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Last Updated : Jul 20, 2018 03:33 PM IST | Source: Moneycontrol.com

Podcast | Digging deeper - The Business of Family: Mahindras

Today we bring to you the story of a company that grew along with the Indian republic and over the years has adapted to changing economic climates to become a true-blue Indian conglomerate.

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Today, we bring to you the story of a company that grew along with the Indian republic and over the years has adapted to changing economic climates to become a true-blue Indian conglomerate.

We are talking about the House of Mahindras but before we get to their origins, let us share a news that you may have read recently.

Anand Mahindra, the Chairman and Managing Director of Mahindra & Mahindra, said this about the impending sale of Air India, " it is time to turn a crisis into opportunity. "What he meant was that with some astute thinking, the once vibrant brand could be given a new life. He also suggested that a sale be made, but only after a turnaround and also opined that the appointment of an autonomous government official as chairman and CEO will help rejuvenate the Maharajah. "A complete insulation from political pressure," he said was the key to this revival.

There are many pointers in this statement that tell us what has made the Mahindras a force to reckon with. Especially when we recall that among many of Anand Mahindra's achievements is turning around a scam hit Satyam Computers.

But well, the pointers first. What his statement about Air India and his success with Satyam Computers indicate is an understanding of the Indian political and corporate landscape and the perceptiveness to be able to negotiate both. That is..the politics and the challenges of running a business. He had also tweeted last year, " I see myself as a generally courageous person. But I confess...I don’t possess THAT much courage.” This was in reference to his inability in taking an emotional decision and bidding for the beleaguered Air India. So just goes to show that he also knows a pit fall when he sees one.

His dislike for "unionbazi" may indicate how far we have travelled from the idea of a business opportunity that benefits the foot soldiers as well as the empire builders but he is undeniably a product of his times who has in turn impacted perceptibly how business is done today. And anticipating which way consumer preferences will turn also is a skill that the Mahindras have mastered if you go by their two fresh MoUs with the government of Maharashtra to expand the presence of electric vehicles in the state.

According to news reports, With the first MoU, the company will attempt to improve its EV manufacturing infrastructure by investing pver Rs 500 crore in its Chakan plant. This is where large scale manufacturing of EVs, e-motors, controllers, battery packs and other components takes place.

The second MoU underscores a strategic alliance to empower the Mahindras to deploy EVs across major cities in Maharashtra. To achieve this, the company and the Government hope to cohesively synergise with, and we quote from news reports, " various fleet partners, taxi aggregators, logistics companies, amongst others to deploy 1,000 electric cars over the next 1 year." Unquote

So how did the Mahindra story begin?

The Mahindra Group as a casual google search will tell you is an Indian multinational conglomerate holding company headquartered at Mahindra Towers in Mumbai, with operations in over 100 countries around the globe. The group has a presence in aerospace, agribusiness, aftermarket, automotive, components, construction equipment, defence, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real estate, retail, and two wheelers. It enjoys market leadership in utility vehicles as well as tractors in India.

Kailash Chandra Mahindra along with his brother J. C. Mahindra co-founded Mahindra & Mahindra in the mid 1940s with Malik Ghulam Mohammed.

Kailash Chandra Mahindra, known famously as KC, was born in Ludhiana, Punjab, and was the second of nine children. The loss of their father at an early age made the brothers hunger for stability and affluence and they began to dream of becoming entrepreneurs.

KC went on to shine at the Government College, Lahore, and became an exemplary Honours student at Cambridge. The dream of starting a business did not materialise immediately and post graduation, he joined Messrs. Martin & Company, where he also edited the monthly magazine INDIA and, also the Hindustan Review.

As Steve Jobs wrote in his autobiography, we can join the dots of our journey in life only in retrospect and see what we were being prepared for as we examine the small events that led to our ultimate destiny.

In 1942, KC was appointed as the Head of the Indian Purchasing Mission in the United States. When he returned to India in 1945, he was appointed the Chairman of the Indian Coal Fields Committee by the government and also of the Automobile and Tractor panel. He foresaw and strategised pathbreaking coal policies that shaped the Indian mining industry for years to come. His Coal Commission Report became a definitive document in the industry. During these years, he also wrote industrialist Rajendranath Mookerjee’s biography.

And this is how the dots connected subsequently

KC's exposure to ground realities of Indian industries and to the automobile and tractor sector prepared him to branch out independently and so in 1946, he moved to Bombay to found Mahindra & Mohammed. Initially to just trade steel. Then Partition divided the nation and post 1947, Malik Ghulam Muhammad left the company and emigrated to Pakistan where he incidentally became the first finance minister of the new state (and later the third Governor General in 1951).

Inevitably, in 1948, K.C. Mahindra changed the company's name to Mahindra & Mahindra.

The Mahindra brothers initially established themselves by trading steel with UK suppliers. They also started manufacturing Willys Jeeps around 1947.

Since the time Willys Jeep was widely used in World War II, the company has gone on to build and assemble military vehicles.

For the next 13-years, under KC's leadership, Mahindra & Mahindra became a top rung Indian industrial house. KC also served as a Director of the Reserve Bank of India, Air India, and Hindustan Steel.

