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

Good afternoon to everybody who is joining here in person and to those who have joined online. We invite ED for AFS, Rajesh Jejurikar, and our CFO, Manoj Bhat, who will be talking to you. And we'll take questions like we usually do. I just want to be sure for the sake of completeness that we read this out. Certain statements in this meeting with regard to our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements, okay? With that, I'll invite Anish to start with his opening remarks.

Good afternoon, everyone, and good morning and good evening to folks who are joining us online as well. Pleasure to have you all with us here today. And it's a great pleasure for us to talk about our F '24 results. Again, we've delivered what we committed and in fact, much more as you will see. So let's talk about the key messages to start with. Strong performance overall. On a stand-alone basis, our PAT is up 48%. On a consolidated basis, it's up 25%. We have excluded a few one-offs from last year, which I will talk about. This is despite challenges. You've seen the challenges on the farm sector and the industry being down last year. And Tech M, where profits were down 52%. But despite that, across the group, we've just seen our businesses come together to deliver an outstanding performance overall. Beyond numbers, we've done a lot in terms of what we call living our purpose because that's important for us. On the sustainability front, we've always focused on tangible results. And we prefer to talk about things after we've actually achieved something meaningful. But what you see here is the auto and farm business overall have achieved EP100. Auto is at 120, farm is slightly below 100, collectively, they're over 100. What does EP100 mean? Energy Productivity. This was a target we had for 2030. We achieved it 6 years prior. And the implication of this is that we need half the amount of energy to produce the equivalent number of vehicles, whether it's automobiles or tractors, than we did at a baseline in 2009. So over the last 15 years, there have been a number of different projects that have been done to help achieve this. And this is, in many ways, much more meaningful than talking about where energy comes from because one can talk about renewable energy being greener and cleaner than fossil fuel. But in this case, we've eliminated half the energy use. So you don't need to use energy at all. And that enables, again, a much better path to net zero, and that's what our businesses have achieved. We are a water-positive group, have been there for a while. So just highlighting that again. But beyond that, just a number of things that have happened. On Investor Day, we'll give you a deeper view on all the actions that have been taken place on sustainability and why that's such an important area for us. Women Empowerment is another key area. We've had the Nanhi Kali program for educating the girl child for over 25 years. Over the last 2 or 3 years, we started focusing on skilling of women from a women empowerment standpoint and providing jobs. We provided jobs to over 200,000 women in the last year. Our target is to get to 1 million a year, which we will. And we'll again talk more about that when we go to an in-depth session at Investor Day. And there's meaningful progress on being future-ready. Our talent pipeline is outstanding. We've been able to attract talent from any of the companies we wanted across the world. And we've got some very strong talent in the group. We've created talent programs at the entry-level, mid-level, senior-level. And these are programs that would stack up or in my view, be potentially better than what we've seen in companies across the world. In many cases, with strong support from leading universities around the world as well. Beyond that, we've launched a newer version of our Mahindra Leaders Program, which takes in top talent from MBA schools. We've been very selective in going only to the top 5 schools. And within there, taking only the top talent that's available in a program that actually gives them the choice of being in consulting or investment banking or in a business where you can look across 20 industries. So it's something that's very appealing, and it's structured in a way that can give them a career acceleration as well. Technology. We've been an early adopter across many technologies. We've talked to you earlier about Metaverse and what we've done across the group. In Gen AI, there are a number of applications across different industries that have helped us either reduce cost or improve customer experience. And again, we will delve into this in a lot of detail on Investor Day and show you how we're using Gen AI across the different businesses. So our financial performance, stand-alone, as I mentioned, there was a onetime last year, which was an impairment for trucks and buses. And that's something we've taken out as a onetime. If we don't take that out, stand-alone would have been up 64%, not 48%. On the consolidated side, we had gains from Swaraj engines, the listed entity where when we bought shares from Kirloskar, the entity was revalued and therefore, we had gains last year. We similarly had gains from Susten when we sold stake to Ontario Teachers and we had the trucks and buses impairment. So those 3 we've excluded. Excluding that, consolidated is up 25%. What's driving it? Auto and farm are the key drivers of this growth right now, up 54%. Yes, primarily auto at this point given where the farm industry has been, but the farm business also has done very well in terms of maintaining margins, increasing market share and therefore, actually showing higher profits than the prior year in a tough industry. Tech Mahindra has been a weak spot. A number of actions have been taken to set the business on a strong path going forward. Some of you may have heard Mohit Joshi's commentary on the path for the next 3 years. And it will take a 2- to 3-year time period for the full turnaround, but there's a clear path that has been outlined. The impact for this year was negative where profit was down 52% from the prior year, but that's something that we see recovering very well over the next 2 to 3 years and moving on a path where we can even build an even stronger business than we've had before. Mahindra Finance has actually performed outstandingly well. It's hidden a little in the realm of the fraud that was uncovered and let me cover the fraud first, which is something that happened in the Aizawl branch in Mizoram, where we had collusion of at least about 20 people, 11 having arrested so far already. Dealers were part of the collusion as well. Collections agents were part of the collusion as well. And that resulted in the fraud not being picked up. What we've done since then is first, we had to go and do a deep dive on every single loan in the portfolio to ensure there was no other fraud anywhere else. And that was a very detailed exercise. And literally in 3 to 5 days, we had to go through 10 lakh customers and prove to the auditors that there's no fraud anywhere else. And that's what the team did. And that, again, talks a lot about the controls that are there in the business today. We have also put in an even stronger control mechanism to prevent potential collusion fraud that can occur in future by centralizing certain key checker responsibilities as you have a maker and checker responsibility and putting in place certain data tracking elements that will help us get there. But yes, that was a negative for us, INR 136 crore provision, a pretty significant one that had to be taken. And that overshadowed some of the key highlights for that business, which is it has reached INR 1,00,000 crores of assets under management. Assets under management grew at 24% in a year that has seen interest rates go up, in a year where we cut back on certain segments and did not lend to them because we wanted to improve asset quality. And therefore, even more importantly, asset quality is up significantly, and you see the GS3 numbers having come down to 3.4% now. Credit losses are well within the range that had been promised as well for the quarter as well as for the year. So overall, it's been a very strong performance in Mahindra Finance. There's been a lot of work on technology and data. That is something that will start reaping results. I still say that we are halfway through the turnaround there. We are 1.5 years into the turnaround. In another 1.5 years, we expect the technology to be fully deployed, the data analytic tools to be fully deployed and Mahindra Finance will really stand out as a leader in its space. Growth gems continue to do well. And while you see income up here 6%, there are a few things that have been driving it, a number of things on the positive. Logistics has been one negative, and you've heard the details on logistics, which is essentially driven by the express business. And as a result, there was a loss of logistics of INR 55 crores for the year. That is, again, well-handled now. Execution has improved significantly. And what we are seeing now is a much stronger year for logistics in F '25. But in F '24, we had to take some of the hits from there. Susten has 1 -- 2 gigawatts of bids, which will now get translated into developing these utility plants. 