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

Hi. Good evening everyone. And for those joining online, good afternoon, good morning, depending on where you are. Pleasure having you here today to discuss our results. As you've seen a quarter marked by various uncertainties across the world, translating into a number of challenges in India. But despite that, happy to say that our team has actually delivered some very strong results and across multiple businesses. So the key messages for this quarter are consolidated profit up 34%, ROE at 23%. Auto and Farm, resilience in a strong quarter. despite commodity price impact of 400 to 500 basis points, auto profits up 21%, Farm up 15%. Rajesh will talk more about the margins as well, some impact on that, but not as much as could have been the case, a lot of good actions taken by the team. Mahindra Finance and Tech Mahindra on a very strong journey now. We've been talking about both saying that they have been turning around. They are on a good track. What you can see from results is we can show proof around the turnaround now. Mahindra Finance has had 2 or 3 very good quarters. This time, profits up 78% and driven by a lot of things that we wanted to have in place, especially around asset quality, a lot of work done on technology and data, and we're starting to see results being delivered. Tech Mahindra, up 28%. Again, a very strong quarter on track for all the commitments that the business has made. And our growht gems. -- we've been talking about them. They are starting to deliver meaningful results, profits up 3x for growth gems. So as we look at all of these businesses together, we've got multiple growth engines delivering value in tough times. As we look at the overall results, revenue up 28%, PAT is up 34%. And the key drivers, the summary of a few points I said earlier, growth gems driven by real estate, Accelo and Logistics, Mahindra Finance driven by NIMs driven by asset quality and growth. The growth part is new. We talked about pivoting to growth last quarter, and that pivot to growth is starting to drive asset under management being higher as well as maintaining GS3 at a reasonable level. Tech Mahindra, driven by margin expansion, EBIT margins up to 14.4% and the promise has been to get to 15% by the end of this fiscal year, on track for that. Auto volumes offset by commodity prices, farm volume again, offset by commodities in Turkey. And investments, we had a gain on sale from CIE that have contributed to investments. So overall, as we look across everything we do, very, very strong numbers. Let's look at each business and this time, we've added an element of future growth drivers. So not just talking about what's happened for performance, but also what are we seeing for this business going forward. And as we look at auto, while Rajesh will cover the detail, the key highlights are SUV volume up 15% despite some challenges from a production standpoint. Penetration for electric is at 12% now, and that's a fairly significant number on a good track there. Inflation, I talked about. But more exciting is the future growth drivers. The new Q platform will start delivering models fairly soon, and we will have a number of new models coming out from there. That gives us a much stronger foothold into a segment we really haven't played in, in a big way, accelerating EV volume growth. And for that, we will need more capacity because, as you know, we are stat for capacity right now. And there is a plan to double capacity from where we stand today. And Rajesh will walk through details of what that means when in terms of specific questions that you may have. So I'm fairly hopeful we can answer all your specific questions on what capacity comes on board at what point in time over the next few years. Farm, not just domestic volume, but exports up 15% as well. Again, commodity inflation, slightly lower impact here. Erkunt foundry problem that we had, we've now solved for and exited. And there, the future growth drivers are around product launches, accelerating exports further. And international, we still have a certain set of weak spots. So fixing those that gets Farm overall on a much better trajectory. Mahindra Finance, the growth pivot is very clear now. So AUM and disbursement growth is what you see as driving performance in Q1, along with the credit discipline and NIM expansion. As we look forward, continuing on the same path that we've been talking about, technology and data fixed, asset quality in good place, need to continue maintaining that. Diversification has started, need to accelerate diversification into mortgage and SME and add more from a fee-based income standpoint. So that's going to build a very strong, stable business with good returns and something that will add significant value as we go forward. So that's the path that Mahindra Finance is on at this point. Tech Mahindra, performance driven by large deal wins, by margin expansion and free cash flow as a result is up 94%. Continued focus on large deals. Geographically, we are diversifying and looking at reducing the margin gap, we will come out with the next phase for Tech Mahindra as we close this phase that we talked about, which is by end of F '27, we get to 15% EBIT margin, and then we talk about the next phase as we go from there. But the one thing I would say for these businesses as well as for the next year, I'm going to talk about an underlying theme is very strong execution across. That's one underlying theme that we've got, and that's what's being able to deliver good results. Let's talk about some of the growth gems. Real estate this quarter has added INR 5,600 crores of GDV, up 60%. Presales number, INR 925 crores, up 2x. A number of OCs were delivered ahead of schedule, not something that happens very often, and therefore, strong execution here again. As we look at the future, GDV is up at INR 50,000 crores now from INR 8,000 crores only 3 years ago. This is the fuel for future growth, and that has been acquired already. So the future growth is going to be driven by what we already have in place. This includes multiple large projects that will be multiuse, INR 5,000 crores to INR 10,000 crores to INR 12,000 crores projects, and that also gives us certainty as we look into the horizon. And we're looking at expanding our industrial portfolio. So we're going to start seeing Life spaces really move to the next gear and start accelerating. Logistics has gone from reverse gear to a positive gear now. Logistics was a business that wasn't doing very well. We had talked about it. Execution was poor. And this has been turned around very well by the management team there with Hemant coming in as CEO. There's been a huge impact, huge focus on operational excellence. And you see the results here for this quarter at the M&M level, it's a INR 14 crore positive profit. At the business level, it's a INR 25 crore positive profit. And this is the highest ever quarterly profit for this business coming out of a turnaround, not just to the turnaround, obviously, but even before that. I usually don't like highest ever because I expect every business to be highest ever every quarter. So which is why we say why use this term. But in this case, it's worth using because it's a business coming out of turnaround, and therefore, we wanted to portray that. Future growth drivers, growing logistics in India, e-commerce, Qcom penetration is going to be much higher. Express business is turning around well. That's a drag even today, but that's a drag that we hope to eliminate and have it start contributing. And then very strong operational efficiencies that the business is driving at this point. So logistics is now coming back into a territory that will start really creating a lot of value, which is the path we wanted when we changed management there and brought the business to a much different trajectory. Truck and Bus, you saw the combination yesterday of SML and our Truck and Bus division. And this only enhances the