By 1956, the company had been listed on the Bombay Stock Exchange, and in 1969 it had entered the global market as an exporter of utility vehicles and spare parts despite the red tape inherent in what we now know as Licence Raaj.

A tractor division was created in 1982 and a tech division (now known as Tech Mahindra) was formed in 1986 and what the founders understood was that the key to growth was continuous diversification with not just joint ventures but also investment in up and coming industries.

By 1994, the Group had become become so diverse that it had to reorganise its strengths in six Strategic Business Units which were: Automotive; Farm Equipment; Infrastructure; Trade and Financial Services; Information Technology; and Automotive Components.

The rise to the top was not always easy because Keshub Mahindra, the Chairman Emeritus of Mahindra & Mahindra, a graduate from the Wharton Business School and a well-known philanthropist ran into a great deal of controversy because  at the time of the Bhopal gas Disaster, he was the managing director of Union Carbide India Ltd. In 2010 he was charged and indicted for causing death due to negligence and sentenced to 2 years' imprisonment and was also fined Rs 1 Lakh. He was granted bail shortly after being sentenced. In August 2012 after heading the Group for nearly five decades, he handed over the position to his nephew, Anand Mahindra.

How the Mahindra story is progressing now

Over the past few years, the company has started taking an even keener interest in new industries and in foreign markets. They entered the two-wheeler industry by taking over Kinetic Motors in India.They now have a controlling stake in the REVA Electric Car Company and also acquired South Korea's Ssang Yong Motor Company in 2011.

In 2010–11, the company entered the micro drip irrigation sector with the takeover of EPC Industries Ltd in Nashik. This just goes to show how astutely they gauge the potential in an industry before taking the plunge.

The saga of acquisitions and controlling stakes is too long to account for here but some of them are as follows:

In October 2014, Mahindra and Mahindra acquired a 51% controlling stake in Peugeot Motocycles.

In December 2015, Mahindra and Mahindra Ltd and affiliate Tech Mahindra Ltd, through a special purpose vehicle (SPV), agreed to buy a 76.06% stake in Italian car designer Pininfarina SpA, for €25.3 million (around Rs.186.7 crore).

The company entered the energy sector in 2002, in response to growing demands for increased electric power in India.

Mahindra has gone on to produce a varied range of vehicles, including MUVs, LCVs and three-wheelers. It manufactures over 20 models of cars, including larger, multi-utility vehicles like the Scorpio and the Bolero.

At the 2008 Delhi Auto Show, the company shared a product expansion program to launch new platforms and vehicles over the next three years and kept their word by launching the Mahindra Xylo in January 2009, which went on to sell over 15,000 units in its first six months.

An interesting bit of trivia is that all the commercial vehicles made by the company have names ending with an 'O', like in Scorpio, Verito, XUV500. This is supposedly done owing to the success of the company's first two vehicles - Scorpio and Bolero.

The Mahindra Automotive and Farm Equipment Sectors (AFS), we have learnt, is one of the largest contributors to the Mahindra Group revenue and includes 27 businesses, 18 subsidiaries and 9 companies.

Mahindra began manufacturing tractors for the Indian market during the early '60s. It is the top tractor company in the world (by volume) with annual sales totaling more than 200,000 tractors. Since its inception, the company has sold over 2.1 million tractors.

Mahindra & Mahindra’s farm equipment division (Mahindra Tractors) has over 1,000 dealers servicing approx. 1.45 million customers.

The Farm Equipment department feeds the end-to-end agriculture value chain by providing irrigation, fertilization, seeds through multiple agriculture and allied businesses.

The automotive business accounts for no less than about 48% of India’s utility vehicle market share and is the number two CV player in India. The Mahindras are present in almost every segment of the automobile industry with a portfolio that includes SUVs, luxury UVs, sedans, pick-ups, light, medium and heavy commercial vehicles to three-wheelers. Their customer base caters to both rural and urban India.

The chairman of Mahindra Group, Anand Mahindra, introduced a new company logo in 2000 but the change was not just cosmetic, because the year also saw an updation of production and manufacturing systems and by 2009, Forbes had ranked the company among the top 200 most reputable companies in the world.

As of September 2017, Anand Mahindra's net worth was estimated to be $1.55 billion. He has been included by Fortune Magazine among the 'World's 50 Greatest Leaders' and was featured in the magazine's 2011 listing of Asia's 25 most powerful business people. He was also chosen by Forbes (India) as their 'Entrepreneur of the Year' for 2013.

So let us find out a bit more about the man of the moment...what do we really know about Anand Mahindra?

Anand was was born on 1 May 1955 to the late industrialist Harish Mahindra and Indira Mahindra. He completed his early schooling from Lawrence School, Lovedale and then went on to learn extensively about film making and architecture from Harvard University where he graduated Magna cum Laude (High Honors) in the year 1977. In 1981, he completed his MBA from the Harvard Business School, as we mentioned before. He subsequently joined the Mahindra Group as an Executive Assistant to the Finance Director of the Mahindra Ugine Steel Company.

By 1989, he was appointed as President and Deputy managing director of MUSCO.