2 gigawatts compares to 1.6 that Susten has done in 14 years prior to that. So we've done all of that and more in 1 year. And we had talked about a 5x plan for Susten. The Susten team is now talking about can we go to 7x or potentially even 10x over the next 5 years, just looking at what has been delivered in the last year. Real estate continues to be strong. Last Mile Mobility continues to be strong. Hospitality is on a very strong track. So we've got many of our growth gems delivering at a very high rate now. As we think about auto and farm, while Rajesh will cover it in detail. The key highlights are: We continue to be the #1 SUV player. Revenues up 36%. LCV is something we don't talk about as much, is at a 49% plus market share, and that has gained 350 basis points, a continued strong margin performance in it as well, which results in auto profits alone of INR 4,700 crores, up 2.5x. On the farm side, resilient is a primary word that I would use. OJA is a great launch for the future. It's a great product in multiple markets in the U.S. and Southeast Asia, in parts of India, and that really positions the business very well for future growth and strong cash generation. As I said earlier, profits are also up, yes, up only 2%, but the operative word is up and not down. Mahindra Finance, I talked about in detail, so I'm going to skip it here except for one comment, which is, while you see profit down 11%, Mahindra Finance had significant write-backs in the previous year because of reduction in GS3 and that is what had really driven it. This is a number that is essentially on budget for us and is reflective of the strong performance in Mahindra Finance despite the write-backs that we had in the previous year. Tech Mahindra, I've talked about, so I shall skip that here. And then growth gems, logistics EBITDA margin is up 25 basis points, revenue is up 7%, but offset by the performance on the express side. Hospitality continues to do well. It's a business that has a lot more potential. So the primary thing for the hospitality business is, yes, it's doing well, but we can do a lot more. And that's part of what we will drive. And real estate, good momentum, highest ever residential sales and more importantly, 4x increase in the land that has been acquired for future growth. So what does this mean from a cash standpoint? We started the year with INR 15,000 crores of cash and I'm going to highlight a few key points here and then if -- as you have more questions, we'll go into details. We've generated operating cash of INR 15,000 crores. CapEx was INR 5,000 crores. In addition to that, EV CapEx was INR 3,000 crores. ICDs that we funded to the group companies is a very small amount, but we've repaid INR 3,500 crores of debt, essentially become almost close to zero debt. There's some long-term debt that could not be prepaid and which is why it's there, but that's a very, very small amount now. And after the dividend payout, we are closing at INR 17,600 crores of cash. So very healthy cash balance, continues the focus we've had on capital allocation. The discipline we've had. As I've always said, that shall continue, that shall not go away, and you see that in these numbers here. We have talked about F '22 to F '24 in the past, and we've showed you projections over the past couple of years on this 3-year window. And this is the final look at the 3-year window in terms of where we ended up. Operating cash across auto, farm and services was INR 37,000 crores. And as we promised to you in the past, we are breaking it out across all 3 verticals. So you can see that transparently saying this is what has been happening. Some of you or many of you in the past have said, we don't like the fact that you're using auto and farm cash for things outside auto and farm. So this is a transparent look at the fact that we are not using auto and farm cash for something outside auto and farm. Deployment total is INR 17,500 crores, and you see that across the various aspects, leaving a net cash generation of INR 19,700 crores over this 3-year period. The thing that I want to highlight and I feel the happiest about on this chart is that services has generated INR 7,000 crores of cash. So let's leave aside auto and farm cash not being used for services. Services has generated more cash than auto. It has generated more cash than farm. And that's the reason why we're investing in our growth gems because that's part of what we want to be able to achieve in terms of the cash generation. So it's not just accounting numbers you see this year in pure cash. And you asked for this before, and we had promised we would deliver our forecast for the next 3 years. You do see a significant jump in deployment, which is reflective of the significant jump in the size of the business and our aspirations and our revenue and our revenue growth that we would want. And what you therefore see is a INR 37,000 crore deployment over the next 5 years. And let's look at the details here. For auto, it will take a bulk of that, which is INR 27,000 crores. EV is INR 12,000 crores, but we're not giving up on ICE. ICE is still very important. And ICE is going to continue to be a mainstay for the next few years, and therefore, ICE will continue to get INR 14,000 crores of CapEx in this time period. More importantly, all of the funding required for auto will be self-funded by auto. And which is the reason why we even talked with our partners who funded our electric business, BII has already put in INR 1,200 crores. Temasek has put in INR 300 crores and they will put in their additional INR 900 crores to hit INR 1,200 crores. But beyond that, we had an additional INR 725 crore tranche from BII. So we've talked to them and said, "Hey, we don't really need this. Do you really want to put it in? Let's decide mutually if this makes sense." And over the next 7 months, we'll assess whether it makes sense and it's a small number. So either way, it doesn't matter from our standpoint. But the primary point is that we've got INR 27,000 crores outlined for auto and that cash will be generated within the auto segment alone. For farm, we've got INR 5,000 crores that we outlined right now, again, driving some of the growth in the farm business. It will obviously generate a lot more cash than that, as you've seen in the past. And services, again, we've outlined INR 5,000 crores right now. As Mahindra Finance grows, it will need capital to fund its growth. But beyond that, our growth gems are doing well, and we will put more capital there. Here again, we expect it to generate a lot more cash than the INR 5,000 crore we're going to use. So this, again, will be self-funding. It will not be auto and farm cash coming into services. And none of this includes acquisitions. And I know your question going to be, what are your plans for acquisitions? Our plans for acquisitions are still consistent with what we've done so far, which is where it makes sense and where we feel we can deliver results from there. We will look at acquisitions. We will be very prudent on that. The bar is extremely high and something we are not ruling out, something that we are looking at actively, and we will leverage that as one of the tools for our growth. So I'll end with this slide before inviting Rajesh up. What's important for us is consistent delivery on our commitments. We had committed to 18% ROE. We continue to maintain that. We had committed to a 15% to 20% growth in EPS. At this point, we're at an 84% CAGR on an annualized basis since F '21, which is when we made that commitment. So we are tracking pretty well on this. It does not mean you factor 84% for the next year in terms of growth. Just leaving that as well. But it's essentially something that we feel good about, and we will continue to track that. With that, Rajesh, over to you.

