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Edited Transcript of M&M.NSE earnings conference call or presentation 11-Feb-20 8:30am GMT

Q3 2020 Mahindra and Mahindra Ltd Earnings Call

Worli, Mumbai Feb 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Mahindra and Mahindra Ltd earnings conference call or presentation Tuesday, February 11, 2020 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Pawan Kumar Goenka

Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director

* Sriram Ramachandran

Mahindra & Mahindra Limited - Senior VP of Corporate Finance, IR & Special Projects and IR Team

* Vankipuram S. Parthasarathy

Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board

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Conference Call Participants

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* Gunjan Prithyani

JP Morgan Chase & Co, Research Division - Analyst

* Hitesh Bhargava

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Hitesh Goel

Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst

* Kapil R. Singh

Nomura Securities Co. Ltd., Research Division - Executive Director

* Kumar Rakesh

BNP Paribas, Research Division - Analyst

* Pramod Amthe

CIMB Research - Head of India Research

* Pramod Kumar

Goldman Sachs Group Inc., Research Division - Executive Director

* Raghunandhan N. L.

Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day and welcome to the Mahindra & Mahindra Q3 FY '20 Results Conference call hosted by B&K Securities. (Operator Instructions) Please note, this conference is being recorded. Certain statements on this conference call with regard to our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.

I now hand the conference over to Mr. Hitesh Bhargava from B&K Securities. Thank you, and over to you.

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Hitesh Bhargava, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [2]

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Thank you, Vikram. Good afternoon, everyone. I would like to welcome the management of Mahindra & Mahindra and thank them for taking out the time for this call. We have with us today, Mr. -- Dr. Pawan Goenka, Managing Director; Mr. V.S. Parthasarathy, Group CFO and Group CIO; as well as other senior management, including the IR team.

I now hand over the call to Mr. V.S. Parthasarathy for opening remarks. Over to you, sir.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [3]

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Thank you. Good afternoon, and welcome one and all to the Q3 F '20 press meet of M&M Limited -- and the analyst call, this is, I'm sorry. It's always -- why is it [press is happen]. So to the analyst meet of M&M Limited. Generally, in these meetings, I start with economic update, both global and local. Today, I'll keep that part very brief, but spend more time on the financials. After my comments, as usual, Pawan will talk about the overall business performance in more detail.

A small respite is expected in global growth, if I'm estimating, the group goes to pick up to 3.3% in 2020 from 2.9% in 2019. However, it remains to be seen how the coronavirus will impact this, both for the Chinese economy and the global economy at large. Currently, there are some signals that things are starting to pick up at least on the manufacturing front in China. Let's hope this smoothens out very quickly.

Closer on, we have seen some green shoots in the rural economy. The rabi acreage have been increasing, auguring well for the farm output. And there are some soft signals around the urban sector, which augers well for the -- that portion of the -- portion of India.

Overall, there is more positive news to look forward to, although a full recovery may be still couple of quarters away. The first budget of the decade lays out a detailed blueprint and provides strategic direction for both Bharat and India and lays a strong foundation, hopefully, for economic recovery.

Overall, it was a budget that will bring the 3 Rs, revive, reignite and rise to the full.

Now let me share financials for Q3 F '20 for M&M plus MVML. The operating performance of the company has been very robust for this quarter. Our OPM in the last 1 year has shown a continuous upward trajectory in spite of pressures on top line due to subdued industry. Our OPM has moved from 13.2% in Q3 F '19 to 13.5% in Q4 F '19 to 14% in Q1 '20, 14.1% in Q2 F '20 to 14.8% this quarter of Q3 F '20. The company's operational performance has also broadly met the expectation of the analysts, and especially on EBITDA and OPM, we have exceeded analyst expectations. The company also continues to deliver best-in-class operating margins amongst other peers in the industry. This improvement in trajectory has been achieved in spite of pressures on revenue due to a difficult external environment. This quarter, Q3 F '20, we showed a minus 6% revenue growth or a revenue degrowth of 6%. However, we could deliver a robust 5% growth in EBITDA and 160 basis point improvement in OPM on a Y-o-Y basis. This has been achieved through robust cost management, improved model mix and softening commodity prices. Good fiscal prudence and discipline has helped us to contain overall working capital and achieve good cash flows. Dr. Goenka will talk about this in more detail.

So overall, while our market performance has been better, are in line with the industry, we have significantly outperformed the industry when it comes to financial performance. However, our reported stand-alone financial performance is impacted by one-off and exceptional items, both in the current quarter and the comparative quarter of F3 -- quarter 3 F '19. In the previous quarter of Q3 F '19, there were 2 one-off gains, totaling to INR 599 crores at PAT level.

There is a onetime dividend received from a subsidiary of INR 204 crores and a onetime tax credit of INR 431 crores to the company. In EI, there is a hit of INR 80 crores on account of impairment of certain investment. As against this for the -- in the current year's quarter, which is Q3 F '20, for a major listed subsidiary of M&M, there has been a fall in market price, on consequent testing of impairment as per accounting standards, based on a conservative approach by the company and as agreed by the auditors, we have recognized an impairment charge in the current quarter for that subsidiary. Some additional aspect that needs to be noted. This is a noncash charge. The subsidiary is currently facing headwinds, both in domestic market and the international market. But eventually, the cycle will even out. The management is taking several initiatives and action to address this, and that includes leveraging partnerships. The business case remains robust, and the company's board strongly believes it can create value and ensure returns, not only to future investment but also the past investment. I'm looking at Mr. -- Dr. Goenka, and I think that he's going to cover this in greater detail in his comments. So we see an EI hit of INR 601 crores due to impairment this year and a INR 47 crores one-off gain this quarter versus an EI of INR 80 crores and a onetime gain of INR 599 crores in the previous quarter, as explained earlier. This has led to a swing of 1,073 quarters -- INR 1,073 crores in the relative Y-o-Y performance, which explains the huge variance that you see in the reported results. If I were to take these one-off and EIs out, then the PBT will show INR 1,323 crores, which is a growth of 1.7% versus previous year, and PAT at INR 934 crores will show a 6.5% growth.

