M & M — Q1 FY26 earnings call

M&M's SUV business delivered 22% volume growth in a market where industry growth was subdued, expanding revenue market share by 570bps to 27.3%. The Auto standalone PBIT margin held at 10% (excluding EV contract manufacturing). Key models performing well include Thar ROXX (booking pipeline strong, especially 4x4 variants; fungibility issue with 3-door resolved enabling ramp-up), XUV 3XO (REVX variants off to good start; 1,000+ units/month export target), and Scorpio N (variant upgrades). Thar 3-door volumes stable at 3,500-4,000/month. ICE capacity at ~55,000/month running at ~80% utilization. Auto PAT growth of 32% was significantly higher than PBIT growth of 15% (at consolidated level) due to surplus fund income from strong cash generation.

The EV SUV business achieved end-to-end EBITDA of Rs 111 crores (MEAL standalone Rs 90 crores + contract manufacturing Rs 21 crores) without any PLI accrual — a significant milestone. EV penetration within M&M SUV portfolio reached ~8%, with volume market share of 31% and revenue market share of 44.3% in the Electric SUV category. Current run rate is ~4,000 units/month, targeting 5,000-6,000 by festival season. Key profitability drivers: (1) only top-end variants sold so far, (2) leveraging existing M&M manufacturing assets. Management was candid that lower variant launch (Pack 2 at 79 kWh, Rs 23.7 lakhs) will be 'a little dilutive.' PLI for XEV 9e expected to be accrued from Q2/Q3 cumulatively from launch date; BE 6 PLI application in Q4. Customer profile is differentiated — ~80% are non-Mahindra customers, highest women ownership across portfolio.

Tractor volumes grew 10% in an industry growing 9.2%, taking market share to an all-time quarterly high of 45.2% (+50bps YoY). Both Mahindra and Swaraj brands contributed. Core tractor PBIT margin (domestic + exports, excluding Farm Machinery and Powerol) was strong at 20.7%, with Farm standalone at 19.8%. Farm Machinery had its highest-ever quarter at Rs 300+ crores revenue with 25% rotavator market share. However, Farm consolidated PBIT growth was limited to 6% due to Sampo (Finland harvester) impairment; underlying growth was ~18% ex-impairment. CFO confirmed Sampo impairments should not recur. Farm Machinery growth ambition has been recalibrated to focus on profitability over volume; harvester market share at only 5-6% with improved products launching. TREM V norms awaiting government decision; M&M comfortable with SIAM panel proposal for phased implementation by HP category.

Tech Mahindra's margin recovery is on track at 11.1% EBIT margin vs 15% FY27 target, with PAT up 34% driven by Telecom and Financial Services deal wins. Mahindra Finance focused on asset quality (Stage 3 at 3.8%) with AUM up 15% and PAT up 6%; disbursement slightly slower by design as the business completes technology/quality strengthening before pivoting to growth. Among Growth Gems: Accelo delivered 34% revenue growth with improved profitability; MLDL acquired Rs 3,500 crores GDV (on track for 14x pre-sales growth this decade); Susten commissioned 70 MW; Mahindra Logistics saw 14% growth with multiple deal closures under new CEO. Classic Legends won 9 awards but market performance impacted by overall slowdown. Hospitality delivered very strong numbers. SML Isuzu revealed an Electric bus — all M&M electric bus plans will be through SML Isuzu.

Exceptionally strong cash generation quarter — cash balance grew QoQ despite infusing ~Rs 2,500 crores into two subsidiaries via rights issues. ROE crossed 20% for the first time at 20.6%, though management maintains 18% as the structural target. Chakan plant expansion underway for new platform (to be revealed August 15, 2025); greenfield site not yet finalized as Chakan is yielding more capacity than expected, reducing urgency. Q4 FY25 depreciation spike (from project cleanups) has normalized in Q1 with gradual increases expected as new CapEx comes online.

Urban demand weakness is tangible and acknowledged by management, but rural sentiment is strong (reflected in tractor performance). Management expects sentiment turnaround driven by rate cuts, improved liquidity, and festival season starting August-September. SUV growth guidance of mid-to-high teens maintained, explicitly caveated against significant economic deterioration. Commodity inflation (steel +6%, precious metals) is a headwind — Q1 was partially protected by hedges and inventory carryovers, but future quarters will feel full impact if inflation persists. Price increases already taken. Rare earth supply comfortably secured for H1 FY26, mostly covered for Q4, through inventory, light earth substitution, and ferrite alternatives.