Hi. Good evening, and good morning to people around the world, probably in the U.S. I'm going to quickly run through my slides, so we have enough time for questions. I think you have most of the information by now. So on the automotive business, a quick look at the numbers. You see them here. In the quarter, we grew volumes 14% and the revenue market share was up likewise for the year. We've seen a big upward trajectory in our SUV business, reflecting the success of many of our current new products and current products continuing to do well, that's led to an improvement in the revenue market share over a period of time. The booking number at this point of time stands at 220,000. This is now upgraded or updated to only add the first hour of XUV 3XO bookings, which is 50,000. We are not going to share an hourly update on what the booking number is. It is going up and it will keep going up, but we're not going to give an hourly update on occasions like this now and it's so and so tomorrow morning. But it's a tremendous and positive response to the 3XO. We think there's an opportunity to be clear #1 or #2 in this segment. The size of the SUV market in F '24 was 25 lakhs. We believe the relevant industry in which the 3XO can place between 6 to 9 lakhs per year depending on who you count in. In the 6-lakh target market, we are #5 player. In the 9-lakh target market, we are #6 player with the XUV300. With the 3XO, we believe we have a very, very strong right to win and a very strong proposition. Many of these are -- this is straight out of the presentation on 29th when we launched the product. But today, we hear this back from customers. And I think some of you have been out there, checked our product out. There's also the product on the first floor, if any of you got a chance to see that. And we actually hear customers playing back very, very similar words to what we have put out on the slide on the 29th. We also got very good reviews from media and all the reviews have been very positive and reinforcing this very strong value proposition that allows us to get upgrades and also allows us to create new segment at the higher end. That's led to this 50,000 booking in the first 60 minutes. And very strong momentum, even on weekdays in showrooms as we are talking to our colleagues through last evening, today as well. So we continue to see very, very strong bookings and momentum. I'll play an AV for you, which is kind of the new ad with a little less of features and little -- some people in it. So take a quick look. [Presentation]

