M&M lines up Rs 37,000 crore investments in auto, farm, services Filesadmin.co

Auto major Mahindra and Mahindra (M&M) which is readying to launch nine sport utility vehicles (internal combustion engine), seven born electric vehicles (BEVs) and seven light commercial vehicles by 2030, has outlined an investment of Rs 27,000 crore in its auto business between financial years 2025 and 2027. Over the next three years, the company will deploy Rs 37,000 crore including its auto business, farm business (Rs 5,000 crore) and services business (Rs 5,000 crore).

M&M board has approved an investment of Rs 12,000 crore in its electric vehicle (EV) arm, Mahindra Electric Automobile (MEAL), to fund the EV journey over the next three years. The first set of born EVs will start rolling out for the first quarter of the 2025 calendar year, said Rajesh Jejurikar, Executive Director and Chief Executive Officer (Auto and Farm Sector), M&M. EVs will constitute around 20-30 percent of M&M’s overall sales by 2027 or so.

As for the EV arm, British International Investment (BII) has invested Rs 1,200 crore and Temasek has invested Rs 300 crore in MEAL. Temasek had committed an investment of Rs 1,200 crore in August 2023 (at a valuation of $9.8 billion). It will thus invest the balance of Rs 900 crore in MEAL as per agreed timelines, M&M said. BII had committed an investment of Rs 1,925 crore in 2022 in the form of compulsory convertible instruments at a valuation of up to Rs 70,070 crore, resulting in 2.75 percent to 4.76 percent ownership for BII in MEAL.

M&M and the auto division expect to generate sufficient operating cash to satisfy their capital investment needs, the company said at the earnings press conference on Thursday.

Speaking to reporters, Anish Shah, Managing Director and Chief Executive Officer of M&M, said M&M and BII have been discussing whether the balance investment of Rs 725 crore is required, and they will take a call on this in the next six to seven months.

“M&M and BII have mutually agreed to extend the timeframe for the final tranche of BII’s planned investment of Rs 725 crore, and will jointly assess whether additional investment is required by 31 December 2024,” the company said.

Shah said that the EVs will have a similar margin profile (on a per unit basis) as the internal combustion engine vehicles. Just like internal combustion engine vehicles, EVs would have a lower margin profile when newly launched, and thereafter improve the margins through value engineering. Shah did not wish to give a timeline by when MEAL can break-even.

With a portfolio of vehicles lined up for launches and also a backlog of 220,000 units to be delivered to customers, M&M is focusing on a consistent capacity ramp-up.

Jejurikar said that from a capacity of 19,000 sport utility vehicles per month at the end of financial year 2020, M&M has already increased capacities up to 49,000 units per month at the end of financial year 2024. By the end of financial year 2025, this will rise to 64,000 units per month and in the next one year, it would further rise up to 72,000 units per month (end of financial year 2026). Jejurikar clarified that the financial year 2025 end capacity includes 10,000 units per month electric vehicle capacity and an additional 8,000 units per month electric vehicle capacity is expected by financial year 2026 end.

As for the newly launched XUV 3XO, M&M has a capacity allocated of around 9,000 units per month, which can be scaled up to 10,500 units per month if needed, Shah said.

Of the total Rs 27,000 crore auto investment plan for the financial year 2025-2027 period, internal combustion engine sport utility vehicles would get around Rs 8,500 crore; while commercial vehicles (including electric vehicles and trucks and buses) will get around Rs 4,000 crore. (refer chart)

The auto business achieved a 3-year revenue compound annual growth rate of 43.1% in financial year 2024. It is the No. 1 player in revenue market share in sport utility vehicles in financial year 2024 (20.4 percent). It is also the market leader in the less than 3.5 tonne light commercial vehicles with 49.5 volume percent share. M&M’s Last Mile Mobility (LMM) company crossed the 100,000 mark in sales for the first time in financial year 2024. The electric three-wheeler portfolio grew by 51 percent during the fiscal.

The financial year 2024 return on capital employed was 42 percent for the auto business.

The farm business will also see an investment of Rs 5,000 crore besides the services businesses (including hospitality, logistics, real estate, finance, IT, etc.) will get another Rs 5,000 crore.

In a challenging market, farm business gained 40 basis points market share in financial year 2024 (41.6 percent). In the 20-30 horsepower tractor segment, the company gained 12.8 percent market share with launches of Oja and Target range of tractors. Farm machinery revenues also grew by 32 percent in financial year 2024.

Tractor Sales FY25 Outlook Positive: M&M

The market leader in tractors, M&M, said on Thursday that farm output is expected to recover, and agricultural exports are likely to see ‘robust’ growth. The India Meteorological Department expects the monsoon to be ‘Above Normal’ at 106 percent of the Long Period Average.

Rajesh Jejurikar, Executive Director & CEO (Auto and Farm Sector), M&M said, “Government focus on infrastructure development, agriculture and rural spending with agricultural credit availability is a positive. Further, a positive benefit of the Navratri festival shift likely in Q1FY25 and Q4FY25.”

El Niño conditions may continue till May leading to concerns on muted Rabi output and associated income. National elections in peak season months of Q1FY25. Jejurikar said that the elections may cause temporary disruptions in May, but that is not a reflection of the sentiment.

First Published: May 16 2024 | 9:04 PM IST