yes. Thanks, Rajesh. I think the big plan is, there's a big focus as we all see that -- there is a -- crop diversification is a big thing, which is being talked about. And many farmers are shifting their cropping patterns from grain crops to horticulture crops. The key thing is there's no mechanization solution for such transition because the narrow [ low weights, very less weight ]. So these are very niche application is needed in mechanizing that. And CODE has actually achieved that sweet spot. There's no machine, which is as narrow weight as lightweight as CODE. So when it comes to customer segments, you talked about the tiller killer or power tiller. But I must tell you, horticulture is not only adopted by the farmers, which are small farmers, who are buying a lower-cost machine like [indiscernible]. What our order book is almost 40% of the order book comes from tractor owners to the fellow who has more than 50-odd tractor. So it's a unique value proposition, which is addressing a [ mechanistically ]. As regards to the power tiller, usually goes, power tiller is a very, very small machine, which involves a lot of drudgery. And this resolves all this help, all its issues, and therefore, it is lot by power tillers. So that's the one -- big one value proportion as we talk about. As we get subsidy is concerned, yes, power tillers are subsidized. Our machine, CODE is also subsidized. So to that extent, it is very well positioned between a small tractor and a power tiller with a much, much higher value than a power tiller, which are offered to the farmers. And I must connect as a big game plan, what Anish talked about regenerative agriculture. I think it means you are creating an ecological system, which is much more robust. And the crop diversification is a key part of the regenerative agriculture. And we are happy that the innovation, what we have done, is really addressing that piece, and it's consistent with our client opportunity roles. Thank you.

Thank you. There's another question from Anoop Bhaskar of IDFC AMC, and this is to Anish. Congratulations to the management for sustaining growing the quarterly profit. How is the [ management ] placed on the journey of efficient capital allocation going forward? I think you addressed some part of it.

So I think we've let our results speak for themselves on that question, in terms of both our pass through ROE as well as the growth we are driving. All I can say is that we will continue to maintain that discipline very sharply, and ensure that every rupee of capital used generates more than adequate returns for us. Yes, we are making bold commitments, but the bigger challenge for us than making the commitment is actually meeting them. So far, we have met the challenge, and we hope to continue meeting the challenge as we go forward.

This is Yogesh from HSBC. Just a couple of questions. Firstly, on the subsidiary ROE targets. While 18% is very healthy, I was just curious, some of your larger subsidiaries are in industry which -- where companies make 35% to 40% ROE. So when you evaluate all your subsidiaries, are you only looking at absolute 18%? Or are they evaluated relative to the peers as well?

So very glad you asked that because 18% at the group level. It will be different for different subsidiaries as compared to their peers. In some cases, it will also be different where we want to drive growth. So for example, what I tell Harish for Farm machinery is I'm fine with a 0% ROE for the next 5 years. But can we go from INR 400 crores of Farm machinery sales to INR 8,000 crores of Farm machinery sales? I'm not putting that as a commitment just to clarify, right? But that's a conversation we are having saying, that's the growth you've got to show in the market, you need to invest for that growth. Because that's going to be a very strong business for the next 20 years after that. So there are going to be different targets by business. It will be lower ROE target sometimes for our very high-growth businesses. And for some of the businesses where we're in an industry, where there are higher ROE targets, clearly, we expect them to beat or outperform financially in those industries as well.

I just have a follow-up from Rajesh, on Scorpio. Usually, Scorpio has a certain level of fan [ polling ] and a profile of customers. The new one looks quite contemporary. So will it expand the market and at some edges, will it cannibalize XUV? How will both be positioned separately?

Yes. Yogesh, thanks, and that's one of the reasons we are going to continue with the current Scorpios, the Scorpio Classic, because we realize that they await different target groups. So a lot of the current Scorpio sale comes from rural India, Bihar, UP, Rajasthan and so on and so forth. So we -- and we think that, that segment still will want the Scorpio in its current form, current level of compactness and so on. So we are continuing with the current Scorpio, so we don't lose that loyal base. And we, at this point of time, expect that to continue, in spite of announcing the Scorpio, and we are seeing very little cannibalization or waiting amongst that target group at least as of now. So the Scorpio momentum continues very strongly in spite of all the announcements around Scorpio-N. The second part of the question is around will this create a new target group, and the answer is yes. That's the whole intent of this marketing strategy.to bring back Scorpio into cities and into the tier 1 towns of India, which is metro. So maybe top 60, 70 towns is where Scorpio lost its current momentum and presence, and the brand is still strong. And we think in this new form with this offering, it will come back as strongly a city vehicle. The third part of your question was the overlap between 700 and Scorpio. You're going to see them next to each other to realize that they're way -- they're going to appeal to very different people. And I mean in a way, it's like comparing Thar and 700, the appeal is very different. This is, of course, not Thar but it has its own distinct body-on-frame and strong rugged presence. We do bring in technologies into it, but it has the character of a real true blue SUV as one would call it. So it would, we think, be very distinct target group from 700, and will create a new segment for us.