competitiveness. It creates more synergies for us. It allows us to do a lot of things in a business that is double its size now. And it continues a strong trajectory we've seen in truck and bus from 3 or 4 years ago. I remember questions from 3 or 4 years ago, which is why do we have this business? And I remember acknowledging saying, look, you're probably right, let's decide whether we want this business or not. Let's see if the business can execute. If they cannot, we will exit, but the business executed really well. And as we now brought SML on board, we feel even more confident that we can create very meaningful value in this business going forward, and that's what you are seeing. The combination also very positive from an SML standpoint, very positive from an M&M standpoint as well because it is going to be accretive and the synergies that we get will add to it even further. So from that perspective, we're looking at this as a big step forward. Aerostructures, we've talked about earlier, we're sharing some numbers now. $1.2 billion of cumulated contract wins, half of them in the last year alone at $600 million. business that has continued deal wins, has a growing presence in what we call the shell and skin panel and accelerating industrialization. The key to this business is very high quality. It's been recognized as among the top quality players. And therefore, OEMs are giving this a lot more business and want to continue down that path. This is a business where we will move up the aero value chain as a result of the quality. We've got 2 large deals with Airbus recently, where we're the single source globally for the fuselage for 2 helicopters, which is a very, very big deal. And that, again, is a testament to the quality of this business can drive. And this is a business we will look at making a potential acquisition globally based on the strength of this business and what the OEM partner customers that we have want us to do. And it's going to be something that we will look at them to underwrite as we go forward in terms of making sure that this business can give us the returns that we would want. So these are some of the businesses that we have, again, driven by strong execution, but more than that now potential that is being realized. So we started to see some of that potential in numbers, which is where we want to be. Let's come back to AI. We spoke about it for the first time last quarter, though we've been doing work on this for a while. And you remember this page from last quarter, our aspiration is to be a tech leader in every industry. In some industries, we can say we are there. In some industries, we need more work. We talked about deploy, transform and invent with 4 impact areas: quality, experience, reach and efficiency with real outcomes for revenue, cost and customer satisfaction. We also talked about transform. And for each of these 4 areas, what are businesses like auto and farm doing and finance. And we gave a few high-level view in terms of here are kinds of things that we're working on. For this quarter, we now want to go deeper and give you specifics about some of those examples. We're not going to talk about all the transform projects, but we picked 4 in auto and 4 in finance. And here are some specifics. Paint.ai, this is making a significant impact on the paint shop in terms of, one, creating a better vehicle that looks nicer in terms of reducing the paint that's used and helping us reduce the rework required as well, which effectively is more capacity. Service.ai for auto, 2,600 workshop assistants are using AI today to help make it easier for the customer, give them faster solutions, be able to reduce the turnaround time in the workshop and therefore, again, create more capacity in the workshop. Reach.ai, we've had 91,000 test drives done entirely by AI or getting customers to the test drive. AI is not doing the test sizes yet. We'll get there at some point in time. But we've got 91 customers to come -- 91,000 customers to come for a test drive, leveraging the AI communication that the customer -- that has been done with the customer. And this is business we would not have got otherwise. So this is direct addition to revenue as a result of that. Simulation in the fun world of product development. This is one specific example where there's a lot of simulations done to look at drag coefficiently. It's something that really becomes the centerpiece for product development in many ways. Each simulation would typically take an average of 10 hours. With AI, we can do that in 2 minutes. And think about the speed of product development as a result. Our goal is to cut down the product development time line. And this is one example. There are many others that the team is working on to be able to do that and to be able to create better products as a result as well. On the finance side, Summarai is our model for loan file processing. 65% of our loan files today are processed by AI, 65%. Service requests, 5 lakh-plus service requests fulfilled through AI, cross-sell 30% lower cost of acquisition through the AI orchestrated channel that we have for cross-sell now. And voice.ai is something we're using in Mahindra Finance and across multiple businesses in multiple solutions around collections, sales and other areas. So here are some real numbers on what we are achieving in some of the projects that we showcased. And as we go through the next few quarters, we'll provide more information around what we're doing on AI on a broader basis as well. This is driven by a very strong foundation. We have 50 forward deployed engineers and AI experts that are working with our businesses. We have 19 proprietary models that we have built for AI for specific applications that are giving us very meaningful results. And these are applications that are built on GPUs we have. So we don't need to pay for tokens for this, which is even better. We don't have to worry about the cost of tokens on these applications. We have 1,900 of our leaders and teams trained in RM.ai Academy and 15 transformation projects that we are driving through AI. These are large-scale transformation projects, a number of other smaller projects as well, along with a group AI Governance Council, Business Governance Council. So a lot of focus on security and governance from an AI standpoint as well. So these are a large number of activities that we are doing in AI with this foundation. And we -- based on various conversations, feel there are multiple areas we are leading in this space, and we continue to be able to drive this and see results from it. That's the most important part. We're seeing meaningful results from AI at this point in time. One other thing I'll mention here is beyond the foundation, AI is really being driven by process owners. And I know some of you have been to our Chakan plant. If you go there again, you will have people on the shop floor tell you about how they're using AI and ideas that they've come up with to use AI as well to create better processes. So this is one area where process owners are the ones that are really driving this transformation, and that's the power of AI, and that's the power of being able to really leverage AI. A chart you're familiar with A number that you're not familiar with is 23%, which is for ROE. And I will stay with my standard approach, which is our target is 18%. So we will go slightly up and above 18%, but 23% is higher than what we expected as well. So we are not resetting expectations. We will stay with 18% as a target there. On growth, we continue to grow faster. We are at 34% growth in EPS at this point in time, so INR 48 EPS and consistent delivery from that perspective. We will share some thoughts on what are the -- some of the factors driving this performance, but I'll hold off on that at this point in time, I'm going to invite Rajesh up to talk about Auto and Farm and then Amar will come on to talk about numbers, and I'll come back to talk about some aspects of performance that we're driving.