Now let me take you quickly through the Q3 segment analysis and financials. Auto segment revenue at INR 7,424 crores is lower by 6.2% versus Q3 F '19 revenue of INR 7,915 crores, but EBITDA has shown an increase of 14.9%. This has been achieved through robust cost focus, material cost management and favorable model mix. OPM of 13.7% is a jump of 250 basis point over Q '19 of 11.2% and even sequentially higher by 110 basis points over Q2 F '20. Segment result at INR 542 crores registered an increase of 17.6% over Q3 figure of INR 461 crores.

FES. Revenue at INR 4,278 crores is lower by 7.7% against Q3 F '19 revenues. At the segment level, the OPM for Farm Equipment Sector is at 19.9%. It is slightly lower than the previous year of 20.7%. However, given this is a benchmark OPM and the best amongst peers, as was stated earlier. Segment result at INR 831 crores, lower by 6.4% versus last year's Q3 of INR 888 crores.

Now let me move to consolidated financials. At a consolidated revenue -- level, our net revenue was INR 25,303 crores, with a degrowth of 4% over Q3 figures of INR 26,352 crores. In the segment results, the consolidated PBIT was 670 -- INR 667 crores, which is 60% lower than Q3 numbers of INR 1,674 crores. Higher degrowth at consolidated level is primarily due to higher loss and impairment related to SYMC. More details will be shared by Dr. Goenka.

Few highlights from our key sectors are: Tech M posted a PAT of INR 1,146 crores; Mahindra Finance reported a PAT of INR 472 crores as against INR 399 crores last year, delivering a growth of 18%. Overall, if I have to summarize, I would say that amidst very tough external environment, Auto & Farm and the operating performance of M&M, we have been able to deliver a robust operating performance. Now I request Pawan to give his comments, please.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [4]

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Thank you, Partha. So as you have already seen that this quarter was -- saw 2 distinct buckets for us in terms of performance. If we look at our performance in domestic core business of auto and tractor, I believe that we have done very well, as Partha has just taken you through, and I'll give you few more highlights. And when we look at some of our international businesses, there have been challenges in these businesses, and I'll talk about some of those in my opening remarks.

So coming to our core business of auto and tractor, especially in domestic market, in Indian market, within the constraints of where the industry is, and both auto industry and tractor industry had a degrowth in the quarter, we have done same or marginally better than the industry in terms of market share in auto, in all 3 segments of auto, and also in tractor, where we have marginally improved our market share in the 9-month period. In auto, of course, the operating margin has jumped by 2.5% compared to last year and even compared to last quarter it has increased. In FES, there is a significant improvement in balance sheet during the year. And in fact, between auto and tractor combined, the cash generated from the business is the highest that we have seen at least in 5 years in any quarter. And the inventory levels are very comfortable. In fact, for auto, it is lower than the normal inventory that one would like to have, and in tractor, it's roughly where the inventory should be at that point of time. So fairly okay on inventory.

I will not go into electric short sector. And if you have any questions on electric during the Q&A, then I'll come back to it. Let me just jump straight to the international subsidiary. I will only touch upon two. And if you have questions on any of the other ones, then we can get into it in the Q&A. The other 2, which perhaps contributed the maximum to the losses in the consolidated results or to reducing the profit in the consolidated results. And the one is MUSA, Mahindra USA, tractor company. And the second one is SsangYong. Mahindra USA, you will recall last year, we had talked about how we have significantly changed our business model and how we are working towards bringing down inventory and reducing financing costs. So we are roughly about halfway through in the -- sort of the changes that we are bringing into the company. Our inventory has gone down by 20% at the dealer level, 40% at plant level. And billing volume last year was -- or in the first 9 months is up by about 20%. So I would say we are roughly half of where we want to be at the end of 9 months during this year. And hopefully, in the next year, we would be completing the task. That when it comes to SYMC, I won't talk too much about the performance that is in front of you. Partha has also covered some of it. You know that we had to take an impairment in our investment this year of INR 500 crores plus, and SsangYong also had a write-down of asset of about KRW 57 billion. Just for your convenience, to get million from billion, just divided by 1.1. And if you are very good in math, divide by 1.157. So in SYMC, so as I said, I won't go too much into the past, and I will just talk about what we are doing from here on. But if there are questions in the past, I will be happy to cover those.

The only thing that I want to say about the past is that as of end of first quarter of 2019, things are looking very positive. And in fact, I was hopeful that we will have a breakeven year for SsangYong. And things started deteriorating in the market conditions in quarter 2 onwards. And because SsangYong is a company that is -- that was at the edge of breakeven, any reduction in volume has had a much severe -- much more severe impact on SsangYong than it would have on a company that is reasonably profitable. That is pure math, nothing more than that. And in the export market also, there were 3 or 4 markets where external environment has not been very kind to us.

But let me now talk about what happens from here on. The SsangYong Board, on 16th December, has approved, after several rounds and deliberation, the business plan for 3 years. In this business plan, SsangYong will become breakeven in the third year that is 2022 calendar year. What it requires is approximately KRW 450 billion to KRW 500 billion, that means about $400 million to $450 million of fund infusion. And we obviously will be looking at a combination of 3 sources of funds coming from external borrowing, coming from third-party investment and coming from Mahindra investment. We have not yet concluded on which source will bring how much funding. But that's the total funding required, including repayment of past loans. So out of this KRW 450 billion, KRW 500 billion, about half of it is repayment of past loans, and about half of it is fresh investment into the company.