As Anish said, on the LCV side, we've continued to see strong growth in market share. The industry has been slow for the last year with a negative growth. We grew through market share gain. The Last Mile Mobility business, we sold over 100,000 vehicles last year. The electric 3-wheelers grew 4x in the last 2 years, and we continue to have a strong market share. There are a lot of questions on what is the impact of competition coming in. Competition is good for the category, we believe. The category penetration is only 11%. This category has the best chance to electrify right now because of a very strong value proposition for customers. We believe the more players that come in, there's a greater opportunity to electrify faster. And that will have some impact on market share downward, but we think it will fuel the pace of growth momentum in the category, which is really what's very, very important. We've launched the Treo Metal Body, which has got also very good response. These are numbers you're familiar with, so I'm just quickly going through them, a very strong profit growth both in the quarter and the year and a very strong margin performance as well. These are -- this is just recapping some of the commitments that we had made seeing the kind of margin that we could get to in what we had called the medium term, and you can see we got to that pretty quickly. This is an update on our commitments. Again, I will do this very quickly because you're familiar with a lot of this. I've spoken about. These are the commitments we had made a couple of years back by when we'll get to -- in 2025. This is what is an update on that. And we think we're doing very well on most of the commitments that we had made for 2025. What next? We're looking at 9 ICE SUVs, 3 of these will be mid-cycle refreshes, 6 will be all new and 7 born electric vehicles over -- by 2030. 7 LCVs, out of which, 2 will be electric. So it's a strong portfolio in the making, as Anish said, reinforcing, again, ICE is very important. We stay very invested in updating our ICE portfolio. As we've said in the past, we won't share details of ICE because it does create confusion in the market and fear of cannibalizing our current portfolio. So we don't share details of what we're doing in the ICE space. But this is just to reconfirm that we are investing very strongly. We said we'll share the capacity plans in this meeting, and that's what we're doing here. We exited March at 49,000 capacity. By end of F '25, we should be at 64,000. The breakup of 64,000 increase, which is the 15,000 number is 5,000 between Thar 5-Door and XUV 3XO and 10,000, which is the first lot of the born electric capacity. The next 64,000 to 72,000 is the additional 8,000 born electric capacity that will come up. And as you can see, this is a 3.5x increase in capacity over where we were in F '20. This is a breakup of the investments, Anish spoke about the INR 27,000 crore number, broken up as SUV ICE, INR 8,500 crores; CVs including trucks and buses and the electric CVs is INR 4,000 crores; Sustenance is INR 1,500 crores; investment in MEAL is INR 12,000 crores and INR 1,000 crores for investment in other subsidiaries. I'm just leaving that for a second. We can come back to this if there are more questions. On the farm side, it was a difficult quarter for the industry. We knew it because of festival season shift. We knew that the quarter is going to be negative, and it was. We had also said we'll correct some stock, which we did which is why you see our market share going down. For those of you who track us closely, it did go back in April to 46%. So we had to make the correction as we ended March. There's some corrections still to be done, but that's very small and we'll smoothen that out, but we did need to do a onetime correction on our dealer stocks. 20 to 30 horsepower segment, September to March, we gained 12.8 share points through the launch of OJA and Target. And that has helped us to gain overall truck market share. Farm revenue, we grew 32% in the year. I think it's -- we had said we hope to do more. But this category, too, has seen pressure from -- given the overall environment amongst agriculture and tractors. So in the context of industry slowdown, we think a 32% number here is good. We are very well set strengthening our position in multiple product categories in the farm machinery segment, and we are looking at, again, a significant growth path in F '25. These are numbers you are familiar with, Anish covered them as well, so I'm passing. The core tractor margin has gone up to 17.7% for the year. But interestingly, when you see the quarter trend in the quarter, the core tractor margin is 17.6%. To clarify core tractor, it includes all tractors sold in India plus all tractors exported from India. It has both. It is not only the domestic sale. It is -- but it doesn't include global tractors like Erkunt. All exports from India of our tractor and domestic sale is covered in this, and that's a 17.6% margin in spite of a significant reduction in volume that you see. So you can see a trend of a very good uptick in tractor margins. Quick update on the commitments. We're doing well and on track on most of these. So what's next? We think many favorable factors for the farm sector as you go into F '25, especially as we get to the second half, favorable monsoons, farmer terms of trade, investments beginning to pick up in agri and rural. Navratra festival shift, some watchouts. But at the moment, on the balance, we think the year will grow at plus 5%. Of course, we'll revisit this once in July. INR 5,000 crores investment. Anish spoke about this. This is the breakup, INR 2,800 crores for products, INR 700 crores for capacity. We are providing INR 600 crores for TREM-V in this 3-year cash flow, which may not be needed because we do expect that the regulation implementation may move further. We're fully ready with product, but the execution of that, we provided INR 600 crores in case we need to be ready with TREM-V. So summary on the auto side, we did INR 76,000 crores top line, PBIT of INR 6,000 crores, a strong margin improvement, good performance on market share, 23 product launches by 2030 and a INR 27,000 crores CapEx plus investment plan. On the farm side, again, you see the numbers and a INR 5,000 crore investment plan. So we believe that we have now a strong execution track record, a strong brand and momentum that we've built in, and we'll have a very good product portfolio to fully leverage that as we go into the next 3-year cycle. Thank you. Manoj, please?

Good afternoon, everyone. I think I'll do a very quick wrap of what the numbers look like and throw it open for questions because I think all of you must be very eager to do that. So quickly at Q4, 12% growth led by auto. It was 20% growth in auto and then farm was flattish. If I look at PAT, it's a 32% growth in terms of stand-alone numbers for Q4. If I look at consolidated overall 9% growth. I think there have been multiple growth areas across multiple businesses. But of course, auto is a lead. From a PAT perspective, if you look at it, I think auto has shown a significant growth in PAT, but Tech M is a decline, and I think Anish referred to that in his slides. If I look at overall full year, at 17% and a 48% and that was also explained by Anish in his slide. And if I look at the consolidated number, it's a 25% and I'll just flip to the next slide. So if you look at it, INR 2,800 crores absolute increase in auto PAT, and a INR 709 crores decrease in Tech M PAT. So I think -- and if I look at farm despite all the challenges, I think an absolute increase of INR 86 crores in terms of PAT, when we go from F '23 to F '24. And all the other services, there are puts and takes, but a positive number of about INR 62 crores. So that's the quick summary. With that, I'll throw it open for questions, Amar.

We'll kick off with Kapil from Nomura, please.

Congratulations to the team for a successful launch of 3XO. I think very well executed. Probably one of the best facelifts that I have seen in a long time. So congrats. My question is on capacity. We are going up from 49,000 to, I think, 64,000 and 72,000 per month. If we look at the order book, despite this booking number of 50,000, we have not really seen much growth. So in that context, last quarter also, the order book was around the same levels. So if you could just help us understand in this context, what's going on in the market because this capacity is coming up. Also, what we are noticing is market growth has dropped significantly to low single digits and electric vehicle growth is also quite low, right? So a lot of capacity in the second half is coming in electric vehicles. So what are your thoughts on that? And also if you could split up the CapEx that you've given and how much -- on the farm side, you have given a breakdown of new product and capacity. On the auto side, if you could also share that?