Good evening, and good morning to everyone, depending on where you are. I'm going to go a little faster because you would have already picked up some of this from the earlier presentation, so I'll go a little faster. On the farm equipment side, we had an 18% volume growth, a very strong market share. We did lose on a sequential basis, a little bit of share, but -- sorry, compared to last year same quarter, but on a sequential basis, it's a very strong quarter as well. You can see that last year, the 45.2% was an all-time high that we had on market share. Farm Machinery had a very strong robust growth again. its highest quarter. That's a business now which is getting into momentum. And in a way, it connects with what we are seeing as increased level of mechanization in rural India, both on the tractor side and the adoption of farm machines. This is a new chart, and I'll spend a few minutes trying to walk you through it. There are 3 columns literally. So column 1 is what you've been seeing in the past, which is what we call core tractors. Core tractors is basically domestic plus exports of the tractor business. What you're seeing in the middle is international subsidiaries. And what you see on the other side is others. The others are defined below, but mainly, it's the Farm Machinery business, the Powerol business and the Indian subsidiaries like Swaraj Engines. So that's broadly the third column. All of that totals to what we also put out as farm consolidated, right? So these are the 3 columns, which help you understand the margin structure better. So the 19.2% is the core tractor margin. You can see that we've taken a loss in international subs. A reasonably large amount of that is the impairment that we've taken on Erkunt Foundry and one more company. And the third one, as you can see, has seen an improvement in the margin percentage and the growth. So all of that together gets us to 14.2% farm consolidated margin. The 19.2% here is the chart that you've been seeing, which is -- carries over to the column 1 of the previous chart, right? So basically, we are now building on this to give you a disaggregated view of how Farm consolidated breaks up into different subsegments. This is a chart we often show you more to kind of say that the band in which the tractor margins operate is 17% to 19%. There are periods where we do 20. There are periods where we do 17%. We've rarely gone below 17%, except maybe 1 quarter. And that is the ability of the business to manage either the up cycle that may happen for an industry or in spite of a down cycle or commodity cycles up or down. So irrespective of what is happening to these 2 key variables, we are able to manage margins mostly between 17% to 19%. These are the farm consolidated financials. You've already seen them. 9% PBIT growth after impairment, 12% before impairment and a 15% PAT growth after impairment. I'll spend a few minutes on this because I think it's in the mind of quite a few people. The -- what is driving rural in spite of all the fears of El Nino, and we've kind of tried to capture here the positive enablers right now in the rural market. Not to say that there are no negatives, and I'll kind of call that out as I walk through this. Clearly, we're seeing a farm labor shortage. It's not a new phenomena, but it's an accelerating trend. We are seeing that labor is moving to industrial areas as they're getting paid better. There is a lot of labor shortage in industrial areas, specifically with small, medium enterprises. And that's coming out of the movement of farm labor. So as farm labor is earning more, they're seeing greater value in going and working in industrial enterprises, which is what is one of the factors driving mechanization right now. in rural area. So that's point one. Point two is the rabi cash flows have been healthy. There has been an improvement in wheat procurement by about 19%. So that is strengthening the cash flows in the rural economy. The third is the deficit in rainfall was really bad as we were into June. It's come down significantly from then to what is now at a 15% deficit. If rains continue, then we may be at a reasonable level of deficit. Of course, this is different in different parts of the country, and we track that as well to see how that is impacting it. Because the rains have come in, in most parts of the country, our feedback on the ground right now is the sentiment is actually not negative. The data indicates a lot of negativity, if you just look at the rainfall deficit. But because rains have actually come in, the sentiment is not negative. Reservoir levels are 7% below LPA, but have recovered from where they were. There was a much greater deficit, and it is lesser than the same period last year, but it was much worse a few weeks back. Kharif sowing has accelerated significantly after the rains have started over the last 3, 4 weeks. And at the moment, the shortfall over last year is a little over 4%, which is not too bad for this time of the year. The government spending has gone up by 16%. The state governments too are putting in money, and that itself is an enabler for greater cash coming into the rural economy. So overall, we see many factors beyond the negatives that we may be hearing about El Nino, which makes us believe that the sentiment on the ground or the reality on the ground right now is not as bad. Of course, we need to see what happens to rainfall and other factors over the next 2 months. But at the moment, the rural market, and that's been playing out in the volumes that you've seen over the last 3 months and early signs of July as well is reasonably okay. So that's on the farm business. On the Auto business, the SUV volumes grew, we had said mid- to high teens. We had a 15% growth in SUVs in spite of some production issues, especially in April and May and 20% growth in LCV, which also had some production issues. We continue to be revenue #1 market share and a strong growth in market share sequentially on LCVs as well. The -- this is just a chart which kind of shows you that last year, Q1 was an exceptionally high revenue market share. But on a kind of linear line basis, we are by and large, at the same level of 24%, 25%. The electric penetration, Anish spoke about that was 12%, 9% for the industry, which some of you will remember the industry penetration for EV just a few quarters back was 2%, 2.5%. So the 2% has gone to 9%. We were, of course, 0 6 quarters back, which now is for us 12%. And we continue to have a very strong performance on revenue market share. And we've sold 77,000 vehicles cumulative till now. And interestingly, the XEV 9s is the single largest even by volume, selling EV across all passenger vehicles in spite of its price point, which has done very well. LCVs, again, strong performance on volumes and market share. I'll explain the same auto margin chart, taking a column at a time. So the first column is something that you are seeing for the first time. What we are showing you here is auto plus LCV, domestic plus exports, okay? So that's really, in other words, what can be called the core business, which is without EVs. The second column is the EVs, eSUVs, which has 2 components, what happens in Mahindra Electric and the conversion cost that we earn in M&M. So that comes into the second column. The third column of others is listed below, but is mainly trucks and buses and contract manufacturing that we are doing for last mile mobility and some other domestic subsidiaries and international subsidiaries plus the last mile mobility company. So all of that comes in column 3. So if you look at column 1, our margin at a PBIT level is 8.9% and that's what is also represented here is a trend. So it was 10.2%, 10.8% and 8.9%. Now of course, we have lost margin compared to last year, and we can talk more about that in the Q&A. But we believe this is a reasonably good margin performance, which has been on the back of a very high commodity price increase, which we've seen over the last many months, but has got significantly escalated after February. This is a chart we have shown you in the past. So you basically see on the top, Mahindra Electric as a company, contract manufacturing of EVs and end-to-end of EVs. So the 5.3% margin here that you saw is the same as in column 2 of the 3 column chart, okay? So we made INR 288 crores PBIT in the EV business end-to-end, out of which INR 270 crores was in Mahindra Electric Company. Okay, so this is the capacity planning chart. The chart has not changed fundamentally, but I'll just walk you through it. There are some updates. So I'm on the first row, which is the ICE SUV capacity. We had said by September, we'll be at 60,000 per month, which we should be ready with by September, which is the end of first half. We said we'd be operationally ready for 8,000 EVs, which we should be ready by 8,000 EVs -- for 8,000 EVs. Of course, there is an issue of mix because there's product out of the 3, which is doing disproportionately well. But from a capacity readiness, we are ready for 8,000. That takes the total September capacity to 68,000. By the end of the year to the 60,000, we add 10,000, which is the capacity which will flow through into F '28, which is really for the launch of the first of the new IQ platform products. Likewise, the 8,000 becomes 12,000, I'm on the last column, second row. The 8,000 becomes 12,000, which is really adding 4,000 of EV capacity for the new EV, which will get launched in F '28, okay? So 70,000 plus 12,000, you get 82,000. So basically, by end of the year, 64,500 would have moved to 82,000. Then we are adding 10,000 more in Chakan, which will take 82,000 to 92,000. That's for the new Q platform Phase 2. So we would have 92,000 and then we add 20,000 per month which is 250,000 and 250,000 in 2 phases in Nagpur. The first phase of Nagpur should be ready first half of calendar 2029. So that's what you see in the first bullet point there, which is 20,000 and then the second is a few months later, maybe 10, 12 months later. So that's really the 2x capacity increase between now and F '31 in multiple phases, as you see it. We had 11% growth in the trucks and buses volume. Market share was at 7.8%. Market share is much higher for us in quarter 1 for this business because SML has a very strong bus queue and the bus market is really in quarter 1. So we see a much higher market share in quarter 1 than we see as an average for the year. Last mile mobility had a very good quarter, very strong growth. Volume of -- total volume of 42,000, continue to be #1. And most interestingly, the L5 EV penetration now is 40%, which was about 27% same period last year. So significant acceleration in the EV penetration in this segment. The Udo has done very well and is leading to -- is enabling this kind of a volume growth. These are the auto consolidated numbers. So profit PBIT grew by 28% and PAT by 21%. Amar? Thank you.