And just to put this in context, while $450 million or $400 million may sound like a large -- lot of money, but it is approximately 2 new product development programs that we would undertake in an auto company even in India and represents less than 1 year of CapEx that Mahindra would have in a normal year. But that's what we need to turn around the company. What we obviously have to do, and there's no rocket science in it. We have to increase volume, we have to reduce cost, and we have to increase efficiency. We have already achieved some of these things and working on more. For example, a very tangible thing that has already been implemented is an agreement with the labor union, whereby they have agreed to take a hit in their compensation for some time for the company to become normal. And this will go a long way in terms of helping us to breakeven. The second thing that we are doing very tangible is to look at, very aggressively, material cost reduction, working with an outside consultant, whereby we are targeting about $90 billion reduction per year, which means approximately 3% to 4% of material cost. The third thing that we are doing is making synergies with Mahindra in product development, almost a given rather than an option. And thereby, the new development programs, that is the C-SUV, B-SUV will be aligned with Mahindra and significantly will reduce the CapEx and even material cost by doing that. And then the fourth thing is to look at how do we look at new export markets. The domestic market growth will be more or less in line with what happens in the domestic industry. And therefore, we don't expect domestic markets to jump too much over the years. But export, where we have declined sharply in the last 3, 4 years, is where we see an opportunity to get back some good volumes. And the 2 markets we are focusing on are Russia and Vietnam. Russia is unlikely to happen during this year. If all goes well, it should happen by middle of next year. Vietnam could happen towards the end of this year. So basically, that's the 3-year plan. Of course, I can go on in lot more detail, but this pretty much summarizes how we are expecting to get back to profitability for SsangYong.

If I was to look at now FY '21, coming back to India, and what is the outlook that we see, on the passenger vehicle side or auto side, the SIAM estimate is PV growth of 2% to 4%. Obviously, given that we have had a very bad year, this may look like a small number. But the reason we have been cautious in saying 2% to 4% is because of BS VI coming in and prices going up. And therefore, for a while, consumer sentiment will remain negative, and therefore, 2% to 4% is the growth that we're expecting right now. On commercial vehicle, maybe somewhat low -- somewhat higher, 4% to 6%, including for MHCV. And therefore, overall auto growth of about 3% to 5%. This obviously is being helped by focus on rural economy that the Government of India has. And that should -- unless something negative happens in terms of agriculture output, which right now we don't expect, that should do well for us.

On the tractor side, this quarter, current quarter, we expect to see a growth of about 5% to 7% in the industry, leading to an overall degrowth for the year of about 7%, which currently stands at about 9%. And for the next year, it's bit too early, but our best estimate right now is about a 5% growth plus/minus 2%. And the reason we are saying 5% growth is because of many sort of positive signs that we see today. Rabi sowing has been good, 8% above normal. The reservoir levels are very good. And that means that even if the monsoon is somewhat deficient, then because of good reservoir level, we will not see a very -- major negative impact on agriculture. And as of now, there is no negative on the monsoon. The El Niño impact appears to be neutral as of now. So, therefore, 5% right now with plus/minus 2% range appears to be a fair and realistic growth for us to talk about for next year.

Transition to BS VI more or less on track, not just for Mahindra, but as much as I can determine, for all the companies. We are in the process of petering down our BS IV production and ramping up BS VI production. And before March 31, all the vehicles should be produced -- we should be producing BS VI for all the vehicles. Cost increase, I have already talked about in the past, cost-wise about INR 15,000 for petrol, and diesel between INR 50,000 and INR 70,000. Price increase will depend from manufacturer to manufacturer. Some may decide to pass on everything, some may decide to pass on in phases, and some may decide to absorb some. So that we don't know how everyone will play it out.

New launches, very quickly, are on track. We have talked about most of these, so I won't repeat W501 that is THAR, W601, Z101. On electric vehicles, e-KUV, the Atom, the e-XUV300. On commercial vehicle side, the FURIO ICV range, the LCV range and the Cruzio minibus. And also, I can just point out that we are working on a fairly major program for developing a new tractor platform called K2. I don't think we have talked about that in the past. And the K2 platform will have 4 different tractor ranges or horsepower ranges and designed for both domestic as well as international markets. The work is primarily or majorly being done in Japan right now in cooperation with Mitsubishi Agricultural Machinery. So this is a very ambitious major program of tractor development for us. And finally, 2 more points, one on Ford. So we have a small sort of first tangible output of our alliance with Ford, where we'll be launching a connected vehicle solution. I think Ford is launching it this week, and we'll be launching it at the end of this financial year. This was developed jointly after we announced the Phase 1 of our collaboration. The C-SUV platform work is going on in full swing. And this will be saving us approximately INR 1,000 crores in terms of overall investment compared to if Ford and Mahindra were to do this program separately. Same thing is happening on the B-SUV with similar saving that will happen. B-SUV program is about a year behind the C-SUV program. We also have recently talked about using Ford's unused capacity for expanding Mahindra's engine capacity. That will save us a CapEx of about INR 400 crores. And Mahindra G12 engine is getting ready to go into a Ford vehicle in the first quarter of next year. So these are sort of Ford activities. As you probably have read, that we have already received yesterday the CCI approval. So now we just need to start completing all the processes. And we are hoping that by end of May, we should be completing the process of the joint venture. On the investment, we had announced INR 18,000 crores as the investment including CapEx as well as the equity investment. For FY '20, '21 and '22, I've just talked about INR 1,000 crores as saving coming from Ford, which makes it INR 17,000 crores. We are targeting INR 15,000 crores by looking at other areas of investment addition. And I should also point out that in no case would we allow the investment to go above INR 17,000 crores, including whatever money we have to invest in SsangYong. So that kind of becomes an upper limit of investment for FY '20, '21 and '22, hopefully, bring it down to INR 15,000 crores. So that's sort of the summary of what I wanted to talk about. Now we can open it up for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a first question from the line of Kumar Rakesh from BNP Paribas.

