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Mahindra & Mahindra Ltd. (MM) - Company Update - Dated - November 27, 2013




Axis Capital Limited


27 Nov 2013





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We attended M&M’s conference call chaired by Mr Anand Mahindra (CMD – M&M). He reiterated that M&M should be viewed as a federation of companies rather than a conglomerate. Key takeaways:  Federation structure is the bedrock of Mahindra philosophy. It fosters entrepreneurship and strong corporate governance  Global push is a mean to achieve global competitiveness (for gaining strategic advantage) and stay ahead of competition across markets. Acquisitions are opportunistic  Export strategy: Identify markets that are suitable for current products as well as scalable and make long term commitment – associate with a partner or set up an assembly  Maintain HOLD rating with SOTP-based TP of Rs 937. Our TP implies a downside of 1% from CMP of Rs 943. Other highlights  Benefits of diversification are visible as the group has not been affected much by slowdown. Businesses like IT, tractors/ agri-related, finance, used cars, etc are gaining traction even during slowdown  Benefit of localization will stay only for some time for home grown companies. As Indian markets achieve scale, MNCs will accelerate indigenization process. Hence it is imperative to be globally competitive and achieve success in other countries. It helps in improving competencies against MNCs in India also. For instance, post Ssangyong (SS), M&M has been procuring certain parts cheaper from SS’ vendors vs. M&M’s vendors  Funding new businesses: There is a clear laid out process with focus on return on investment. Any new business proposal is evaluated by a dedicated team (under ‘Mahindra partners’). The idea is that the company has to achieve self-funding status as early as possible. Extent of ownership/ control is not the area of focus while entering a new business. For eg, holding in Tech Mahindra is ~30%  Core businesses: Today the concept of core and non-core business is not relevant for M&M group. Each business has its own set of core focus. For eg, mobility is core for auto business and hotels for Mahindra Resorts. Regards, Chirag Shah (Sr VP – Automobiles) Institutional Equity Research Axis Capital Ltd. Tel: 9122 4325 1148

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