Thank you, Rajesh. So we've talked a lot about the PAT performance. I'm going to focus a little bit on the revenue performance. Just want to highlight outside of the Auto 32% that you heard and Farm 15%, Mahindra Finance had a very strong revenue quarter as well, and we had growth gems grew 39%. And when you consider what we have been saying that the growth gems are going to help drive the diversification of the group and help drive a lot of the future growth, that 39% far outpaces everything else. And so that momentum should help us tremendously in the years to come. The other thing that I want to highlight in terms of the PAT performance, Rajesh spoke a lot about the inflation. But if you think about it, with a 400, 450 bps pressure in Auto and 300-plus bps pressure in Farm to come out with the 160, 170 bps reduction in Auto is remarkable, happened because the team proactively took actions on pricing and also took a lot of actions on operating costs, right? So that continues. That mentality of kind of being ahead of emerging risk has really helped the business come through this. And as we look towards the future as well, unless commodity prices significantly deteriorate, we expect that Auto should be able to now get better from here on, right? Farm will continue to have some pressure because of what we saw in steel and rubber. Steel is up now 24% and rubber is up 30%, 53% from the beginning of the year -- calendar year, right? So it's pretty remarkable the kind of -- and both of these cannot be hedged. So this is a chart which showcases what we have talked about that the every engine in the -- in our federation is right now firing. And you see a remarkable performance from each of the pieces and contributing significantly to the growth impact. Even if you take out the CIE gain, it's a 22% increase year-over-year, okay?