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Kumar Rakesh, BNP Paribas, Research Division - Analyst [2]

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My first question is to Dr. Goenka. You were quoted in the media articles suggesting that BS VI transition could be hit because of the coronavirus impact with the supply chain getting hit. Can you help us understand which specific BS VI component supply is getting hit? And you have a fair representation at SIAM. Do you see other OEMs also struggling with the same challenge?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [3]

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So the concern that I had talked about was not so much in BS VI, because BS VI we're just ramping up, and a week or 2 weeks of components not coming in, it's not going to make a major difference to BS VI. In any case, the BS VI volume offtake will be very slow. And therefore, BS VI is not the concern. What I had talked about is BS IV, where we have 1 component coming from China, and that affects approximately 3,000 to 3,500 vehicles of BS IV, total effect. We are hoping that it will open up in a week to 10 days. If that happens, then we'll be able to still manage, time-wise. If it goes beyond, let's say, February end, it will become very difficult. And then we will have to request the Supreme Court to give us little extra time to sell these vehicles. So that's the total risk that we have, the 3,000, 3,500 vehicles of BS IV. As you also know that China has started opening up and supplies have started trickling in. So we are hoping that we will not get to a situation where these 3,000, 3,500 vehicles become a risk for us.

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Kumar Rakesh, BNP Paribas, Research Division - Analyst [4]

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My next question is around the new tractor platform, which you talked about is under development. Can you help us understand which specific category you are looking at getting that...

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [5]

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No. So this is the first time we have talked about it. So this is the first teaser. With time, we'll give you more and more information. For now, all that I can say this is the most ambitious tractor development program that we have undertaken. We'll have 4 horsepower ranges that will come on this tractor platform. And it will be for both India as well as international markets shared with Mitsubishi Agricultural Machinery, which as you know, is our joint venture with Mitsubishi.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [6]

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Comes up to 2,400.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [7]

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Okay. So I've just been informed that the number 3,500 of risk has just come down to 2,400. If the call is long enough, then maybe it will keep reducing and becomes 0 before the call gets over.

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Operator [8]

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(Operator Instructions) We have next question from the line of Pramod Kumar from Goldman Sachs.

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [9]

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Pawan, sorry for this, but I'm going to ignore -- for the time being, oversee the -- overlook the India performance and go to SsangYong first. We had earlier targeted a breakeven in 2017, now the breakeven has shifted to '23, right? So what has gone wrong? And what is the confidence in terms of achieving this breakeven at SsangYong in the next 3 years? Because we've been -- we probably have invested over $1 billion since we acquired this company, and we haven't had much of a return as such. So just wanted to understand -- appreciate the fact that you put upper limit on the CapEx plus investment for the next year. But on the longer term, what is the thinking here? Or if any of the fundamental premises have changed since you acquired the company? If you can share that as well, that will be really great.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [10]

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So I think only premise that has changed since we acquired the company was a slowdown in the overall global auto industry that we have seen in the last 12 months, okay? And as I had mentioned in my opening remarks, that as of first quarter, it was looking like that SsangYong will be breakeven. And therefore, with a normal year of automotive volume, SsangYong would have been fine. Okay? So that's really the only thing that has changed. And the reason it looks to be a very big impact on SsangYong compared to, let's say, Mahindra or any other large OEM is because SsangYong was at the sort of breakeven level, plus/minus 1%. And when you are at the breakeven level, as math will tell you, any drop in volume can have a fairly big or major sounding impact. So that's the only thing that has changed. Let me first correct that we have not invested $1 billion in SsangYong. In fact, after first investment, which was -- Partha help me, how much was the first investment?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [11]

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INR 2,450 crores.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [12]

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INR 2,450 crores was the first investment. And after that...

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [13]

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Total investment.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [14]

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Total so far is INR 2,450 crores. Yes. Okay. Total investment so far is INR 2,450 crores. Most of the investment that SsangYong has made in product development has come out of its own generation or out of outside loan, not from Mahindra. And I should also point out that every year, up until this year, 2019, SsangYong had been cash positive in terms of operations, and the investment that has been made or the money -- the funds that have been required, have been required for future product development and not for running the company. And as we look at the future, as I've mentioned to you, that KRW 450 billion to KRW 500 billion is what we expect to be the fund requirement that once again is not going into, what I would call, EBITDA loss funding. EBITDA is positive this year, in 2020, 2021 and 2022, of course, and has always been positive, except for the 2019 when we were minus KRW 4 billion, that means about $4 million minus, the net has always been positive. So now KRW 450 billion to KRW 500 billion that I just mentioned will go into the total product pipeline. And as I've mentioned that out of KRW 450 billion, actually about KRW 250 billion are repayment of loan. So the fresh fund requirement or net fresh fund requirement is only about KRW 250 billion to KRW 300 billion. And KRW 250 billion to KRW 300 billion is approximately 1.5 vehicle programs. I just want to put that in the context that for an auto company that kind of investment is not something that becomes a major investment.

Now from the viewpoint of what it does to our P&L and what it does to our investment, of course, that's something that you have already seen, that this time this year, the consolidated level -- SsangYong did pull down our profit significantly at the consolidated level. But that's again mostly coming because of D&A, depreciation and not because of EBITDA loss. Now I think the most important question that you would have is what is the confidence that we have in this plan that we've talked about, and will we be sitting here 3 years from now having a similar conversation, okay? Clearly, no one can give you a black and white sure-shot answer to that. There are no sure-shot such things. All we can talk about is that this time around, everyone is looking at the business plan very carefully, the Board of SsangYong. In fact, we have engaged an outside consultant to review the business plan of SsangYong and independently tell us, not coming just from SsangYong management, but independently tell us whether this program or this business plan is something that we can take as realistic plan and invest based on that plan.

