Refocussed, fleet-footed M&M has new strategy to grow in revenue, profits

The 79-year group Mahindra & Mahindra (M&M) has transformed into a leaner, fitter conglomerate under the captaincy of group MD and CEO Anish Shah as it seeks to inaugurate the next chapter of expansion. The past four years have witnessed a lot of flat-shedding exercise by the Rs 1.39 lakh-crore group as it went out of as many as 15 businesses.

Detailing how the more fleet-footed M&M is now ready for a multipronged growth agenda, Shah told The Economic Times that they are now exploring new businesses, list the auto recycling and electric vehicle (EV) units in the market, and boost overseas presence of the automobile and farm operations.

Among other focus areas of the group are IT (Tech Mahindra) and financial services (Mahindra & Mahindra Financial Services), logistics, holidays and real estate.

Among the businesses that M&M exited include dairy, helicopters, yachts, special steel, overseas subsidiaries such as SsangYong Motor and Peugeot Motocycles.

“We will potentially look at one new area (new industry) beyond our current footprint. We have been looking at that for some time now and haven’t quite found the right place where we are very confident of delivering returns that outperform the industry,” the group CEO told the newspaper, who would be in his 10th year with this conglomerate. Shah took over as the group CEO in April 2021.

The focus of the automobile and farm business is to boost its prominent position in the market maintain the growth trajectory. Expanding these businesses overseas, riding on the success of models such as the Thar, XUV700 and ScorpioN are specific targets.

In fact, the automobile and farm businesses will occupy centrestage in the next phase of growth of the group.

The markets that provide growth possibilities to M&M are Chile, Australia and South Africa. The target is to gain a market share of 15%. It will also target its resources in Nepal, Bangladesh and Sri Lanka – markets in the subcontinent which resemble that of India.

“As we see success in that we will then move to phase two and then phase three. So, what we want to do is, do less but do it very well and then go to the next step after that,” remarked Shah.

M&M has announced an upcoming range Born Electric, which is scheduled to roll out in January 2025. The decision to take this brand overseas will be taken later as the group is now seized with the target of turning it into an “outstanding new products.” By 2027 M&M expects to have 20% of its utility vehicle sales turn electric.

Mahindra Electric Automobile Ltd (MEAL) and Mahindra Accelo represent M&M’s recycling business for energy and mobility sectors. Shah wants to get these two firms listed in India. Accelo will hit the market with an IPO though the time frame has not yet been fixed. But MEAL will not be listed before 2030. In the next four years, Shah thinks this company can build a strong business.

In FY24, Tech Mahindra, Mahindra Holidays & Resorts and Mahindra Finance, generated a total of Rs 7,000 crore cash. These will also be crucial to the growth strategy of the group. “For both Mahindra Finance and Tech Mahindra, it would be about what we call unlocking full potential, because both businesses in the past have underperformed the peer set,” said Shah.

Tech Mahindra has just started a new growth path under the leadership new CEO and MD Mohit Joshi. In the last week of April, he announced a three-year blueprint to revive the company’s slowing business. Better revenue growth optimising margin improvement by FY27 are the twin focus of the company.

In July 2023, M&M acquired 3.53% stake for Rs 417 crore in RBL Bank through the open market route. This move took the market by surprise. The objective of this sudden move was to “understand banking with a long-term view of 7-10 years to enhance the value of its own group’s financial services business.”

Referring to that stake, Shah said, “We don’t plan to invest anymore. We were clear that it is essentially a treasury investment for us, which has a potential strategic option in the long term if things change, but at this point we aren’t looking at anything further.” However, RBI regulations state that industrial houses can only buy have less than 10% in a new private sector bank.

Shah also said that holidays, logistics and realty businesses have the potential of rising five times in terms of market cap in five to seven years. They would give the group huge growth in terms of revenue and profit.