So as I mentioned, I want to come back and share some reflections on what are some of the key factors driving performance because we are starting to see a few things we had planned for play out well. And what is that set of factors that we also call the Mahindra Way now that are driving performance across multiple businesses. It starts with purpose. It's about values that enable us to lead with purpose. Integrity, quality, care that covers customers, that covers our associates, that covers the broader communities. And that is a very important element for us because that is what enables trust. And trust is a very powerful factor for us across multiple businesses. Our Life Spaces businesses can price 15% higher in the market with very strong competitors because of trust. We've been able to close joint development partners in one particular case for a INR 12,000 crore GDV opportunity because a partner said, I'm just going to work with Mahindra. I don't care what other people give me. Across businesses, that's a very important factor for us. Talent. Everything that we've done is driven by talent. And the ability to attract talent, the ability to have our best talent go into areas of highest opportunity is something that's unique to us as a group, and that's driving results across multiple businesses. Technology. We talked about AI, but it's not just AI. It's across multiple different areas. And the ability for each group business to benefit from the experts we have across the group in technology to see best practices somewhere else, adopt them is turning out to be a very powerful thing for us because technology is central to almost everything that happens. Logistics is building a very strong business with technology as a backbone. Because if you have that, the customer is not going to go anywhere else. Not just logistics, that's something we're seeing across multiple businesses. And then with that, it's behaviors that drive meaningful outcomes. We are a large company that wants to operate and it often operates like a start-up. It's about collaboration, agility, being bold. And which is the reason why you see some of these results that you'd look at and say, how can this be consistently delivered over such a long time. And it's a combination of these things that create the synergies for growth and the synergies for resilience across our businesses. So I wanted to share some of those thoughts with you. And what we're going to do today for question and answer is different from what we've done because we're actually going to have multiple leaders up here on stage as all their businesses have contributed. And I want to go back to this chart that Amar presented. If you just look at the numbers here, the contribution of multiple businesses, you see very significant numbers. Growth gem year-over-year is almost equal to Tech M and Tech M done well. And you see Mahindra Finance has INR 213 crores greater than Farm. And Farm has also done well in a tough cycle. So that is why we're going to have a number of leaders come up on stage and a format we will use going forward as well, so you can hear from some of those leaders directly and yourself be able to assess the quality of talent that we have, right? So with that, we're going to have a large number of chairs and take up all the space that's available here.

Just give us a minute to complete the setup.

As promised, we've taken up the entire stage now. And what we're going to do is I would just want each of our leaders to just spend a minute giving you a highlight of what they've done, and then we open it up for questions and answers after that. So with that, Vinod, why don't we start with you? We'll just go around in this order.

Yes. So we'll briefly talk about the 2 businesses, which came on the slide. So on SML Mahindra, a big announcement, which happened yesterday, poised makes us very well poised for harnessing the full potential of what this industry promises. It's an industry with a very high revenue pool, very high profit pool. Of course, we have a mixed bag of products. We -- by the way, in quarter 2, we became #2 player in LCV, ICV bus segment of less than 12 tonnes. We used to be #3 with a very thin margin, we hope to sustain and increase it. We are amongst the leaders when it comes to LCV trucks. ICV trucks, we have a limited range, we are doing well. And heavy trucks is a long haul, which we are continuing to commit. And with the 2 teams coming together, not just from the network and product point of view, but also a lot of synergy from the cost and value engineering we have already started working and now the company becoming one with both the brands and its product, it promises a lot of potential to harness both on revenue and the profit side. On Aerospace, Anish talked about it. We are very well poised for future growth, both organically and inorganically. Organically, we are getting a lot of business coming our way because this is an industry where your reputation counts over everything else and reputation gets built over a period of time based on your quality and time and the cost of the delivery, which you do. And as Anish said, we are rated amongst the top 5 globally in terms of our quality and business excellence performance. And because of which a lot of businesses are coming our way. We are in the process also trying to go up the value chain. We started with detailed parts players and now going towards subassemblies and making to fuselages. So from a manufacturer of OE is to make thousands of small parts to moving towards making hundreds of high-value parts is also a transition we are trying to do. And of course, inorganic is another opportunity we are looking at.

So thank you. Vinod runs our aerospace, advanced technology and truck and bus business. All have seen significant growth in his time at the helm. And with that, Hemant Sikka, CEO for Logistics.

Yes. So on logistics, we have put a lot of focus on operational execution. As a result, we took several actions. The significant one I will call out was the work that we did on white space reduction. Same time last year, we had 16 lakh square feet of white space. As I speak, we have only 2 lakh square feet of white space available and that also we should be able to sell it by September. That was a big drag on our numbers, so that is out. And mind you, none of this white space has been surrendered. It is all sold. So these are all now revenue-generating assets for us. Apart from that, a lot of focus on our customers. We are winning a lot of large deals, very good growth on manufacturing and e-com side. This month itself, we have start-up done on 3 very large e-com sites across the country. So that focus on customer continues. And with that, in quarter 3 of last year, after 11 straight quarters of losses, we got a little bit small profit in quarter 3, but quarter 4 and quarter 1, again have been very strong. And we see that this kind of momentum will continue going ahead. One of the big levers that Anish called out was our Express logistics turnaround which is the Rivigo company. We have cut down the losses significantly in the last 1 year. However, still, it's a drag on our business, but we are very confident now that our EBITDA positive is just around the corner. I won't give you a month, but it is just around the corner. And that should then lead us to a PAT positive number at some point in time very soon. That -- this kind of effort will obviously bring goodness in our financials. Apart from that, there is a lot of focus on, again, winning new businesses and that effort, both in terms of consumer, pharma, telecom, manufacturing and e-comm will continue. Thank you.