So that's an extra layer of confidence that we're trying to build in into the business plan. The part about cost reduction based on the experience that we have had in the past in India, we are fairly confident on. The part about CapEx, we are fairly confident on, because that's something that we have done time and again. The part that, of course, remains an unknown, that nobody can give any guarantees on, is the volume growth. And therefore, volume growth is what the total performance will depend on. And clearly, if Mahindra is going to invest more money in SsangYong, Mahindra will be reasonably certain that the 3-year plan that we have put in place will work out, and we will have a situation of breakeven in 2022.

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [15]

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Okay. Now I'll address my question to Partha on the stand-alone performance.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [16]

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Why does Partha get the easier question and I get the more difficult one?

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [17]

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You're the man...

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [18]

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He's the one.

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [19]

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So Partha, on the India business, I think, good performance. I think Operation Kuber clearly reflecting in your margin performance. But how should one look at how much of more of the benefits are still to accrue on the cost side going to BS VI? And how should one look at margins in the BS VI era for you? For the automotive business, tractor doesn't get impacted. But if you just talk a bit more about the cost and the benefit kind of jostle in the BS VI era, sir?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [20]

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Okay. So you're asking me to do a crystal ball, and you know that's the toughest one for me because we don't give forward-looking statements. But having said that, let me dissect the cost element and look at each of these elements. One of the biggest beneficiaries from an external point, before I start talking about internal, is about the tailwinds and material cost, okay? And that is the material cost tailwinds, you all are, in fact, more research -- you do more research and how the trends are occurring. You can take it as a philosophy that we do pass on whatever material cost increases happen. But, however, currently, we are at a cycle where it is giving us benefit, and we hope that it continues, but there are always cycles here. So that's how we should look at that line item.

The second is project Horizon and project Kuber done by auto and farm respectively. These are costs which are -- in terms of the benefits, are permanent in nature. And we hope so it's certainly permanent in nature. And this is giving us very good, not just on the material cost line, but also up to EBITDA, all the lines. Yes. So -- and this is something which can continue.

The third portion, this time what auto got a huge good benefit is on model mix. They've got a very good model mix. It is always our endeavor that our power brands do well. And as the power lines do well, our margins do well. So this is an attempt and how it pans out, for future, you can do it, but we hope it will continue. But projections, we cannot make. The next -- last one out of the material cost is in terms of stock -- the stock. At this time, we have no net-net benefited at M&M level, we don't have a hit because of stock increase or decrease or vice versa. We don't have a positive impact. So these are the elements, Pramod, I would like you to kind of look and factor them in.

BS VI, you asked and I will not dug that question. There is a cost increase, and there will be a price increase taken. Yes? And if you take a little bit of measured price increase, we hope other elements will come and kind of manage margin. All I can show you is the 5 quarters trend, 13.2%, 13.5%, 14%, 14.1% and 14.8% this year -- this quarter. So this is the trend, but future -- the past is not, as they say, only indication for future.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [21]

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Pramod, let me be a little bit more bold in answering your question. So if I look at the petrol vehicle, and we have right now only 2 petrol vehicles in our portfolio, XUV300 and KUV100. In both of these, we have taken a INR 20,000 price increase already announced. And both of these pass on the cost increase and also make some margin on that, in line with the margin that we have in our products. For diesel, as you know, cost increase is much higher. And every automaker will take a call on how much of it to pass on and whether to pass on everything in one shot or do it in 2 or 3 tranches and how much margin can one potentially make on this cost increase. It will depend, to a large extent, on the competitive scenario, who does what, and also depends on where the positioning of our product is. So we will start announcing these price increases. Mahindra, as you know, has always kept the financial performance in consideration as we take such calls, and we'll do the same thing again. And there will be products where we'll take the full cost increase, and there will be products where we'll do partial increase in phase 1 and another increase in phase 2. But eventually, we will try and recover all the cost.

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [22]

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And Pawan, with timeline on the launches, there's so many launches coming up, including the XUV500, the new Scorpio, everything. If you can just say, quarterly, what is the kind of expectation on major automotive brand launches, sir?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [23]

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Okay. Are you allowed third question, I'll be happy to answer.

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [24]

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This is a follow-up.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [25]

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Okay. This is not a follow-up. All right. Okay, okay. I think I others will have the same questions, I'll answer it. So the question is sort of timeline of launches, right?

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Pramod Kumar, Goldman Sachs Group Inc., Research Division - Executive Director [26]

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Yes.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [27]

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Okay. So we have several launches coming up in the next 18 months to 24 months. The most imminent one is the launch of e-KUV100, which in terms of volume, obviously will not be very large, but very important launch for us because of the very, very aggressive pricing that we're able to do in this one. And this should be happening in the first quarter of the coming financial year. The next one is the new THAR which should also happen in the first quarter of next financial year. And we're very excited about that launch. We decided not to showcase in the Auto Expo because we didn't want it to get lost in the crowd, and we'll do a separate event for that. Following from that would be the launch of the Atom, which is the mass mobility electric vehicle that we showcased in Auto Expo. We are very sort of positive on this launch because we think this will be a perfect last mile connectivity electric vehicle, very affordable, very comfortable. And therefore, we expect this to become a major volume driver for electric vehicle. And we expect this launch to happen in the second quarter of next financial year, FY '21. Followed with that will be the launch of W601, which is a brand new platform, SUV, crossover SUV. That will happen in the first -- or the fourth quarter of the next financial year. That means first quarter of 2021 calendar year. Followed with that will be Z101, which will be happening in the first quarter of FY '22 or second quarter of 2021 calendar year. Followed by that will be the e-XUV300, which we showcased in Auto Expo. That should happen in the middle of calendar year 2021. That's on the passenger vehicle side. I'm not talking about the refreshes that will happen. There are several refreshes that are happening on many products. I've only talked about the new launches, the new platforms. Then on the commercial vehicle, we have showcased -- not showcased, launched the Cruzio minibus in the Auto Expo, 12-seater and 42-seater. On FURIO ICV, we have launched several variants, 5 have already been launched and 5 will be launched during the next financial year. That will be from -- covering from 5.4 to 7.2 tonne. And that will complete the range of commercial vehicle for us from 0.5 tonne to 49 tonne. And then on the tractor, I've mentioned, the K2 platform is the main one where the launch will start from middle of 2021 and carry on for almost 2 years as we launch different horsepower segments in the tractor.