Kapil, thanks. So let me try and take the demand side question, if I could call it that. So when you look at quarter 4 growth, we had kind of, in a way, indicated that that's going to be muted because we were transitioning out of 300 into 3XO. And you did see the effect of that through this quarter because we were basically into liquidating whatever we had of 300. And though we had started producing 3XO, so we were not wanting to sell it before the launch date. So you clearly had a product which was doing 6,000 a month literally out of sale for a large part of the quarter. So we're not -- we were expecting these numbers given that we were transitioning to this. There are ways in which you can optimize that, but we didn't want an optimization to manage quarter numbers to come in the way of making a very good 3XO launch. And we know that any time you try to do this over optimization, you leave inventory of the old product in the channel then there is a pressure on the dealer to push the old product while the new is coming in. We wanted to just absolutely clean the channel, and we did that. So there was actually no 300 in the channel as we went in with 3XO. Everybody is clear. The salesmen are clear what they're doing. So I think quarter 4 has got affected. The growth has got affected by that. On the XUV700, we did indicate last time that we will move to creating a more accessible price point. We are in the process of doing that. You will see some of that play out over the next 15, 20 days. So there's a very specific plan for that, that's going to play out. So these are kind of the 2 key initiatives that we are taking right now. We did go through a process of cleaning up the 700 order book which is why you see the cancelation rate go up. And I say clean up the book, it is go back to customers who have a booking, ask them whether they are still really intend to buy. So in a way, we force conversation on do you really want to buy and that's now reflected in the order book numbers that you see here. It's a reflection of us going back to customers who may have booked whatever 10, 12, 15 months back, still have an order in the system. And this is reconfirming with them. Those who are kind of tentative not wanting to buy now, bought something else, we've kind of removed them from the booking list. So you see a much more updated booking list. We thought it was important too that we did that over the last 2, 3 months. So I think we must separate out what we intend to sell from capacity. Capacity should -- we have learned out of this, and the cost of losing sales because you don't have capacity is much lesser than having some capacity which is unused because given that we don't have to do greenfield plants, the incremental cost of creating capacity is not that much for us. So it makes sense for us to have capacity so that we are able to leverage opportunity -- every opportunity that comes up. And that's why even though we have 49,000, it doesn't mean that we will have exactly 40,000, 49,000 or 50,000, 55,000 sale every month. What we've said is we are very confident on mid- to high-teen growth rate in F '25. We stay with that. We've said that on an assumption of where our current product is. Our current products are on the assumption that time that 3XO will turn out to be a really good product, which it hopefully is playing out that way. And the launch of the new Thar a few months later, which we think will also be received extremely well. So with all of that, we think that that's the right mix of having the right amount of capacity with a reasonably aggressive growth plan, the mid- to high teens will be much faster than the industry growth. Industry growth you are seeing is muted. We think -- we always believe that in this industry, good launches -- success of good launches are agnostic to state of market at any point of time. When you have a good automotive launch, you create demand irrespective of what's happening to the industry. And in a way, 3XO is playing that story out. There is so much enthusiasm about wanting to buy that even though that segment at this moment is a little muted, but there is so much excitement about it. On the question of EV capacity, we stay -- our storyline has been that we believe we should create a very strong lifestyle proposition to customers. It's not about saying that we are here to electrify, it's about we are here to create a really exciting SUV portfolio, which is going to be a standout design, a very good level of tech, an absolute fun to drive. We are going to showcase some of that on the 14th of June for those of you who come in, you can't drive it, but you can definitely see it. And they're really coming out. They've really come out very well. So we treat that as a capacity that we have to create anyway for the future. Did I cover everything, Kapil?

Just CapEx, if you could give with the new product...

Yes. The split on capacity, the reason we were thinking whether we should call that out separately. The reason it becomes difficult to call it out is a lot of our capacity is fungible between EV and ICE because they're primarily in Chakan. And then it is becoming confusing on how much capacity we attribute to each. So we made some assumption and put some of the capacity into ICE and some of the capacity into EV. But the overall investment in capacities is not very high, and we didn't feel them in proportion to the total. So we didn't feel the need to call it out separately.

I was looking for basically how much is the R&D out of this total budget if that's possible to give.

Rajeev, can we say like roughly, I think more than 70%, 80% is product. Product development.

[indiscernible]

No, he is saying product development versus capacity. I think it's 80-odd percent will be product 20% will be -- just a very ballpark number.

Kapil, just on your point on bookings. Ideally, we want a lower number of bookings because if you have a month or 2 months of bookings, then you can service the customer faster. So one can argue whether 80,000, 100,000, 1,20,000 is a good booking number. When we are at a 2 lakh and 3 lakh range, it's not a great customer experience. So now that we're putting capacity in place, as Rajesh said, it's better for us to have some excess capacity rather than losing volume because we can't deliver fast enough. So I think we're reaching that phase now. So I'd probably say I'm still uncomfortable with 2,20,000 that we see there. But as we put the capacity and as we're increasing it this year, we start bringing that number down.

Yes. No, I agree. Just one question is on emissions. If you could talk about the road map for M&M in the medium-term, 2027 CAFE norms are also coming. Where are you currently? How do you -- how are you planning to address that given the higher diesel mix that we have? Are you looking at other different technology options? How well are you prepared with CNG, hybrids, all of those kind of options? So just more medium term kind of thing.

To be clear, you're looking at our preparedness for CAFE-III? Is that what you have in mind?

That's right. And where are you today as well, we don't know. So if you could.

Yes. So in F '24, we clearly met the target with the volumes of 400 that we sold and the rest of the mix that we had. So we have full compliance on the CAFE-II norms in F '24. We expect that to happen with the portfolio of electric that we have in F '25 as well. So that's clear. The CAFE-III norms are still under discussion with BEE and SIAM and so on. As we understand it, the mindset right now is to create CAFE norms, which encourage companies to have a very high portfolio of electric. It's being designed in a way that you discourage, literally discourage nonelectric. That's the way this is going. A little counterintuitive as we may sound and I was having a chat with Velu on this, his understanding is actually diesel for us is more favorable from complying with CAFE norms than gasoline. So we don't see a worry between diesel and gasoline. But with the plans we have for electric by the time we get to the CAFE-III, which I think will be '27, '28, we should be very comfortable with our EV plan because we are very invested in EV. The direction of the conversation right now is move OEMs, push them to have EV because that's the only way to meet the CAFE norms.

What is the bare minimum EV penetration that is required in your portfolio to meet this?

I think it's a hard number to calculate right now because it depends on what the rest of your mix is, but our guess is 15% to 25%.

15% to 25%. Okay. That's -- and that would, I would...

These are not finalized, Kapil. This is in very early stages of discussion.

But do you think this is going to be similar across all OEMs or it is specific to you?

The percentage?

Yes.

The percentage will vary depending on how much CNG you have, but it's not going to vary too much based on the diesel-gasoline mix.

Binay?