Thank you, Hemant. Vijay Nakra, CEO of Farm.

Rajesh has covered quite a bit in detail, so I don't want to repeat what he just covered, but strong performance in quarter 1 despite the headwinds that we've had because of the war and commodity prices. Actually, I'm actually delighted that we are having this conversation at the end of the month where we've seen a favorable monsoon turnaround in the last 2 weeks. So the sentiment on the ground is definitely a lot more positive as we are moving into quarter 2. But no doubt, there are challenges still in front of us. Internationally, also, we've had some headwinds, but in our core markets, we performed very well. So yes, with that, we'll be happy to answer questions as we go forward.

Amit Sinha, CEO, Lifespaces.

So I think I'll just highlight 4 things that are shaping our performance and aspiration. Number one is stick to the guns on strategy and what we will do and what we will not do. What that means is focus on a few cities for residential, Mumbai, Pune, Bangalore. We get a lot of land parcel requests come to Indore, come to Hyderabad, come to Delhi. But I think for us to scale, I think we will stick to the guns. It also means what we will not do. Like affordable segment has been -- has not done well for us. So we decided to exit that, and we'll continue to focus on doing mid-premium and premium segment. The second is for us to secure a strong future for this business, it was important to lock in some key land deals. We were always looking for the right deals. And over the last 3 years, we have scaled that pipeline, which is locked in, in terms of greenfield, in terms of joint development, in terms of society redevelopment, roughly INR 50,000 crores of deals. And those deals have gone through a very rigorous process so that we have more upside in those deals rather than downside. Third is a focus towards customer experience, premiumization, making sure that customers want our product, they come in because of our brand, but they should stay there because of the experience they have. And I think that has been a key part of our effort over the last few months. We got a lot of OC that Anish covered, 3,000 apartments. We have delivered 1,500 apartments until a few days ago and 99% apartments have been zero snack apartment to the customer. That means customers are accepting those apartments as is. That means we've been able to do a good job in terms of quality side. And then finally, making sure our execution stays on course. This is a business where price gets locked upfront and the costs get covered over the next 5 years. So how do we ensure delivery of our projects as per the original plan? I think Amber covered a lot about the cost escalation, et cetera. We factored a lot of it, and we always have some surprises. So we want to make sure that whenever we execute, we are very prudent about cost escalations, surprises. Our IC business helps us quite well. It complements the residential business. And these 4 things have been quite good for us, and we'll continue to have this shape the journey for us in the future years.

Viru Swami, CEO, Auto.

So the auto team delivered a resilient quarter performance following on an exceptional Q1 F '26 performance of 22% growth. They have Q1 F '27, the team delivered 14.7% growth -- 14.9% growth on SUVs and 20% growth on XEVs. All the 3 verticals are really doing well. The ICE SUV, the EV SUV, the LCV, they are really doing well. The ICE SUV and EV put together 14.9%. In the EV SUV space, we have grown 77% compared to last year. A combined EV brand, it is 16,500 in the quarter volume, 16,500 and it's -- and as Rajesh pointed out, xEV is the largest selling SUV despite high selling price. The revenue of auto, 32% growth and with a PAT of 21% growth. The resilient performance continues for the coming quarters in spite of pressures on margins as you have heard from all the presenters. The festive season is going to be a big one for us. As you have seen the capacity increase is happening from 64.5% to 68%, it will happen end of H1. This is a very question for this to upcoming quarters. All the best for the team and wish you all the best.

Raul Rebello, Mahindra Finance, CEO.

Thank you. Pleasure to be here this forum. So in our business, we look at consistency being the real hallmark of directionally moving well and consistency in growth, margins and risk. When we reflect on the last 2 quarters, actually, that's played out quite well. Starting with risk, and Anish alluded to it, in risk, we look at stable -- stability in the GS2, GS3. And that's come in, I think, in a very formidable manner, for example, in our GS2 plus GS3, for the last 7 quarters now, we have been below 10%. And if I just look at last Q1 versus this Q1, GS2, which is 30-plus early risk, that's 100 bps lower than last Q1. So that's on risk. We think we have covered fair ground there. On margins, we had dropped significantly to NIMs of 6.5%, and now we have climbed back to a good 7.3%. And overall ROAs, which was quite unusual, we were below 2% and now is respectively in a respectful range come to about 2.4%. Finally, growth, Anish has tasked us now to pivoting back to growth. And I think off late on that metric also, both the wheels business and the non- wheels business. The wheels business, we benefit from a lot of gentlemen on the forum here. We feed off the auto CV tractor business. So the wheels business has been growing well at just 20% in that vicinity. But what's really encouraging is the non-wheels business, which grew at 79%, which is the mortgage business, the SME business and the PL business. So yes, we are starting to see a good balance between the growth margin risk. We keep balancing between all the 3. It's been progressing well. And it's early in the year, Q1, and we have some curveballs, which we have seen with fuel prices, et cetera. So we have to monitor the portfolio well and just make sure that we are on the path to being steady balancing between these -- the growth risk margin equation.

Thank you all. With that, we open up for questions.

We can begin with Chandru of Goldman.