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Operator [28]

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(Operator Instructions) We have next question from the line of Raghunandhan from Emkay Global.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [29]

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It's only 1 question I wanted to just -- one question on JAWA. Last quarter you had provided an update. If you can provide an update on how the production and volumes are going? There was also some news relating to doubling of production to 10,000 per month by January. And if you can also indicate the breakeven point for JAWA.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [30]

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I think on JAWA, last year, we -- last time, we had especially requested Anupam Thareja to come in to this conference. Today, he is not on the conference. But I can basically say that there is nothing significantly new to report. Things are going as per the plan, and whatever was mentioned in last conference is happening. We are constantly increasing our volume and looking at new products to be launched. Perak was launched also, I think, November '19, and booking started in January '20, and more products will be coming up.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [31]

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Can you share the volume number, sir, for the December quarter?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [32]

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We are not sharing volume numbers.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [33]

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Yes. So just to give you a perspective, last time when Anupam came in, what we had made a request is, you were very keen so we will give you some numbers. Give us a little bit of space. In May, we will come and share. And by the time the annual numbers will also be due. And it will be a good time for a very -- a company which is just doing its early bit to give it enough time. But I must share you that we're looking at it very, very positively on a 10,000-feet level, and you'll have more details in May.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [34]

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I think one summary is -- one sentence summary would be, this is where we said that we started in two-wheeler.

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Operator [35]

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We have next question from the line of [Dinesh Singh] from Morgan Stanley.

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Unidentified Analyst, [36]

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Congratulations for good performance on the India business amidst very challenging times, but it was dragged by the consol business. And in fact, even when we look at between FY -- sort of FY '14 to FY '19, we see that the consol profits have lagged the stand-alone profits. By stand-alone, I mean M&M plus MVML. So in light of this, is there a rethink on the federation structure or a rethink on incremental investments that you're planning to do in -- on M&M plus MVML business?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [37]

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You want to go?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [38]

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Yes. So first and foremost is that whenever -- you are right, this is a fact that our consolidated profits are lower than stand-alone profit and, therefore, that point is well taken. We are having basically 2 big ticket items where we are seeing that last 2 kind of coming. One is in SsangYong and one is in MUSA. SsangYong, you already have had an update from Pawan. And in some sense, we also covered -- you didn't cover Mahindra USA specifically, Pawan. You did cover.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [39]

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But it's very...

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [40]

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Yes, it's very short. But to say that we -- also on year-on-year, you will see a greater improvement every quarter. And next year, we should be on the breakeven to positive mode. So this is the broad coverage on MUSA. This is how we will handle it. Just -- sorry, go ahead.

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Unidentified Analyst, [41]

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Yes. Actually, the point I was trying to make is that even when you look at FY '14 to FY '19, the consolidated profit for Mahindra has grown by around 3% whereas M&M plus MVML profit has grown by around 7%. So for last few years, we've seen that in the consol business ends up being a bit of a drag on the stand-alone business. So in that context, when you look at incremental investments outside the automotive business, is there a sort of a rethink on that? Something on more on those lines?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [42]

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Yes. So just one more point, and Pawan, then you can come in. There is one technical thing that you need to look at because the good companies are paying us dividend, which goes into the bad growth in M&M plus MVML. And when you compare that with the consolidated, yes, so if you remove the dividend and see it, it must give a much closer figure, but that's more technical, yes? But what your point is that we are in a cycle where the investments that we have made is not yielding as that kind of a positive momentum from a profit growth point of view, yes?

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Unidentified Analyst, [43]

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Correct.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [44]

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And we hope that the cycle reverses. From a capital allocation point of view, you are aware, how we have said that we look at each investment on its merit, we look at the IRR that it gives from a financial perspective, we look at what it does to us strategically, and I've explained that all to you in terms of our investment philosophy. We will continue with that philosophy, but building more checks and balances because of the external environment, which has also changed dramatically over the last 4 or 5 years, yes? And more about this maybe after the year-end, when you have the analyst conference, we will take this as one of the subject matter and could have longer discussions around in terms of thought process and how we address various loss-making subsidiaries.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [45]

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And then I just want to add 2 things. See, first of all, in terms of total investment that M&M Limited makes, bulk of it goes into M&M and not into outside investment.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [46]

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Bulk of it goes to AFS.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [47]

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Yes. That's what I mean. I mean, M&M plus MVML. Bulk of it is going to M&M plus MVML. I don't have the number in front of me, but it certainly will be more than 50% going into M&M plus MVML. And only about the remaining is going into the various investments. That is one point. So it may look like that we are investing lot of money outside the M&M Limited, but the number in terms of investment may not be as large. The consolidated profit loss is a different thing, I'm talking about investment. And the second point that I want to make is that in automotive and tractor business, as we look at growing beyond India, the gestation periods are long. And that's -- one cannot take that away. And no matter which company you look at, when it goes into a new market, with the MNCs coming into India in automotive business or anyone going anywhere else, there are long gestation periods. And if we were to take a call that we will not invest in the long gestation period investments, then we would be constraining ourselves to the India domestic business. And that's not how we can grow in the long term. So there may be some discomfort in terms of the time it's taking for us to turn around some of these investments to become profit making. And it has not been helped by the last 2 or 3 years of slowdown that we have seen in the auto industry globally. But we still believe that while -- as Partha said, we'll be obviously looking at each investment a lot more critically as we'll be doing that. But even so, I would like to think that we have to take these bets. And if we didn't take these bets, then we will not have the growth engine for the future.