Congratulations for a stellar year. Globally, the trend that we are now seeing in auto is slowdown in electric, pickup in hybrid. In fact, in India, also, we've started to see in the last few months slowdown in the EV side. So how are you looking at other powertrains in your portfolio? Any change in view on scope of hybrid or CNG? The second question is in the presentation, I noticed that you talked about X of cell localization CapEx in one of the slides. So is that something that you are looking at? And the third one is on the automotive margin, stellar performance. You guided for 300 basis points you've done much better. When we look ahead, do you think like we understand -- is it fair to assume that the mix is going to get weaker in the auto business, so that's an offsetting factor? Because all the other factors look pretty favorable in FY '25, volumes, leverage playing out. So these 3.

Okay. So these 3 questions. I just want to make sure I got them right. The first one is about how we think about hybrids and others.

Mix of powertrains.

The second is on cell localization. And the third is on auto margin and the mix effect. I've not understand the mix effect, but I'll come to clarifying what you mean by that. So on hybrids, and I think you would have read recently that we knew it was headed this way, but today, it's been confirmed that the Finance Minister said that there's no GST reduction going to be taken on board for hybrids. It's not surprising to us given that that's been a very constant imperative of this government that we have to drive EV penetration in India, and they're doing everything to enable the category to move towards that. I think the current -- a lot of people are tending to compare India with the rest of the world. I don't think it's the right thing to do at the moment firstly, because we are -- our EV penetration is 2%. The others are reaching some kind of a saturation after having reached 15%, 20%, 25%. The other conversation and -- one of my colleagues was out at an investor meet in another country. And they were comparing countries like China, how charging infrastructure has come up. But India is very different, right? India, we do build, do build, do build, do build, right? It's -- we don't do anything which is 10 years ahead of when it's needed. So as sales pick up, charging infrastructure will come. As we've been saying repeatedly, our belief is what the EV market needs in India is a really wow! product. People buy wow! products. And very often, we share this with all our channel partners and dealers as well that look at what happened with Thar, I mean there's no rational reason to buy a Thar. It's just a very emotional wow! purchase and no one would have thought that we are doing -- we did our highest, it's now almost 3.5, 4 years since we launched it, and we did our highest sale of Thar 3-Door last month, which was more than 6,000. So we do believe that when you have the right proposition, people are going to buy it, and that's what we think will happen with the born electric. So we are really, in our mind, very clear that what we are setting out to do is stay consistent with what our brand stands for, what we are offering, exciting, very good products. Electric has the benefit of a wow! drive experience. I mean just -- it's just an amazing driving experience apart from the quietness, the acceleration, all of that. So it's just a totally different experience. And as customers experience that, I'm sure they'll move to the right products. I think today's electric offerings are very functional, including our offering in the market. They are not products which will wow! the customer. We do believe with the wow! products, that's the right path. So sorry for the long answer, but we are staying committed on our electric path. And as Anish said in the earlier meeting, we will -- it's not like we are ruling out hybrids. For us, hybrid is an optionality twice. So basically, just as diesel was to gasoline because diesel was more fuel efficient and when diesel prices were lesser than gasoline, customers were to run a lot of their vehicle every day, prefer to buy a diesel vehicle going back in time. The same thing is going to happen with hybrid today. Today, as we analyze our portfolio of customers, very different than what we had 5 years back, 5, 7 years back. Customers bought a Mahindra because they wanted fuel efficiency. Today, that's amongst the least important buying reasons amongst our portfolio of customers. So we don't see hybrid wanting customers actively cannibalize us, except in some very few segments. So at an appropriate time, depending on how the category is moving, we will look at hybrid wherever we need to show that. Anish, will you add anything for it?

Yes. I'd just add that governments around the world for the last 20 years haven't incentivized hybrid because hybrid is more expensive because you got 2 powertrains. Emissions is really not that much better than ICE. Yes, there's fuel efficiency that's better than ICE, but it still uses a fair bit of fuel. As compared to EV, where you've got zero emissions, where you've got zero fuel use and which is why governments are incentivizing EV because they want to have the industry transition to EV. Also, the incentives will come down over time as costs of battery will come down over time. So EV is the end-term game. Hybrids can be something that's in between. And if the consumer wants more hybrid, then we will be ready for that. We're also looking at hybrid technologies that may be closer to a pure EV. And to the extent those technologies develop further, then we'll move faster on that play. So we're keeping our eyes open for that. But we're not surprised by what we saw recently because there isn't a logic to incentivize hybrid as compared to a very strong logic to incentivize EV.

Yes. On cell localization, yes, we have said we will evaluate cell localization. We continue to do it. We won't do it alone. We would do it in a partnership and there could be multiple constructs to that partnership but it is something that we are very actively looking at. It certainly won't be a full investment by us. It will be with multiple sets of strategic or financial investment options. Anish, you want to add? On the auto margin, can you just clarify what you meant by mix?

That in general, if you look at on the XUV side, 700, we are talking about lower trims. XUV 3XO is coming in, which is also lower ASP. So which is why when I look at FY '25, it's very clear on the positive side of drivers, which is volume leverage, is going to be quite sizable for you. Pricing is holding quite well in your segments. So there is a headwind, if I think that maybe the mix is looking weaker. So just happy to hear your comments on that.

Yes. So we are worried giving a definitive guidance except at one time we did. But I think what you have to go with is our track record to deliver margins, and we've consistently been focused on getting margins. What we do try to do is balance growth and margin all the time. We don't want to get into a margin-chasing mindset, which affects our ability to grow and stay strong in the market. So we do this balancing. As we are looking at mid- to high-teen growth, definitely, there will be operating leverage that will come in. Hopefully, commodities will stay reasonably benign as it looks at the moment. Of course, this -- we can't predict which way that goes. So overall, we would continue like what we've done in the past to make sure we get important or interesting price points in place so that we get growth but also keep a very close watch on costs and the mix, like you said, I just wanted to be sure you're talking about the model mix and the variant mix so that we get the right growth in margins as all of you want and we want.