I have 3 questions. I'll ask them all at once. First one is just on the battery electric vehicle business. So it's good to see that now 12% of the vehicle mix is battery electric vehicles and making north of a 10% EBITDA margin. So just wanted to clarify what is the PLI in the current EBITDA/EBIT margin contribution from PLI? And just related to that, I just want to understand, is there any discussion around PLI 2.0 and whether this might be extended beyond FY '28? Second question is on the tractor business. So just want to understand, I remember in FY '24, when we had a rainfall shortfall, there was a lot of destocking in the back half of the year. So I just want to understand where we are on channel inventory as well as in terms of horsepower mix in a typical in the past, have we seen improvement in tractor horsepower mix? That's, I think, the strategy which we had laid out at the Investor Day in November last year. And the last one is just on Mahindra Finance. So I think most of Mahindra Finance on the wheels business is new vehicle sales. But over a period of time, is there a strategy to do more used vehicles where the yields must be much, much higher? I just that.

So I'll just take the PLI question and then have Rajesh cover everything else and then let Raul cover the last question. In terms of whether the subsidy continues or not, the objective of PLI has been to transition to EVs and ensure that we can maintain reasonable price parity with ICE. And that has been done very well so far. With scale coming in, what you've seen in the numbers is the ability for us to be able to reduce cost and therefore, get higher margins as well, not as much as ICE right now, but that will start happening. So our expectation would be that as we start showing higher margins with scale, PLI should reduce. That is part of how it should go because we would not want to make super normal profits based on subsidies. And that's a conversation we have with government as well to say that, that's only the fair thing to do. In terms of specific time lines, we don't have an answer on that as yet. That will depend on how the industry moves as well, but we'll have more clarity on that in the next maybe 6 to 12 months. We still have some time to go on this one.

Yes. Chandru, on the specifics of how much PLI, I don't think we want to share the absolute amount right now. But one reassurance we can give is that we were EBITDA positive without PLI. So we're not losing money without PLI at a cash level. So that I just want to reinforce that part that we are EBITDA positive without PLI right now. So that's on the PLI. Anish answered the second part of the PLI question. On the tractor, you had 2 questions. That was the only Auto EV question, right?

Inventory and...

Yes, on the tractor, the -- there was one question related to the inventory and you are relating that to 2024.

And the horsepower mix.

And the horsepower mix. So on the channel inventory, I think this question had come up earlier as well on why we are seeing lesser volatility on industry growth in tractors. And a few quarters back, I kind of reflected on that to say that I think there's much more discipline today by all OEMs, which means that when there's a down cycle, the extent of downstocking that we need to do on channel is much lesser. Between our 2 brands would be, by and large, in line with norms. Actually, Swaraj is below norm because they had some supply issues in the quarter, but in the region of 30 to 40 days, which we think is fine and not much destocking needs to be done at this point of time. Do you want to take the horsepower question?

On the horsepower mix, we can clearly see a shift towards higher horsepower. Rajesh spoke about mechanization. So we are seeing that if you look at the first quarter of this year, already -- I mean, close to 69%, 70% of the horsepower mix has now moved towards 40 to 50 horsepower. A lot of that is being driven also by the kind of implements that the farmers have started seeing adoption towards. So whether you talk about seeders, whether you talk about balers, some of these higher value, higher horsepower drawing implements are -- is what they are looking at. And also, I think post GST, they are able to sort of buy a product with a higher horsepower for a price that they would have paid for a lower horsepower earlier. So I think all of these have helped move the mix towards about 70% for the 40 to 50 horsepower range.

Yes. On the question on the composition of the used vehicle business. So when I just look back 8 quarters, that number from a disbursement hovers between 15% to 19% of our incremental disbursements. Last quarter was at 16%. We did slide down a bit because post GST, actually, we were ourselves getting firmed up to the new residual value, right, because the GST prices caused a huge shift in the residual value. So we were ourselves being a little conservative in the last 2 quarters. But from now on, we will see us going up that scale, the 16% to 19% that I talked about. And see, if you look at on the leader board, we are always between #2 and #3 in used car. We are #1 in used tractor. In used CV, we're not a very big player, but these 2 are big categories for us. And you're right, it's margin accretive. So it is an important business. It's not small in any capacity, and you'll see this business grow in the times to come.

If I could clarify what the farm implement revenue was for the quarter.

INR 350 crores or INR 360 crores.

INR 370 crores.

INR 370 crores in the quarter. That was on the slide.

Kapil, please proceed.

Yes. First of all, thanks for getting the entire leadership team here. It's great to meet all of you. And I have a question which is relevant probably for everyone. So Anish, you've talked about building AI-based competencies. What I would like to understand is these same AI models are available to everyone, right? So where will the differentiation come from? And if some of the business leaders can also share their experiences as we are building these things, where do you think we can differentiate because technically, same things can be built by everyone, right?

So first, Kapil, I'm glad there's value in this. But this is not the entire leadership team. This is just a few folks. We still have other leaders, and we will bring them on board as well. We just ran out of space on the stage. So we've kept it at this level so far. On AI, I'll just take a quick answer to that, and then we'll have some of our leaders come in. We are building many of these models as proprietary models. So if you look at simulation for product development, and I'll ask Velu to talk about that, that is something that's built proprietary. Almost everything that I spoke about is something that our teams have built. And it's our process owners that are coming in and saying, this is how we should build these things. So that, to me, is the biggest difference in AI. It is the process owners that have to be a part of it and have to build it in a way that makes sense for their process. Let me give you one example around welding in Chakan, which we haven't put up there. There are 300 welding guns in Chakan. Welding quality is done from a destructive standpoint. So every month, typically, you take the car apart, you take each model and take it apart. Now there are 20,000 welds done every hour in Chakan. Every single one can be validated with AI that this is a proper weld. That's a welding model that has been built by our team operating there. So our AI engineers are the ones working with each of the businesses to be able to deliver that. So let me have Velu come in for that. Let me have Raul talk about some of the Mahindra Finance work that's being done. And then we can go to other leaders we may go to other questions first and then come back to it.