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Unidentified Analyst, [48]

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Right, right now the point well taken. Just one suggestion. Maybe the company can explore to sort of give a longer-term return on capital employed target. Like when you meet us in May, maybe have like a 2025 target. Because that will just make it easier to sort of put some number as to where things finally reach to.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [49]

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I got that input, and I've taken onboard. We will kind of think through. And in May, we will come back with a response. We may come back to with a response. We will come back with a response. So I don't know which is correct.

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Operator [50]

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We have next question from the line of Kapil Singh from Nomura.

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Kapil R. Singh, Nomura Securities Co. Ltd., Research Division - Executive Director [51]

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My question is on the electric side. We are seeing a significant number of new launches. Could you talk about where are you seeing initial signs of success? In which segments you see electric could gain significant market share in next 2, 3 years? And are these products going to be profitable right from the start for you?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [52]

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Okay. So the segment that is clearly taking the lead right now is the 3-wheeler segment. And in fact, if I was to include the lead-acid battery 3-wheelers that are being sold, which are not -- which I don't think will be the long-term future. But even so, if we include those that are being sold right now, we are now selling in Mahindra close to 1,500 a month of these 3-wheelers. 500 of these are lithium-ion Treo and 1,000 of these are the e-Alfa lead-acid. In lithium-ion Treo, right now, we are the major player, in fact, almost the only player. And the e-Alfa, there are many, many players in that segment. So that will be the first segment that, I believe, will take off. And the reason it will take off is two. One, already with the current level of fame benefit and current level of GST, the Treo kind of 3-wheeler is commercially viable for the owner-operator. That means owner-operator makes little bit more money per month after paying for all the expenses on the Treo than he obviously will make on the petrol, diesel or CNG 3-wheeler. And therefore, commercial viability is established. It's just a matter of the operators getting used to it. And for Mahindra, the Treo is at the variable cost level profitable from the word go. And as the volumes go up, I'm sure that it will become profitable at the EBITDA level also and then at the PBT level. So I don't think that the time is very far. I don't have a calculation right now as to how much volume we require per month to get to that level. But it's not very far for getting a PBT breakeven on Treo. We already are, like said -- as I said, variable cost profitable.

On the second segment that is emerging, but slowly, is the fleet operation. E-Verito and a Tata vehicle are the primary vehicles being used in the fleet operation. We have now launched the e-KUV100, which I hope will be more desirable because of low ticket price that we have, INR 8.25 lakhs. And once that vehicle gets accepted in the fleet segment, the fleet segment can grow very rapidly. Now our calculations are that e-KUV100 at the INR 8.25 lakhs price is commercially breakeven for an operator compared to an IC engine vehicle that they may be operating. And therefore, commercial viability at INR 8.25 lakhs is established. INR 8.25 lakhs is not a probable price. This is introductory price. But if we get to a volume of, I would like to say, 500 or so per month, then it will become variable cost profitable. The e-Verito is already profitable for us and is selling about 100 a month. But again for it to become meaningful, the volume has to be minimum 500. The bus segment is not something we have presented, but bus segment also is growing very, very rapidly. I do not know the profitability of the bus segment and I don't know whether current OEMs are making money in the bus segment. I would just like to add, though, even though we don't make forward-looking statement that Mahindra Electric, we are expecting to be EBITDA positive in FY '21.

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Operator [53]

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We have next question from the line of Gunjan Prithyani from JPMorgan.

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [54]

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I had a few follow-ups on SsangYong. You mentioned that the infusion could come through external third-party or the -- or by M&M. Now by third party you mean are you open to some strategic stake sale there because those were the kind of news reports also circulating in December. If you can share your thoughts there? And on the write-off that you've taken in this quarter, now if I look at the investment here, it is about INR 2,400 crores, right? After taking INR 600 crores, I mean, it's not really mark-to-market to the current stock price. So what has been the thought process around INR 6 billion write-off?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [55]

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Yes. The answer to the first question is very simple, yes. Second question, Partha?

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [56]

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Okay. Are there any conversations which are -- as part of this 3-year plan, are there conversations underway where you're looking at strategic sale?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [57]

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Yes.

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [58]

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Okay. Got you.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [59]

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Okay. So this is a very involved question, which -- when we look at prices. So on one hand, I told you in my opening remarks that we think the business case not only covers the new investment but also all the past investment and good could give return. So the business case is positive on one hand. And then the market price is showing stress, right? So we have to take both of these into account in order to arrive at a conservative basis. On one hand, you can say, no impairment required because the business case is positive. On the other end, you say market price is what it is. So you put all this into the boiling pot and then you kind of appear, what is that, conservative provision that I should take, and then you have auditor also agrees with you, and that's the figure you take. But your assessment is right at INR 2,450 crores when we knock off, it still is about 25% to 30% higher than the current market price. Okay?

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [60]

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Correct. So I mean, we should not be worried that this write-off is coming. I mean, the -- there's going to be another MTM here because the way the operations have panned out, I mean if there was a write-off being taken, I thought it should have been MTM, which is why I thought how you were looking at it.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [61]

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It's a good point. Actually, all I can say is that whenever we take any write-off or any provision, for the year it is a onetime assessment, and that's what will be for the year, is our way of looking at financials, yes? So what you think is what it is for this year. And in a sense, it is our best estimate, on a very conservative basis, of what we should have in our books.