I'll just add to that. In general, the mix itself may not have a big impact with the 3XO coming in because we should be able to get margins on that. But the principle we've talked about in the past will stay, which is for every new launch, there will be lower margins. So the 3XO also at the start will have lower margins than what it will go up. The Thar 5-Door will come in, will have the same thing. The electric vehicles coming in will have the same thing. And also as you think about margins for electric, just to remind that Rajesh reminded me in the previous meeting as well, is that the percentage for electric will be lower because GST is far lower. So while the same -- if we could -- let's say you have the same margin on an ICE vehicle and an electric vehicle, the percentage margin will be lower and likely because the GST is lower. So that's something we'll just have to ensure that's factored into sort of calculations that you have.

And we'll call it out separately.

And we show it separately for both, ICE and electric, so that would be easier from that perspective.

And just lastly, fair to assume that you will qualify for PLI when you launch the next leg of electric launches?

Let's say, it is fair to assume that we are doing everything to qualify for PLI.

That is the target, and that's something that...

I'll just take a couple of questions online because there's a whole list, and then we'll come back. Raghu, we can start with you. Anish, these are two questions for you, related, so I thought I'll club them. One is great performance means dividend expectations go up. Question is, why does 30%? And second, does this mean EPS guidance goes up?

As I said earlier, don't factor 84% in for next year's EPS guidance. Why 30%? We felt that, that was a good number overall in terms of growth and something that reflects our performance. We do feel that there are exciting growth opportunities for us, which is why we are still being very measured and focused from a capital allocation standpoint, but at the same time, keeping the cash balance we have for potential growth opportunities as we see them. And over time, we'll continue giving back more. But for us, it's important to be consistent, and it's important to be steady in terms of how we grow. Does 30% mean our EPS guidance goes up? At this time, we will stay with 15% to 20% EPS growth and 18% ROE. So that's something -- over time, if we continue to perform much better, we may revise that. But at this time, we will continue to stay with that.

Raghu, maybe we'll start with you and then come back and then Gunjan after that. Please go ahead.

Congrats on delivering on so many parameters. Sir, firstly, on the tractor side, a 5% growth expectation for FY '25, how do you see growth panning out across regions? The general expectation is North, Central and West should do better compared to South. And also, what do you think can be the upside trigger to the growth estimate you have given? Continuing on tractor, if you can also talk about whether TREM-V would come in April '26? If that is happening, can FY '26 growth be substantially strong? Second question is on 3XO. Congrats on the strong bookings. So in terms of the bookings, if you can provide some color, your initial thoughts how the top end versus how the order book is divided between automatic, normal, top end, low end and how you're seeing whether that attractive initial pricing attracted or that ADAS 2 attracted, what attracted people to the product?

I've been in board meetings since yesterday, so I only know 50,000. I'm joking. I'll try and answer it as much as possible. So on the tractor growth, the -- I think the obvious way to look at it is South will grow slower than the rest of the country. My, at least so to say, discussion point on this with our team is why because they're on such a low base. Many of the Southern states have seen like Telangana, Andhra, Karnataka, between minus 25% and minus 35% in F '24. So given that they're on a low base, I think if you see good rains there, actually, that, to your second point could be the upside because why should we assume that South will continue on a negative growth given that they're on such a low base? So I think that's to me the key story that has to play out. The 3 regions will get that you spoke about. East, I'm not so sure because there is a little -- the initial forecast on monsoon on East are not that great, and there's a possibility of either too little or too heavy rain as I gather from the initial forecast. So East, I'm not sure, but I think North and West will be pretty decent including Maharashtra, which also has a very low base in F '24. So that could be one upside as we think about the F '25 number, which is some of these regions move into a growth trend. I think the positive farmer terms of trade is a potential upside, and we shouldn't discount that. It makes a lot of difference to the farmer. The critical thing is, as monsoons come in, how long does the new -- it take for new cash to come back to farmer? And that's why a lot of people are saying that we should be very optimistic about the second half whereas the quarter 1 right now is a little disturbed because of election, cash not yet -- will not come back so quickly right now, given they're coming off a negative last 4, 5 months of Rabi output and so on. So, there is a lot of optimism about how second half can bounce back very strongly. So it's too early to call, but April was better than what we thought. And hopefully, we will see a better than 5% growth as we go along, but it's too early to call as we always say. So right now, I think 5% will be a good starting point. But hopefully, there would be more upside triggers to that than what we are taking on board. TREM-V, Rajat -- Hemant, it's '27 right now.

'26.

It's '26. That's the current level of postponement. I mean, our sense is very unlikely to happen in 2026, very, very unlikely. So of course, if it were to happen in '26, there will be a huge upswing in 2025 volumes, but I would not count on the 2026 implementation date. Certainly, not the way it's envisaged with all models going into TREM-V at the same time in all horsepower. So -- but you're right that if that were to happen, of course, F '25 will see a very big up. On the 3XO, let me try and give you a little more philosophical answer than a numeric answer. So the way we've constructed the pricing is to actually think of attracting many different types of target segments. And if you went through a launch presentation, we took a lot of effort to kind of define, I think, we did 6 or 5 segments finally. And each segment has a -- there's a logic and a strategy built in and we balanced our portfolio almost equally. So we do want some variants to help migrate from down to up, which is outside the 5 or 6 players that we spoke about. So there is something in at the entry-level as an upgrader from either a hatch or no car. So the one data that we have, not out of the 50,000, but the first lot of inquiries and test drives that were going on is 25%, no vehicles, no vehicle ownership out of the first lot of people, 25% hatch. So it's very different and only 15% Mahindra ownership out of the first lot of customers coming in. So we are attracting a very different audience. But we equally have a lot of excitement at the top and even anecdotally, as you talk to people, Anish wants to book 2 for himself. So, he's not in that 50,000 yet. But there are many such people who want to buy either for spouses or older parents where you want to give them everything, but they don't want a bigger -- they just don't want the benefit of size. And a good takeaway is that the words customers are using are either Mini 700 or Baby 700. These are the kind of words we are hearing back from customers. We'll not use this anywhere in our communication. But customers as they're experiencing us are playing this back. So you do have the AX7, AX7L excitement as well because that's a very, very different customer. So obviously, we'll never get the model mix, absolutely right, and we'll kind of fine-tune as we go along. But we've worked on a balance right now. I think early numbers are gasoline is 65%, 70% and diesel is about 30%. I don't know the automatic. You have? I don't have that number yet. So this is the only one I have right now. 20? Automatic about 20. So that -- they are very early numbers. So that's all I have.