So one key difference is that the AI model is an intelligence layer. So you feed in 20 years of your simulation data into it. Then it becomes a different AI. That AI is more bonded to you and it is processed by you. So that's the differentiator.

Velu?

Yes. I think what's contextual to us is because we are such a distributed business, 3.8 lakh villages, so many dials. There's a lot of unstructured data sitting in our system, which was never harnessed before. And today, we are using the power of night bots, et cetera, to even acquire customers at a much lower cost. Anish talked about our proprietary Summurai, which is the world on summurai.ai, which is basically helping us to cut down that by almost 40%. The time it took to basically process a loan because we're able to piece together a lot of these unstructured data and the time to yes and time to money is now significantly shrunk. We have many more examples, but I'm sure there will be...

Yes. Vijay, go ahead.

I don't -- it's not a very HiFi use case of AI, but I'm just stating this because you can find very simple use cases. And we've recently started experimenting with this in the farm business, and we call it sentiment.ai. So we've come up with a very simple tool where we can connect with our field force, and that's where the power of FD, SD, both divisions, a very large channel presence across the country and feet on the ground. So through AI, we are able to collect sentiment on the ground in that village at that pocket, and we can use layers of AI and data to collate that to see where there are patterns, where there are discrepancies that are coming up and that can feed into a lot of work that we do on the ground to proactively act. It's a very simple use case.

[indiscernible].

So there are a couple of questions on the Auto sector as well. Firstly, because you have been slightly capacity constrained. So I would like to know in terms of inquiry or booking growth, what kind of growth are you experiencing? And if you were to cut the data by powertrains, diesel, petrol and EVs, where -- what is the kind of growth you're experiencing? Is there any significant difference that you're observing over there? And similarly, if you were to cut the data by GST, like 40% GST bracket and 18% GST bracket, is there a significant difference in the inquiry growth?

You really want to know everything about our -- I think it's a very let's call it, information that we wouldn't want to share because it kind of gives an indication of what is actually where demand momentum is, but we'll try and give you an overall sense rather than the level of detail. So I'll start and then hand over to Velu. We have seen very strong demand momentum, urban and rural both. We are seeing some kind of a shift to diesel. Of course, there is a segmental shift to CNG and especially the lower GST product category, less than 4 meter that's happened very fast over the last few months. as the move -- as one part of the segment has moved to EV, there's another part which is moving to CNG as the fuel prices and the fuel prices has kicked in. But also, there are people who have looked at diesel because fuel efficiency has become that much more salient in a way. So you're kind of seeing some of this play out in the fuel mix. Right now, I think all our brands are on very strong momentum and growth, EVs in particular and especially [indiscernible]. Velu, you want to add?

As you said, we said EV is 77% growth. And if you see overall industry above 4 meter and below 4 meters, you can see wherever there is a new product, there's an equal growth that has come above 4 meter and below 4 meter. I'm not sure it is segmentized rather than it is whether it is a refresh and new launches and every segment is growing. That's what...

Okay. And lastly, just on the electric vehicle business, how should we think about the profitability path ex of PLI? Is it going to be pricing led from here? Or most of it is going to be through cost efficiencies? And what are you doing over there?

Yes. I think, Kapil, it will be a combination of both. You'll remember that when we are launching EVs, you thought we'll never make money. So we've come a long way since there in the last 6 quarters to now at least talk about what is the sustainability of the profit that we are making versus will we ever make money in this business. I think what is the value of reaching an inflection point on penetration is that a very strong word of mouth starts building where customers who are EV users start talking about how much money they're saving. And once the proof of money being saved becomes still and not notional, then the acquisition price becomes less relevant because you have a very tangible, yes, with this kind of a usage situation, I can save INR 5 lakhs in 3 years if this is my driving situation or INR 1.5 lakhs a year or whatever in a different driving situation or whatever. Then the ability of price to go up is something that customer is able to tangibly see the value that's creating, right? But when the category adoption is low, then the customer is not able to anticipate what are the other barriers. So really, what is happening as EV penetration is going up and better quality cars are coming in, customer is confident on reliability, more confident on range, charging infrastructure is building up. So the barriers are disappearing and the real savings are tangible. At that point of time, we expect price sensitivity to be much lesser. And that's why the inflection point probably will be after 20%, 25% EV penetration. And that's really the journey that the government also has in mind, as Anish said, that you get EV penetration to 20%, 25%, then there's enough word of mouth and enough customers who are talking positively, then the price equation need not be parity or close to parity. Today, we are -- our EVs are at close to parity, twice. I mean there's very little on-road difference between a 9 and a 7XO. So once your savings are visible and tangible on all fronts, then a reasonable premium of 5%, 7% is possible. Meanwhile, there's a lot of work going on to continue localizing and bringing costs down. And as scale builds, then it's even more remunerative for the supply ecosystem to pass on the benefits of scale. So today, most of them are operating at well quoted us on subscale because there was complete uncertainty on how EV will pick up in the country when this was done in '22, '23, '24, more like the BOBs were done or the orders were awarded in the year '22, where there was really no EV penetration in the country. Today, it's a very different scenario of scale. So we would expect the cost curve to kick in as well on multiple technologies that we are following -- have deployed, which are being optimized from an engineering point of view, but also from a scale point of view. So I think both of these will kick in, in the next 12 to 18 months.