The Anish Shah Era: M&M Shifts Into Top Gear As Profit Doubles In Three Years

Mahindra and Mahindra Ltd.'s fourth quarter results were largely in line with estimates. But its guidance—the first in many years—for the next year as well as launches for the next six years, show that Managing Director Anish Shah has led a significant turnaround for the company.

The managing director took charge at the end of fiscal 2021. Since then, the Scorpio-seller has seen its volume and revenue grow every year.

Here's a look at the changes in Mahindra & Mahindra:

M&M performance under Anish Shah in blue. i.e. FY22, FY23 and FY24.

Growth In Sales And Production Volume

Production volume has seen a major change after Shah's entry. This has been backed by the strong product launches in the past 2-3 years, including the likes of XUV 700, Thar, Scorpio, XUV 400 and 300, and now the all-new 3XO. Notably, all have been in the SUV space and the company has guided for further launches in this space only.

These launches have led growth in sales volume, as they have increased from roughly 1.55 lakh in FY21 to 4.5 lakh vehicles sold in FY24.

Apart from a strong product portfolio, they have also invested in ramping up production to roughly 49,000 vehicles per month. The carmaker expects to raise this to 64,000 vehicles per month by the same time next year.

They also have bookings of roughly 2.2 lakh vehicles and expansion in production capacity will aid faster deliveries, which is a key need, the company said in its recent analyst meet.

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Systemic Changes

The company has seen systemic changes after Shah took over the helm. It suffered from high debt and interest cost, which affected profitability prior to this.

Revenue growth was also a concern, with a 16% CAGR fall from FY19 to FY21. However, this includes the impact from the pandemic.

The company's strategic diversification, sale of unrelated and loss-making businesses and focus on capital allocation have turned things in its favour, as revenue has incrementally risen since fiscal 2022.

Revenue, Ebitda And Profitability Turnaround

Management has focused on product, production and performance, and this is finally visible in the financials as well. At the time of Shah’s appointment, M&M reported a revenue of Rs 44,630 crore. This increased to Rs 98,397 crore in fiscal 2024.

Margin also grew from 12% in FY22 to 12.8% in FY24, the first such increase. This signifies that operating leverage has started to reflect and most brokerages are positive for the next couple of years on both metrics.

Profitability has been the biggest and strongest show, led by lower interest cost and operating leverage benefits.

Profit after tax has gone up from roughly Rs 4,800 crore in March 2022 to Rs 10,700 crore in financial year 2024. Debt reduced from Rs 5,600 crore to Rs 1,134 crore, which helped it halve the interest cost.

Diversification Of Underperforming Business

Shah’s tenure has been notable for a leaner, granular Mahindra and Mahindra. He has been instrumental in exiting 15 businesses during his tenure so far, which has included subsidiaries SsangYong Motors and Peugeot Motorcycles, as well as helicopter, dairy and special steel businesses, among others.

SsangYong has been one of the key talking points over the past few years, due to the higher debt and expenditure needed for the business. This was a much-needed investors' plea for many years due to the drag on overall numbers.

French motorcycling company Peugeot was acquired back in 2014, for roughly 28 million euros, and had largely underperformed, with no signs of improvement. At the end of 2022, M&M signed an agreement with Mutares, a Munich-based private equity firm, to acquire controlling stake in the motorcycle company.

In 2021, M&M restructured its Turkey farm equipment business, with another subsidiary Erkunt Traktor acquiring stake in Hisarlar for Rs 5 crore. Mahindra and Mahindra had acquired 75.1% equity stake in the Turkish farm equipment company Hisarlar for Rs 130 crore.

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Growth Strategy

M&M will be investing Rs 27,000 crore in the auto division over the next three years, Shah said. It plans to invest Rs 14,000 crore in petrol and diesel variants, and around Rs 12,000 crore in the electric vehicle business, signaling that it is not exiting the ICE division and will continue betting on petrol and diesel cars.

There are nine new launches lined up in internal combustion engine segment and seven new launches in electric vehicles by FY30. This could potentially make M&M a strong carmaker, with products at multiple price points and appealing to varying customer profiles.

The 'Gem’s' portfolio, which includes its future businesses and ‘Gems’ is another creation of Shah. This includes multiple businesses like Mahindra Susten, their renewable energy arm where management sees seven times growth in the next five years.

It also includes listed entities such as Mahindra Holidays and Resorts India Ltd., Mahindra Logistics Ltd. and Mahindra Lifespaces Developers Ltd. Defence and aerospace, which have been incubated recently and are the newest ‘gems’, have started securing orders.

In a recent analyst meet, after the fourth quarter results, the management highlighted the possible listing of their three-wheeler electric business, Last Mile Mobility. They have raised roughly Rs 1,000 crore from external investors in this vertical till date and sold 1 lakh electric three-wheelers in the past year, double from FY22 levels.

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Brokerages

Motilal Oswal Financial Services Ltd. has affirmed its ‘buy’ rating on the company, with a target price of Rs 2,720 per share. It expects recovery and margin expansion in the farm business and has raised earnings per share estimates by 11% for FY26.

BNP Paribas sees a solid model launch and capacity plans giving future visibility and has raised earnings estimate by 17-23% for the next two fiscals. It has an 'outperform' rating on the stock, with a target price of Rs 2,550 per share.