[indiscernible] First question is on capacity in Auto, both ICE engine as well as taking it ahead to electric whenever you showcase the products. Is there a re-thinking on how you look at capacity given the momentum that you have gained on the UV side, and the fact that you're looking at platform consolidation? Traditionally, you have started with 4,000 to 6,000 units of capacity, and then looking to ramp it up. Is there any re-thinking happening that you need to look at a much bigger capacity at the base capacity? Given platform sharing your breakeven will definitely be far lower than what they were earlier.

Yes. The answer to that is yes. And every time we have to go to Anish or Manoj and tell them, we are revising our number upward. We don't want to go that path too often. So we are -- this is a learning that we've got out of the last launches that we've kind of not investing in the tail of the investment, right? In a way, capacity relative to the total cost of a project is not such a high investment, given that we already have manufacturing presence and so on. So we are now going into this, which must create confidence and hence, building capacities keeping the future in mind, not just with us but with suppliers as well. So clearly, this is a learning out of what we've done in the past. Even on Thar, we have started with 2 -- we've now -- we started with just a capacity of 2,000, we hit 4,000. We're going to hit 6,000 in a month or 2, and we're going to move that up further.

How are you thinking about it? So we -- so when you launch a new set of models, do you think you need to set up a capacity of 10,000 units given that it could be -- the platform could be used further in average, going ahead? How -- so if you can articulate how you're looking to expand the capacity. How fast?

How fast?

Yes.

Yes, it will be hard to answer that question without putting out the exact volumes, but the plan is that we want to be #1 in SUVs. We see ourselves on a clear path to get there. We're setting up capacities to meet that. We've set out a road map for EVs. There is going to be some overlap because there will be some carryover. So all of that is being factored into the capacity expansion. From a time line point of view, most of this will kick in, in 18 to 24 months.

So let me just add a perspective to that. All of you track this industry very closely. If you look back at the launches in the SUV space in the last 5 years or the last 7 years, as we look at it, there wasn't a very high percentage that hit 6,000 a month. In fact, even if you take the bar lower to 3,000 a month. And after maybe an initial blip for some of them, there's -- there are very few that can sustain going over 3,000 a month. So if you were to look at where we were 2 years ago, 6,000 a month seems a fairly bold step at that point in time to say that, yes, it can be done. Because as you well know, the capacity comes at a cost in terms of our capital and our suppliers' capital as well. So today, where we stand, 6,000 seems low. It's a great place to stand right now. And it's not 1 launch, it's essentially multiple launches that we've seen. So yes, we will be revising our standards upwards in terms of saying, yes, we can hit this regularly. But not just as we should be able to hit more regularly. And that is what will be factored going forward. Will we get to starting with 10,000 capacity for certain models? I'd love to be there when we get there. I don't think it may be too far off, but I don't think we'd start with 10,000 right now on the next model that we have.

Yes. But a lot of that, Anish, to build on your point, it will come in through the platform approach, right? So we are saying that this platform will be 10,000-plus, et cetera, et cetera, right? So now we're thinking about it as platform capacity, which solves 70%, 80% of the availability issues, then you only have to invest incrementally on what's not common.

Second question is on 2-wheeler side, given that the focus on right to win is there now, where does the 2-wheeler piece fit in the scheme of things?

We're not getting back into mass market 2-wheelers in India.

But even globally? If you can articulate how are you looking at -- it's not more from losses perspective, but it's more from management bandwidth and how you're looking at it. Because if you don't have a right to win over there in that sense, which are the areas that you are seeing, you have a right to in 2-wheelers in the space.

Should I take that?

So we have 2 parts to our 2-wheeler business as things stand. One is a business which is called Classic Legends, which is the JAWA, Yezdi and the BSA brands. And then we have the Peugeot scooters in France. Yes. So basically, these are the only 2 legs we have in our 2-wheeler business. Classic Legends, we have a co-investor who leads the management of that company, right? So neither Anish or I spend -- it doesn't consume our bandwidth by way of management to drive that business. It has an independent CEO, and one of the -- 2 of the co-investors who are non-M&M, play a very significant role in enabling that business. The other is the Peugeot scooter, which has a full-time CEO, and again, doesn't consume too much of our bandwidth or time on running it. So from a management bandwidth point of view, both of these are niche businesses, not playing in the mass market. And as Anish said, we don't have intentions of getting into the mass market in India. If we were to do that, it would take bandwidth.