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [62]

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Sure. And the other thing that you mentioned, CapEx rationalization and cost is in our control. Now, you have some assessment on what is going to be the cost saving and the savings on the CapEx side. Do you think that with those two -- keeping the volume aside because that's something which is going to depend on how the global markets do as well as some of the export markets where things haven't really changed in last 1 year. So I'm just keeping the volume variable aside. Do you feel confident that with the cost and the CapEx initiatives, you would be able to reach a cash breakeven sooner enough?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [63]

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So see, I have given some numbers to you that we have a fairly meaningful reduction in personnel cost, thanks to the workers' union agreement that we have already put in place.

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [64]

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Sorry, I missed that. How big is that -- material costs I got, $90 million, but...

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [65]

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I didn't give a number, that's why you didn't hear the number on that one because I cannot reveal that number as to what it is, the confidential agreement between the labor union and the management. On the material cost, $90 billion is looking fairly doable based on the initial analysis that has been done by the outside consulting firm. And we should be kicking off that project, hopefully, by the end of this month. And therefore, these 2 will amount to a fairly significant reduction in cost. And like you said, that we need that volume increase to get the financial performance at a comfortable level. I just want to go back to your other question that I said very short answer, yes, to. You mentioned the word strategic sale. Just want to clarify that what we're looking for is an investment, not a sale. So it's not like Mahindra is going and selling their stake. It is about getting investment into the company and not selling much stake.

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Gunjan Prithyani, JP Morgan Chase & Co, Research Division - Analyst [66]

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Okay, got you. Just last one question, very short one. On the farm business, again, the inventory correction was taken last year, from what I recall. Then what really is the issue still there? And how confident are we of a breakeven on the farm side -- overseas farm subsidiaries next year?

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [67]

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No. So what we had said last year was that we had fairly large inventory at the dealer and at the plant itself. And we are going to take a 2-year program to bring that inventory down to the level where we want it. We have reduced inventory -- dealer inventory by 20% in the last 12 months. And we have reduced the plant inventory by about 40% in the last 12 months. We still have some more ways to go, maybe not 20% reduction, maybe 10 more percent in dealer, maybe 20 more percent in plant. That will bring us to the right level of inventory. And right level of inventory means working capital reduction and, therefore, interest cost reduction. So that's the one area that we are doing. And the second area is operational efficiency, which will save us tens of millions of dollars. And that 2 together will bring us profitability in 2021 calendar year.

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Operator [68]

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We have next question from the line of Hitesh Goel from Kotak Securities.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [69]

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Sir, just wanted to check -- double check on this consol EBIT of automotive. What is the kind of write-off included in this for SsangYong? It is INR 340 crores or it's higher than that?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [70]

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Yes. So just to -- yes, this a good question. When it comes to SsangYong, we'll consolidate it. We are not talking stand-alone, okay? Because it's -- that's a new investment impairment. In consolidation that doesn't figure in because you are picking up every quarter the financial losses or proportion of the losses that we have, okay? So therefore, there is no investment. This is an impairment of assets at SsangYong level. That impairment of assets on a gross level is INR 340 crores, and at the PAT level after NCI is INR 254 crores. So INR 340 crores and INR 254 crores, respectively. So that's the impact on the financials of consolidated.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [71]

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Okay.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [72]

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And -- yes, the segment level in our consolidated, INR 340 crores; at a PAT level, INR 254 crores.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [73]

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Last question.

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Operator [74]

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We have next -- the last question from the line of Pramod Amthe from CGS-CIMB.

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Pramod Amthe, CIMB Research - Head of India Research [75]

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This is with regard to the third partner or the partner you plan to bring into SsangYong. This is more for a value discovery or to reduce your burden? And follow-up to the same is there are talks about you looking for a partner in the EV business in India. So you're just structurally changing the way Mahindra is looking at investments into subsidiary to bring in partners so that the burden on the shareholders would be reduced structurally?

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [76]

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Just to give you a perspective, whether it is Systec when you saw auto components or any of the other investments, we have always welcomed and believed that a financial partner will actually help us from many -- in many ways, not just monetary. So this has been a philosophy, have always been, not a new philosophy that we are having from that perspective. Having said that, now you asked 2 questions about -- first about SsangYong. SsangYong -- first is that when we are looking at getting investments, it is from that perspective that investment into SsangYong will help us with both the things that you said and more. So therefore, we are keen in it. When it comes to electric vehicle, I don't want to comment on any speculation that happens. But broadly, I can say to any private equity who walks into my door that here are my 10 sectors, we welcome investments in all of them because we believe that together we can create more value. So this is a very general philosophy, and therefore, if somebody did tell tomorrow that they want to invest in Mahindra Electric, I would welcome it. But I don't want to comment specifically on -- based on the report that you may heard from market.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [77]

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But a priority preference will always be strategic partner because strategic partner will bring value also, especially when we talk about Mahindra Electric, where I have said many times that scale is the key. If you get a strategic partner who puts together their requirement of electric vehicle components into Mahindra Electric, then clearly, they create a bigger business and brings in more value. So priority will be there, but we would welcome a financial partner also.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [78]

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Yes. So sorry, I just wanted to clarify this. What Pawan said is very applicable for Mahindra Electric, but not generally.

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Pawan Kumar Goenka, Mahindra & Mahindra Limited - MD, Member of Executive Board & Whole Time Director [79]

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Correct.

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Vankipuram S. Parthasarathy, Mahindra & Mahindra Limited - Group CFO, Group Chief Information Officer & Member of Group Executive Board [80]

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What I answered applies generally, and to that extent applies to Mahindra Electric, but not in this order of priority for strategic and then financial.

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Operator [81]

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I'd now like to hand the conference over to Mr. Sriram Ramachandran for closing comments. Sir, over to you.

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Sriram Ramachandran, Mahindra & Mahindra Limited - Senior VP of Corporate Finance, IR & Special Projects and IR Team [82]

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Yes. Just thanks a lot for participating. And if you still have some queries, you can write to us, and we will respond it. Thank you.

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Operator [83]

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Thank you very much, sir. Ladies and gentlemen, on behalf of B&K Securities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.