“Beyond auto and tractor, Mahindra Finance up 97% from an operating standpoint, excluding the reserve release that we had in the same quarter last year. Tech Mahindra is up 35%. Our growth gems up significantly. Mahindra Lifespace is up 5x. Mahindra Logistics first profitable quarter after 11 quarters,” he said.
“For us, our focus is on strong execution,” Shah said, adding that the group’s businesses broadly fall into three buckets. Some already have scale and a strong right to win. Others have the right to win but are still building scale, while a third set has potential but is yet to fully establish itself.As for which one could emerge as the biggest growth engine from here, Shah said, “I will leave that to investors to decide,” he said, before adding simply, “pick one in every industry.”
These are edited excerpts of the interview.
Q: Another good quarter. Analysts seem to be upgrading earnings forecasts again, largely on the back of tractor earnings. Tractor volumes are looking much stronger.
A: One challenge with performing well consistently is that expectations keep going up. If we look at it — 47% reported PAT growth and 66% operating PAT growth — it talks volumes for our team in terms of execution. We’ve tried to keep our head down and execute well, and it is all our businesses contributing at this point.
Tractor domestically has been very strong, but internationally we had to take a few impairments. On balance, our tractor business from an operating standpoint grew 7% domestically, 64%, offset by some international impairments.
Auto grew 42% from an operating profit standpoint. Both tractor and auto had very good volume growth — 23% volume growth. Auto margins were up 90 basis points, tractor margins were up 40 basis points.
But beyond auto and tractor, Mahindra Finance was up 97% from an operating standpoint, excluding the reserve release we had in the same quarter last year. Tech Mahindra was up 35%.
Our growth gems were up significantly. Life Spaces was up 5x. Logistics delivered its first profitable quarter after 11 quarters.
Beyond the numbers, the businesses are in very good shape. That’s what we are enthused by — the strong execution across businesses.Q: You mentioned all these other companies — Life Spaces, holidays, logistics, etc. If you had to pick one business in that portfolio which perhaps accelerates at the fastest pace from here?
A: For us, our focus is on strong execution. If we feel that a business is not going to be a market leader or does not have the ability to outpace the market, then we’ve looked at that very carefully and often exited them.
Today, we’ve got a great portfolio of businesses. Some have scale and a strong right to win. Some have a strong right to win but don’t have scale as yet, and that’s what we are driving for. And some we feel have a strong right to win, but we haven’t established that as yet. So those are the three groups of businesses we have.
Q: Which business lies in that circle which has all the attributes?
A: I will leave that to investors to decide. But all I can say is we have a very good set of businesses, and you’re seeing that performance across businesses now.
Mahindra Finance is on a very strong track. It is now pivoting to growth. Life Spaces has done exceedingly well in terms of profitability. Investors have come into Life Spaces as well. That business has signed up for 14x growth in pre-sales, which is one of the key metrics for this decade.
The logistics business is executing very well and is on a strong path. Holidays is going through a transformation. We were number one in 8% of the market, which was timeshare. We are now looking at the entire leisure hospitality market with the aspiration to be number one there.
The aerostructures business is growing at a very rapid pace.
All of these are very strong businesses. I would just say — pick one in every industry.
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