I would just add that CLPL, or Classic Legends, is actually a very exciting business because if you look at the brands it has with JAWA, Yezdi and BSA, this is a very strong collection of brands. And this is one, therefore, that has -- it might be a very strong right to win. And we are playing in a very niche segment with those brands. But again, if you look at the industry on that, and all of you are experts on that, you would see the highest profit creation in that industry or that segment of the industry. So if you look at the profit pool, while it's a much -- it's a tiny part of the overall industry from a profit pool standpoint, it's a pretty significant part of the industry. So that gives us a lot of confidence in terms of playing in that space and saying, we can actually create and generate a lot of value. And the consumer pool on that is extremely good.

Okay. So the last 2 questions. One from the online, one from the participant here. Online question, this is from Binay Singh of Morgan Stanley. The amount of EV CapEx number looks smaller than what peers have announced. How to think of M&M EV share in that context? When do we hear more about the Volkswagen MEB tie-up? Also what sort of CapEx savings come from doing partnership with Volkswagen?

The number that we have shared is for the next 2 years. So there's a buildup obviously, of capacity. More details on both the Volkswagen, our product portfolio and how we think about it will all be shared by August.

I would also add that given the capabilities that we've seen in Mahindra Research Valley, if you look at even the XU700, the Thar or the cars we've developed, I'm pretty certain that we've developed it at a far lower cost than what many others would have developed. So that is one factor here as well that needs to be taken into account.

Yes. Yes. One other question is the SUV order book, any data on consumers in terms of M&M's consumer upgrading versus new-to-the-brand? And urban share seems to be going up.

For 700?

SUV order. More on SUV order.

Okay. So I'll answer for 700, then the 300 and -- both of these actually have a hugely new customer base. One clear indication of that is the level of automatic in our portfolio. So all the launches, 300, 700 and Thar have more than 50% automatic in that portfolio, 30% gasoline. So these are all non-traditional minder customers. 700 does have a huge metro focus. For our 300, it's roughly 60% metro, 40% non-metro. So all of these launches are getting very new customer base. In fact, even the Bolero Neo is getting us a completely new -- very minimal cannibalization with Bolero. It's taken the Bolero brand back to 9,000-plus, and a completely different target audience. So it's got back into Delhi. Bolero is never strong in South. Neo is doing very well in South. So very different target audience even for a product like Neo.

Nitin Arora from Maxis Mutual. Just for the perspective of emission norms in the next 3, 4 years, 2, 3 changes are happening. Just want your thought on why choosing still a diesel over hybrids for the SUV? If you can throw some light on that? And also, if you can throw, with respect to the total cost of ownership, which you might see increase in your assessment for a diesel engine, would choosing a hybrid would be good? Or you think diesel would still rule that space? If you can throw some light on your bookings, how much still Thar bookings or XUV bookings are still in diesel?

70%-plus are diesel. So clear, clear preference from customer for diesel. So the new evolving Metro segment maybe 25%, 30% gasoline, but -- and we have a really good gasoline engine, both on the Thar and the 700. Gasoline is really quiet, very good, very peppy, all of that. But this segment is not, from a customer preference point of view, moving away from diesel to gasoline in a hurry. But we think with EV that we will start seeing that shift where they will get the performance parameters much more strongly than EV.

No. Why I'm asking this because, let's say, the CAFE or RDE -- if you can throw some light, what's the total cost increase for you, let's say, in a diesel. Why I'm asking this because a small...

10,000 to 12,000, which are already done.

That doesn't go in favor of hybrids, even you feel that way, even if the diesel is [ extended ]...

Yes. We already made the changes for CAFE on first day. It was built into -- most of the changes are built into our cost.

It's more about performance and the diesel engines we have today are very good. The petrol engines. We've had a few Auto journalists tell us that they are the best-in-class petrol engines that we see around. So it's a very strong set of engines. And we see the move really going from here to electric, not as much to hybrid, which is sort of an interim solution. Similar to the fact that even for electric the interim solution is taking an ICE car and making that electric, but the real game is Born Electric platforms. That's when we get the optimization of the vehicle.

And RDE would add how much cost, if I can get that?

Sorry, what?

The RDE norms would add how much cost? Let's say, the CAFE is [ 10,000, 12,000 ]?

That is still a while away. So we're not going to talk about that number right now.

Yes. There was one question at the very end that the gentleman was asking for -- or raising his hand for a while. So let's go there, please.