It was he who also spearheaded Mahindra Group's diversification into the fresh areas of real estate development and hospitality management.

The rise in the ranks continued thus:

On 4 April 1991, he became the Deputy managing director of Mahindra & Mahindra Ltd and in April 1997, was appointed as the Managing Director and then in 2001, became the Vice Chairman.

In August 2012, he took on the role of chairman of the board and managing director of the Mahindra Group from his uncle, Keshub Mahindra

In November 2016, Anand was re-designated as Executive Chairman of Mahindra & Mahindra Ltd and has continued to be the Chairman of Mahindra Group.

Numbers keep shifting but at the last estimation, give or take a few millions, the Mahindra Group is a US$19 billion organisation, and one of India's top 10 industrial houses.

Anand Mahindra's reputation has travelled far and wide and in April 2014, he became a member of the board of U.S.–India Business Council (USIBC).

He has also been on the International Advisory Council of Singapore's Economic Development Board, has chaired the India Advisory Council at the Lincoln Center, New York among many other roles that he juggles.

In 2014, he and his brother-in-law and sports commentator, Charu Sharma, launched the Pro Kabaddi League in India.

There is of course more to him than just profit margins and balance sheets.

In 1996, he established Nanhi Kali, a non-government organisation that supports education for underprivileged girls in India. As of September 2017, the project has supported 130,000 girls. The foundation currently supports the education of approximately 51000 underprivileged students.

His wife and renowned journalist Anuradha has launched two magazines Verve and Man's World and Anand too has varied interests and has thrown his weight behind the Mahindra Blues Festival held annually in Mumbai since 2011.

Once a student of cinema himself and now a keen promoter of the arts and culture, Anand has set up an awards platform named Mahindra Excellence in Theater Awards as also the Mahindra Sanatkada Lucknow Festival, a crafts exhibition and performing arts event held annually.

A history of philanthropy has kept the Mahindra legacy bigger than just its business empire so let is find more about that

Though he has been called the poster boy of Indian capitalism, Anand understands that a society thrives when the mind and the spirit are fed and has consistently advocated the study of humanities. He donated $10 million to support the Harvard Humanities Center which was named as the Mahindra Humanities Center in his honour.

Anand is also the chairman-for-life and one of the board of directors of Naandi Foundation, a charitable trust that works towards the socio-economic development of India.

The Mahindra Group has been involved in philanthropy and volunteering for a long time and received the Pegasus Award for CSR in 2007.

Most philanthropy is done primarily through the KC Mahindra Trust, which was founded in 1953 by K.Chimself. Since then trust has worked to increase literacy and promote higher learning through significant grants and scholarships.

The group also operates several vocational schools as well as the Mahindra United World College.

A green initiative includes Mahindra Hariyali ( which is a 1 million tree planting campaign) as well as sponsorship of the Lifeline Express, a mobile hospital train.

The CSR initiatives seem to have had a trickle down effect because Mahindra's employees lead their own service projects through Mahindra’s Employee Social Options Plans. Just in 2009, more than 35,000 employees participated.

The Mahindra Group also created the Mahindra United World College, a UWC campus located in Pune.

One of the group's companies Mahindra Cleantech Ltd focuses upon eco-friendly, or "green" power. Mahindra Solar, in 2010 offered a range of solar solutions, both off grid and on grid.

The way forward and decoding the Anand Mahindra success mantra

In a Forbes India interview, Anand Mahindra had given readers an insight into the reasons that made his success inevitable. One of the most important things he said in the interview was this and we quote, "To me, building companies that can inspire trust and gain the confidence of consumers is as important as making factories on the moon.”

So yes, he is aspirational but he knows he is working with and for people.

The interview also focussed on how the company has invested and we quote, " over `650 crore to set up Mahindra Research Valley near Chennai and staffed it with 1,500 young engineers." Unquote. This was to underline Mahindra's understanding of the fact that research and development initiatives sustain and nourish businesess.

The article also acknowledged just how Anand also realised the need for product development in the automotive space and hence set up a product development centre in Detroit. This goes to show that he knows how to fill in the gaps in his own vision.

And his vision is continuously revising itself and expanding just like his business that in the US market is in the third position in terms of market share for tractors that are below 150 horsepower (HP).

Plans are afoot also to scout or establish manufacturing facilities in the US and the company is tapping markets in Canada, Brazil and Mexico apart from Turkey and Egypt. Today, the company's revenue from India and international markets is in the ratio of 70:30 and is expected to become 50:50 within the next five years, says the Forbes article.

A key lesson Anand Mahindra has learnt and we can also learn from him is that and we quote, "“Failure is not something you want to keep encountering, but at the same time, the companies that do not fail are not doing enough. If you are only successful, it is pertinent to ask whether you are taking enough risks. I don’t get dismayed by failures, but I do if we do not learn our lessons from them.” Unquote.

So team Mahindra powers on as it builds on its strengths, diversifies them and learns from its mistakes. Because no one knows better than Anand Mahindra just how to bounce back from an error of judgment and plough on to break new ground.
First Published on Jun 4, 2018 07:02 pm
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