Good to hear you're attracting newer customers.

Sorry.

Good to hear you're attracting newer customers.

Yes, that is -- that's how we've constructed the price. So that's why you have such a wide price band and you have such a complex variant mix, which is literally kind of saying, we need a very strong diesel portfolio because the Mahindra loyalist in Tier 2, Tier 3 cities will still stay with diesel. So that is different from the category because that's our -- that's still Mahindra's stronghold and 300 has reasonable amount of diesel customers in Tier 2, Tier 3 towns. We need to protect that. So we've kind of thought of this from multiple directions, but we need a strong gasoline automatic for metros. So we've kind of thought of trying to cover multiple segments using this very complicated brand strategy.

Nitin? All right. Please?

Nitin from Axis Mutual Fund. Congratulations to the team. Though most questions have been answered on autos and the farm. Just one question to you, Anish. Last year, when we met here, you did investment in RBL Bank. It's now more than a year. Any further plans or hopefully, that's the thing but -- thank you for not going ahead after that in the whole year. So I just want your take on that.

I was waiting to see how much time would it be before that came up again. But see, as we said at that time, that was essentially a treasury investment with potentially a strategic option that may be exercised 7 to 10 years later. So there's nothing else on the table from an RBL perspective at all. It's something that we will bring up 7 years later and see whether a strategic option makes sense or not. And if not from a treasury standpoint, we've got good returns on it. And we continue to get good returns is what we believe based on our assessment of the banking industry. So it's something that maybe at the 7-year mark, I can answer a little more clearly at that point.

Great to hear that. Second, on the trucks business, any thoughts now to sell it off or you think you can now turn it around much faster? Any thought process there on the truck side?

So it's actually turned around well, and it's moving well. I think we can do a lot more in that business, hopefully, give much stronger competition to some of the incumbents. We're still small. So we'll take some time to be able to get there. We're also manufacturing for defense armored vehicles and ALSVs. And there's a good synergy between that and our defense manufacturing also. So from that perspective, that should help both the trucks business as well as the defense business as we look at getting more scale with that. And we have just recently put those businesses under the same leader as well. So that we can start leveraging some of the synergies going forward. So we see this as a very good, very strong business. We see this as one that we can grow. It had been one in what we had put back there in Category A in terms of businesses. We feel that will grow and will do well. And it's one that I think is on a solid path now. Rajesh, anything you want to add?

Yes. We're taking this step at a time. And if I was to get more micro about this out of the entire dealer network, right now we are focused on just 40, 50 key towns or key dealerships. We have -- so we're taking a step at a time. So we say 40 dealers, okay, what's the market share there? What do we need to do? Out of these 40 dealers, 12 of them are more than 10% market share. So we are basically building share town by town at a time instead of kind of saying, okay, go across the country. Of course, there are dealers. It's not like we don't have dealers in other towns, but management focus is going into a very, very focused execution on ground taking dealers step by step, building positivity amongst the rest of the dealers by demonstrating success. So there's a very calibrated execution plan on how to ramp this up. And it -- we are not in a hurry. As Anish said, we -- a lot of the financial parameters have turned around. We brought the breakeven in this business down very dramatically. So we will get a lot of operating leverage as volumes go up.

Gunjan, I'll come to you. If I can just take one online as well and then to you. It's a tough question, but it's a fair question to ask, so I'm going to pass it on to you, Anish. Mahindra Finance, every time it feels like things are going well, something comes up. Repeated internal control lapses is how somebody categorized. Chirag from White Pine. Just what's your view?

So let's look at what happened here. This was a collusion with 20-plus people, dealers included, a lot of documents forged, collection agents involved in it as well. And as we looked at, as I said earlier, the entire portfolio had to go loan by loan to show that the controls were strong across the country and their team actually came out fairly well -- not fairly well, really well saying that there is no issue across the country. And they literally went through 10 lakh customers with the auditors and showed proof for every single of those 10 lakh customers in literally 3 to 5 days. So that was the kind of effort that went into it. A lot more controls have been strengthened over the last few years. In fact, this also was essentially picked up by one of the folks on the team that looked at data and said, why are Nissan's sales going up so much in Mizoram. And that seems a little strange and that's how the team picked it up and got into it. So while we have put in stronger controls for collusion, this is not something I would take as indicative of controls in Mahindra Finance. Overall, I think it's a very strong control mechanism. We had even reported a cyber incident where Mahindra Finance recovered literally without any losses. And the entire recovery was done in a 2-day period. While this has happened to others in the industry, many others have been done for a long period of time for recovering. So everything that's there has been set up well. There are various steps being taken to strengthen it even more because what we do realize in the financial services industry is that being good is not good enough. We've got to be outstanding. And that's part of what we are driving the business to do now. But therefore, as I said earlier, let them not foreshadow the fact that the business has delivered very well. And despite the one fraud issue has really been able to bring losses down, has been able to grow assets under management and has been able to demonstrate a very strong control system. And that's something we will just have to be able to show over time that we've got a lot more stability into this business than was there in the past. I think whatever was there about the past is accurate, and we had a fair amount of volatility there. But a lot of that volatility has been cleaned out now.

Thank you, Anish. Gunjan, please go ahead.