This is Ravi Purohit from Securities Investment Mgmt. Pvt. Ltd. Sir, I had 3 questions. First was on capital allocation. I think we've been on this path of creating shareholder value through various methods. Just wanted to get your views on treasury stock. I think between Tech Mahindra and Mahindra & Mahindra, we hold probably a couple of billion dollars worth of treasury stock. We are the only company now left on the listed space who owns treasury stock. There were 2 other, they're already kind of written off their treasury stock in favor of shareholders. So any thoughts that you can share on whether by way of distribution those shares back to shareholders or writing them off or monetizing whatever, if you could share. That's like a low hanging fruit for you for value creation point of view. Second question is on Farm implement. I think we had mentioned earlier that we have a target of about INR 5,000 crore revenue for Farm implements. So if you could just share where we are in that journey? And third and last question is we have a subsidiary of Mahindra & Mahindra, which is into defense and aerospace. Where would you categorize that business in A, B or C? Is that business kind of -- because we don't hear that business being spoken about in our analyst neither con calls. But that business has kind of got some INR 3,000 crore order book now. So is it Category C on its way out, and not a focus area? Or category B or Category A? If you could just share some more thoughts and light on that. Those are my 3 questions.

So I'll start with the last question first. We took all our loss-making businesses and put them in A, B and C. Defense and Aerostructures is actually a profit-making business. And it's on a very good path to our 18% profitable plus value creation. So it's a business we clearly like. This is also a long-term business. It's not one that can be put in place. We've become the tier 1 supplier for Boeing and Airbus for some of the components as well. And we also supply to Boeing and Airbus' tier 1 suppliers as well. So it's one that I would look at as a value creation opportunity. We haven't talked about it much so far because there are some things that we will wait until we can actually show results. So that's something we will wait for. On the Farm implement side, this is clearly a growth area and one where the business is looking at significant growth drivers over the next couple of years. I won't talk about specific numbers right now because any numbers I throw up will essentially be higher than the budgets that the business has right now. But all I can say is that I do think this is an area that we have a very strong right to win. We've got a global progress in this business through acquisitions we made globally, and we can bring those -- are bringing those trends to India. We've got a very strong ecosystem in India from a brand standpoint or distributor standpoint. And therefore, I would look at this business just growing many multiples from here, right? 10x is the minimum I would look at. I'd probably look at somewhere between 10 and 20x in terms of growth. And that will require us to make sure that we are not worried about margins for that business. So please don't ask questions on margins for the business. The investment required is not very high. So we're not really worried from an ROE standpoint, what is the investment there. But ideally, in the next 5 years, we want to build this business to a very strong basis, and then we will start looking at margins and the returns from that as we go forward. And your first question was on capital allocation. Can you...

Treasury stock.

Treasury stock. There, our focus right now is creating value, right? Those are things we will come back and look at in the future as we have to, but that is not value creation for us. I'm not going to put those numbers out there and say financial performance is very strong because that sort of is there right now. Again, we really haven't spent much time on it, so we'll look at that in the future. But right now, the main focus for us is to ensure that from a core value creation standpoint, we can get the business to a level where we are consistently performing and at a very high level.

Just one follow-up on the defense and aerospace business. You mentioned for Farm implements an aspiration that we could have 10x, 20x in the actual scale of revenues. Would you have similar aspirations for this business, also? And if you could spend some more time, if today -- if not today, then may be some other platform. You kind of give us some peep or some insight into what we are really looking at in that space. What is it that we are really kind of trying to build or do?

See, this business has 2 very distinct aspects to it. Defense is based on orders from 1 customer. And those orders can overnight make the business 100x its size, or it can take a while for the orders to come in. And we haven't seen many large orders or -- again, you've seen the level of orders we've seen from the government so far. But it's something that the government has to indigenize defense production. And therefore, we are in a space that is a good space. At the same time, we are careful about how we play in that space. Because for us, we are really looking more at things like cybersecurity, things like managing cities, and not getting into areas that are weapon production. That is not a space we want to get in. So therefore, we have taken some parts of that business, and say, we're not getting into that business. Aerostructures is a business that is a very long-term business. It often takes 2 years to 3 years for the manufacturer, a Boeing or an Airbus, to make sure that the part is perfected before it can be sold to them. But once it is done, it's something that doesn't change for a very long time because the barrier to entry is very high. So the Aerostructures business, it actually has to be built brick-by-brick. And one, therefore, that will become more and more valuable over time.

Thank you. So with that, we come to the end of the conference. We will have all the senior management available to you during the lunch time. So I take this opportunity to thank all of you for being here, and looking forward to meeting you quite often. Thank you, Anish, Rajesh, Manoj and others by being here.

Thank you, everyone.

Join for lunch.