M & M — Q3 FY25 earnings call

SUV volumes grew 20% YoY with revenue market share expanding 200 bps to 23%. M&M remains #2 by volume market share despite significantly higher price points than competitors. The XUV 3XO received ICOTY (Indian Car of the Year) and AutoCar awards. 3XO is running at capacity of ~9000/month with gasoline demand at 80-85% vs planned 65-70%, creating a mix constraint. Strong export traction with 3XO doing ~700/month in South Africa. Thar ROXX achieved full production fungibility between 3-door and 5-door variants. 3-door demand remains strong even after pulling off launch-period discounts. Debottlenecking of 1500-2000 additional units for each model expected by June-July 2025. YTD price hikes of 0.7% through December plus 0.8% in January. Auto standalone PBIT margin at 9.7%, up 120 bps YoY. Auto consolidated PBIT grew 31% on 21% revenue growth.

LCV volumes grew 7% YoY, outpacing industry which saw only low single-digit growth in <3.5 ton category. LCV market share at 51.9%, up 230 bps. In last mile mobility, M&M remains #1 with electric 3-wheeler category penetration reaching 25% of total 3-wheeler market, up from 20% last quarter and 9% a few quarters ago. Management views competition as category-expanding in this nascent segment. However, the broader LCV recovery remains elusive - management expressed genuine puzzlement at the disconnect between improving agricultural indicators and flat LCV demand. First-time buyers constitute 40-60% of SCV market. M&M does not see financing stress in its portfolio given favorable LTV and interest rates, and has no captive financing exposure.

The BE 6e and XEV 9e represent M&M's born-electric platform launch, positioned as lifestyle 'objects of desire' rather than economy/fuel-saving propositions. Three pillars of differentiation: design, intuitive HMI, and high-tech features. Pre-launch marketing generated 1.4 billion video views. Customer profile is predominantly non-Mahindra owners in the 25-30 lakh bracket including luxury car owners - a completely different demographic. Range of 500+ km in real-world city driving and comprehensive battery warranty are the key barrier breakers. Initial dealer rollout was accelerated from 20 cities to 250+ outlets due to demand pull. Dual-product launch creating multiplier effect rather than confusion. Management targeting 5000/month combined initially but explicitly prioritizing quality over volume. Production started Dec (9e) and Jan (BE) with <2000 sold in first month mainly for displays. Price applicable at delivery (not booking) to retain flexibility. All critical integration software including BMS owned in-house by MEAL.

From Q4 FY25, M&M will introduce separate disclosure of: (1) EV contract manufacturing margin within standalone Auto segment - margin earned only on conversion cost and product development expenses, not on materials, and (2) MEAL end-to-end EBITDA and PBIT including contract manufacturing cost and MEAL's own economics. This is a contract manufacturing (not toll manufacturing) arrangement where M&M buys materials, converts, and sells to MEAL. Capital expenditure for products sits in MEAL books. Transfer pricing is arm's length. PLI benefits will be booked in MEAL once specific audit milestones and supplier certifications are met - no firm timeline. No EV vehicle is priced below net variable margin. EBIT-level losses expected initially due to heavy depreciation load but management does not expect them to be outsized.

Tractor volumes grew 20% YoY with market share reaching an all-time quarterly high of 44.2% (up 240 bps). This was achieved despite ongoing Mahindra brand inventory correction (largely complete now). Key drivers: successful Swaraj transformation and portfolio gap-filling (Swaraj Target in <20-30 HP), OJA platform gaining 5 share points in 20-30 HP segment, Yuvo Tech success, and geographic tailwind from recovering South and West markets. Notably, management does not set aggressive market share targets for tractors - gains are purely through operating excellence. Co-tractor PBIT margin at 19.5% (up 260 bps YoY), demonstrating the through-cycle margin stability management has long emphasized. Farm including Powerol and Farm Machinery at 18.1%. Farm Machinery revenue up 12% YTD to ~700 Cr. Q4 industry growth expected >15% supported by reservoirs at 16% above LPA, good Rabi sowing, Kharif crop output, improving MSP/terms of trade, and Navratri days. FY26 outlook positive but specifics deferred to May.

International Farm subsidiaries experienced degrowth due to macro factors in operating countries, dragging consolidated Farm revenue growth to 11% despite strong domestic performance. Management is conducting a strategic review expected to conclude in Q4 FY25, differentiating between markets with structural long-term decline vs temporary macro-driven slowdowns. Different actions planned for each category. Financial impact of any restructuring to be reflected in Q4 results with clear demarcation.

Consolidated PAT grew 20% YoY (20% YTD as well). Standalone revenue up 20%, PAT up 19%. Group ROE at ~18%. TechM turnaround on track with EBIT margin recovery path and key new telecom deal win plus green shoots in BFSI and healthcare. Mahindra Finance PAT up 47% to 918 Cr (aided by COVID-era provision release as model dropped older years), AUM up 19%, GS3 under 4%. Growth gems: Logistics secured large quick commerce partnership though express segment faces challenges; Hospitality at 84% occupancy with 37% AUR increase; Lifespaces acquired 37-acre Bhandup plot with 12,000 Cr GDV. KG Mobility MTM losses were the main drag - shifted growth gems from 94 Cr profit to -3 Cr loss, with impact allocated across segments.

Auto exports grew ~80% in last 4 months. Three-phase globalization: Phase 1 (current) - leverage existing products (3XO, Scorpio N) in existing markets (South Africa, Australia/NZ, Chile). Phase 2 - global lifestyle pickup in both LHD and RHD markets, building on existing Scorpio pickup presence. Phase 3 - electric SUVs starting with RHD markets (Australia/NZ, potentially UK) before expanding to LHD. 3XO doing ~700/month in South Africa with strong demand. All gasoline for export markets. Management emphasizes calibrated rather than aggressive expansion.

Union Budget tax savings for middle class expected to benefit demand across M&M businesses. Rate cut provides additional stimulus. CAFE 3 norms could potentially be delayed given lack of industry consensus on CO2 reduction levels, validation cycles, and multiple views within government and SIAM. This could benefit ICE-heavy OEMs like M&M in the near term.