Today we have come to the headquarters of Mahindra & Mahindra for a very special interview. Yes, we have with us Anish Shah, Group CEO & MD of the Mahindra Group. Anish ji, thank you very much for speaking with CNBC Awaaz today. Obviously we will talk about your numbers, but we rarely get a chance to talk to you, so we thought we'd also discuss some larger issues today. First of all, your numbers that came out today for Mahindra & Mahindra were quite well received by the market. You also raised the outlook. I was reading your presentation. Where does this confidence come from, the visibility you are seeing that made you raise the outlook?
The confidence comes from our teams that have delivered really well, and it's all driven by execution. So far, what we have seen is all our businesses are growing well. Not just a few: Farm up 54% in profits, Mahindra Finance up 45%, Tech M up 35% from an operating profit point, Growth Gems up 22% in profits. But we don't look at profits as much for good growth gems; we want to grow them multiple times, so we are investing a lot more there as well, and we will see much bigger profits a few years down the road. Auto is up 14%. Yes, some transaction issues we had from GST have been made up already in October, but for the quarter it did impact the numbers. And therefore, we see an overall consolidated profit growth of 28%, and that is really driven by the team we have and the execution they have been able to drive, and that is what gives us confidence to do more and better going forward.
Absolutely. When you last spoke to the media, you said that the industry outlook for passenger vehicles would grow low to mid single digits, and for tractors you said you see close to double digit growth. Now after the GST cut, looking at the evidence you have, do you think you can raise this guidance further in both sectors?
So for the tractor industry, what we had said was about mid single digits. Our guidance now is low double digits for tractors. For passenger vehicles, while the overall industry will grow slower, our guidance remains mid to high teens growth for SUVs, and that will continue to grow low to high teens for SUVs. And that is a very healthy growth number compared to where we have been.
Sir, this was a big factor in the re-rating of Mahindra & Mahindra. Your SUV portfolio, and one thing everyone says - I myself am a big fan of your cars, especially the new Scorpio - you always keep innovating. You have always been a leader in the premium segment, yet you keep bringing new models. Now, do you think that the strategy of focusing on profit market share instead of just number market share will continue going forward, and do you think you will remain number one in that?
We will remain number one going forward. And we want to do even better than that. We have a new platform that we have introduced, and with that platform we will have a wider range of SUVs for a wider audience of customers, and that's going to help our SUV business grow even better.
Okay, what kind of traction have the electric vehicles you launched seen? Are you fully booked? Regarding capacity, do you think you'll need to expand it going forward? Let's focus a bit on EVs, because it's becoming a very large portfolio for the entire country.
The response has been very good. The product feedback we got from customers is outstanding; they love the product. It's working very well. We have sold 30,000 SUVs already. Penetration for electric SUVs is 8.7% now, and we plan to get it to 20% and then 30%. We have new SUVs coming up that are electric as well. So overall it's been a great story so far.
Okay. Tesla has entered India. There is also competition from BYD. How do you view the competition, Anish ji? Because you are the leader now; big brands are coming in to compete here.
So we have seen that competition always makes us strong and expands your market. Not only that, it makes us better. Because if we go back to 2002 when we launched the Scorpio, a number of foreign companies were coming in and everyone said M&M is dead. All the big brands are coming in, M&M cannot compete with the rest of the world. Our team at that time took that as a challenge and improved what M&M could do, and over the years we have seen a significant improvement in quality that has continued from 2002 onwards and over the last few years as well, and that is what really keeps us ahead. We welcome competition, and we are actually very well placed right now. We are competing with a lot of foreign brands in global markets, and in these global markets you see our export numbers for this quarter are up 40% year over year, and that is a reflection of the quality of our products.
Just this GST cut that happened, how much impact do you see? I mean, suppose I imagine the Prime Minister announced on August 15 that we will cut GST. Then the GST cut happened. If that cut hadn't happened, now that the cut has happened, will it be a re-rating factor for passenger vehicles and tractor segments both?
The GST cut is a re-rating factor for the industry. It is a masterstroke because it will help the industry, not just for auto but across the economy. Not in this year but across multiple years. What we feel is that the foundation has been very strong, and this is something that has created a sentiment change that is taking that foundation, and we expect the industry to continue growing at a rapid pace over the next few years.
In tractors, you are already number one and have been number one for a long time. What kind of growth do you see in the tractor industry, and given your market share, is there scope to gain further market share from here?
In tractors, we tell our teams: don't worry about market share growth, just execute well. When you are at a 43-44% market share, the focus is on execution, on products, on delivering value to customers. As that happens, market share will automatically gain. But we don't want to go with the mindset of 'we need to gain market share'; we need to be able to deliver things very well and maintain profitability.
I ask this also because tractors belong to a segment that is part of our agriculture sector, a very big pillar of the economy. We saw a lot of pain in that sector some time back. Now, especially in the rural market, are you seeing signs of not just green shoots but a full-fledged recovery?
We are seeing a full-fledged recovery. Green shoots we saw a few quarters ago, and what we have seen now is the rural segment doing really well. And that is a strong driver for the economy. We are seeing green shoots in urban as well, after the GST cut in particular. And that will do well for the economy overall.
Anish ji, the way commodity prices are rising, I'm sure you discuss with your team at the Mahindra Group. What is the policy at this time? Will there be a slight compromise on margins, or do you think your pricing power allows you to pass on the full impact of commodity prices? Especially in an environment where passing on the GST cut is also a requirement. In such a scenario, what is your view on pricing?
So far we have seen increases in some commodities; on balance overall it's been reasonable. And we have not passed on any prices for commodity increases at this point. But we will continue to look at that, and if it makes sense to pass it on, we will try to find ways to reduce costs through productivity to offset some of this. To the extent we can do that, we will not have a price increase.
Mahindra & Mahindra has been a leading stock. Under your leadership, the stock has increased four times as a large cap stock. Many people have credited your leadership for this. Your capital allocation policy has been widely appreciated. I want to ask you this: somewhere in the mind of Mahindra, the Mahindra Group, is there a thought to list different businesses separately instead of remaining a listed conglomerate? Even if not in one year, is a 10-15 year roadmap being prepared to list different businesses separately?
For now, our focus is operational excellence in all our businesses. Create value through operational excellence. We have multiple businesses now; our growth gems are doing very well and they are creating significant value. Everything around structuring is something we are not looking at at all. We may look at it 3 years, 5 years, 10 years down the road - I don't have an answer to that. But right now it's operational excellence.
