The leaner and more agile M&M has a multipronged growth agenda, Shah said in an interview. It’s looking to get into an unidentified new business, list the auto recycling and electric vehicle (EV) units, and step up the overseas presence of the auto and farm businesses, Shah said.
It also aims to ensure that Tech Mahindra and Mahindra & Mahindra Financial Services (Mahindra Finance) realise their full potential besides bolstering the logistics, holidays and real estate businesses, which have been identified as “growth gems”
“We will potentially look at one new area (new industry) beyond our current footprint,” Shah said, outlining the group vision. “We have been looking at that for some time now and haven't quite found the right place where we are very confident of delivering returns that outperform the industry.”
Each group unit has specific targets and goals to outperform financially, said the ex-GE executive, who completes a decade with the Mumbai-headquartered firm this year. He was chosen by M&M chairman Anand G Mahindra to take over the helm in April 2021.
The auto and farm business for instance will look at capitalising on its market leadership and maintaining the growth trajectory. It also aims to expand the auto business overseas in a phased manner, riding on the domestic success of utility vehicles (UVs) such as the Thar, XUV700 and ScorpioN.
M&M will target Australia, South Africa and Chile with a plan to gain 15% market share. It will also tap markets similar to that of India — Nepal, Bangladesh, Sri Lanka — in the first phase.
“As we see success in that we will then move to phase two and then phase three. So, what we want to do is, do less but do it very well and then go to the next step after that,” said Shah.
On whether the company’s upcoming Born Electric (BE) range, which starts rolling out in January 2025, will also be a channel to go international, Shah said, “The first step is to develop outstanding new products, which we believe we have, now we will let the product speak for themselves when we launch them.”
The launch plans in markets outside India will depend on local acceptability, he noted.
The listing of subsidiaries such as Mahindra Electric Automobile Ltd (MEAL) and Mahindra Accelo, the group’s recycling business for the energy and mobility sector, is also on the horizon.
Accelo will be first to go for an initial public offering (IPO), said Shah, without indicating any time frame. MEAL will be listed either in 2030 or later, by which time the company hopes to build a strong business. With its BE range, Mahindra expects 20% of UV sales to be electric by 2027.
“We're going to look at what makes the most sense for investors in terms of value creation and we're going to select the choices based on that,” he said.
The auto and farm businesses that account for a lion’s share of revenue will be central to the next phase of growth. The services divisions, which include Tech Mahindra, Mahindra Holidays & Resorts and Mahindra Finance, generated cumulative INR 7,000 crore cash in FY24 and will play an equally important role in the growth strategy.
“For both Mahindra Finance and Tech Mahindra, it would be about what we call unlocking full potential, because both businesses in the past have underperformed the peer set,” said Shah.
Mahindra Finance is halfway through a turnaround programme that kicked off a year and half ago. Tech Mahindra has just started such an exercise under the leadership of Mohit Joshi, its new appointed CEO and MD, Shah said. On April 25, Joshi unveiled a three-year roadmap to revive the IT services company’s slowing business with the objective of driving better revenue growth than the peer average and optimising margin improvement by FY27.
RBL BANK INVESTMENT
The group had surprised the market by acquiring a 3.53% stake for INR 417 crore in July 2023 in RBL Bank through the open market route. The stake purchase was to “understand banking with a long-term view of 7-10 years to enhance the value of its own group's financial services business,” it had said then.
“We don't plan to invest anymore. We were clear that it is essentially a treasury investment for us, which has a potential strategic option in the long term if things change, but at this point we aren’t looking at anything further,” Shah said.
According to RBI regulations, industrial houses can buy less than 10% in a new private sector bank and cannot have a controlling interest. The Mahindra Group has been one of the few industrial houses that’s bought a stake in a private sector bank even as it has a non-banking finance company (NBFC).
GROWTH GEMS
Mahindra sees the holidays, logistics and realty businesses expanding fivefold in market cap over the next five to seven years, translating into a similar growth multiple in terms of revenue and profit.
To be sure, the once-acquisitive Mahindra Group — which had spread itself thin with a presence in multiple segments leading to a dilution in return on equity — has largely stayed clear of the inorganic route in the last five years.
Under Shah’s direction, his team led by Rajesh Jejurikar, executive director and CEO for farm and automotive sectors, has remained sharply focused on its core UV and tractor businesses and grown them organically while maintaining a strict capital allocation policy.
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