“We are often seen as an automobile group and more specifically as an SUV maker, but autos constitute 28% of the group’s revenues and only half of that comes from SUVs," Anish Shah, group CEO of Mahindra group, told Latha Venkatesh.
As part of the chat with Anish Shah about his group in the series “Latha & The Leaders”, the focus was also on this other 72% of his group. Shah elaborated at length on the growth prospects for farm mechanization, Mahindra Finance, Holidays, Lifespaces, Aerostructures, Security Solutions and Mahindra Susten — the renewables business.
Mahindra Finance
Let’s start with latest. A recent headline from the group is their JV with Manulife for a life insurance company. So is finance going to be second big vertical of the group after autos? "We are already big in Finance," Shah said. Yes, the group already is in Mutual Funds and for many decades in lending through its NBFC — Mahindra Finance. But new areas, we asked.
Finance business needs to diversify beyond auto and farm lending, he said. "There's some element of SME today, some element of mortgage…But mortgage needs to grow much faster and we are looking at various different parts of the mortgage market as well,” Shah said. “We have some key strengths there and we're looking at expanding that in a way that leverages our strengths as a Mahindra group.”
“We are now pivoting to growth in microfinance and we feel that that will be a huge growth driver for us. Microfinance by various metrics is in a much stronger place right now. And is very well positioned for the growth path that we want. Our customer is in semi-urban India and rural India, some in urban India as well. MMFSL is a very strong player in semi-urban and rural India and we're going to take advantage of that,” he explained.
But some analysts say MMFSL is doing well only because of two consecutive good monsoons; will the company grow sustainably, we asked.
Shah brushed aside the charge. “We've seen multiple good monsoons in the past as well,” he retorted, adding that over the last three years a lot of work has gone in to improve asset quality, to use technology and data to improve the processes, create a better customer experience and set the business up for success.
Farm Mechanisation
M&M is a leader in tractors, but will it now expand into farm mechanization more generally? "We already are," said Shah. “We are growing 30-35% a year in farm mechanization. It's not an easy space because it's unorganized today. There is a large set of products. Some of the farm mechanization products are fairly subscale but we are going in with a very good team. We've developed a very good set of products. Some of the international acquisitions we have made have helped us build a better set of products for India because they had to be customized for India and with that we feel that farm machinery will play a much bigger role in our farm business going forward.”
Mahindra Holidays
What about Mahindra Holidays, we asked. Holidays was clearly one of the most ahead-of-the-curve investments of the group. But now as Indian tourism industry has burgeoned, the space has been taken by big hotel chains, homes stays and ecommerce players like Makemytrip. Will Mahindra want to exit this space? “No way, we are going to look at doing a lot more on Mahindra Holidays,” said Shah. “We have a set of members who are really happy going to our resorts. In the past we've had some challenges where members could not get the bookings they wanted but that has been largely fixed now as well and we've got a huge growth potential. We will look at transforming Mahindra Holidays business and grow at a much more rapid pace. More on that at our investor day," he said with some finality.
Mahindra Lifespaces
Our next question was on one of the identified growth gems of the group — Mahindra Lifespaces.
“For Lifespaces, the plan for this decade is to grow pre-sales 14 times and we are a little more than half way through this decade and we've already gone halfway past what we need to do and with regard to the land that we need to hit our target for 2030,” he said. “About 80% of land needed to hit FY30 targets of Lifespaces is acquired already; So it's just pure execution from here on.”
So clearly Lifespaces is a space to watch.
Mahindra Aerostructures & Defence
What about the next growth gem — Aerostructures?
“Aerostructures is a business that we would like to grow 15- to 20-times in this decade,” albeit from a small base, Anish Shah said. "We are regarded as one of the highest quality suppliers even in comparison with some of the large suppliers around the world and that's what's driving the growth of this business," he said.
What’s the plan for Mahindra defence or security solutions — as the unit is called. Shah was equally excited. “Mahindra Security Solutions draws a lot of strengths from our trucks and buses business and from the SML acquisition. The investment we made in trucks and buses, it's a very good platform for armoured vehicles and specialist vehicles that the armed forces needs,” he explained.
Listing? Anyone?
What about capital allocation and listing? Which of these gems will be listed first?
“We're not thinking about listing (of growth gems) right now; We're just looking at pure operational growth. At some point when we need the capital we shall look at listing these gems but not at this stage," he answered.
Okay, any other listing from the Mahindra stable? In say — three years away, or earlier?
“Can’t say when is the next listing, because it's not something we're actively focusing on,” Shah said erasing hopes of the group’s retail investors.
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