M&M outlines Rs 37,000 crore capex for FY 25-27, nearly 75% earmarked for auto business

Homegrown automaker Mahindra and Mahindra (M&M), has announced that it will be investing Rs 37,000 crore for the next two financial years. Out of the earmarked outlay for FY 2025-27,  nearly 27,000 crore will be spent on product development, capacity creation and technological advancements in the automotive division, said a senior official of the company.

“For the next three years, we are looking at deploying  Rs 37,000 crore and a large part of that is going to be in the automotive (division). The deployment in auto has gone up significantly of what you see in the previous three years’ cycle (of FY 2022-25)," Anish Shah, MD & CEO, M&M Ltd. told reporters at a post earning conference call.

Out of the total amount earmarked for auto verticals, nearly 52 percent of the outlay will be spent on Internal Combustion Engine Vehicles (ICEVs), especially Sports Utility Vehicles (SUVs).

As Shah puts it, “I would like to highlight that we are not going to ignore ICE and they continue to be an important part of our portfolio (and) for our consumers over the next five to seven years. And therefore the deployment on ICE is Rs 14,000 crore. This will be new models, refreshes and we will ensure that we have the best SUV portfolio by far.”

Furthermore, M&M will invest Rs 12,000 crore in its Electric Vehicle (EV) unit, Mahindra Electric Automobile Limited (MEAL), over a period of three years up to March 31, 2027.

“EV will get Rs 12,000 crore and all of this will be something that will be generated by the Auto Business. So it will be self-funding. That is the reason we have talked to potential investors. Over the next 6 months, we have to assess if we need more funds from BII and we mutually decide if we need more funds or not. This is essentially driven by fact that the auto business will be self-generating from cash," added Shah.

He also revealed that M&M's Farm Equipment Services (FES) division will get a cash deployment of Rs 5,000 crore as this business continues to be a "cash generator" for the company. Similarly, M&M's Financial Services unit will spend Rs 5,000 crore , a sector Shah believes is growing “ very well” .

M&M reported a 32 percent jump in its Q4 FY 24 net profit at Rs 2,038 crore owing to robust performance of the automotive segment, favourable product mix, and operating leverage benefits. Its revenue from operations rose 11 percent to Rs 25,109 crore in Q4FY24 as against Rs 22,571 crore a year ago.

Capacity expansion, etc., on full swing

Out of the Rs 27,000 crore earmarked for FY 2025-27, nearly Rs 8,500 crore will be spent on ramping up ICE SUV, Rs 4,500 crore for CVs comprising bus, trucks and e-LCVs, and Rs 1,500 crore for sustenance plan.

“That will take the Auto division to Rs 14,000 crore, 12,000 crore in MEAL, Rs 1,000 for investment in other subsidiaries," noted  Rajesh Jejurikar, ED - auto and farm business at M&M.

The company plans to launch over 23 all new models - which include 9 internal combustion engine powered SUVs, 7 battery electric vehicles and 7 light commercial vehicles by 2030.

“Out of the nine SUVs, six will be all-new products and three will be mid-cycle enhancements. So (we have a) very aggressive plan towards ICEVs  over and above our Born Electric portfolio,” stated Jejurikar, adding, “The 7 LCV have electric versions as in. So a lot happening to make us future-ready.”

Apart from rolling out new products and developing new technologies, the investment will also be used for capacity expansion, taking the annual capacity from 6 lakh units or 49,000 units per month currently to over 8.64 lakh units or 72,000 units per month.

“FY23 we have exited 39,000 per month capacity and expect to end next year at 64,000 units per month. And at the end of FY 26, we expect to end with 72,000 units per month," said Jejurikar.

He went on to add, “For SUVs, we will be expanding by 5,000 units per month additionally and that covers up for the 5-door Thar (to be launched this year) and 10,000 units of Born Electric vehicle capacity that will be kicking in by exit of FY 25. It will include another 8,000 units of Born Electric (vehicles') capacity."

The company has also lined up an additional investment of Rs 1,000 crore in its subsidiaries. However, he clarified, “This expansion does not mean that we will not have more ICE capacity coming in but that will happen after FY 26.

Meanwhile, M&M is looking at a mid-teens to high-teens growth for this financial year which will enable the company grow its sales beyond half a million units per annum.