Mahindra & Mahindra Limited

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MARKET DATA

52-week range (INR) 970 / 587

Share in issue (mn) 1,243.2

Market cap (INR bn/USD mn) 1,097 / 14,673

Avg. Daily Vo. BSE/NSE (‘000) 5,065.8

Shareholding Pattern (%)

Promoters * 18.9

MFs,FIs &Banks 26.3

FIIs 37.8

Others 17.0

*Promoters pledged shares 1.34 (% of share in issue)

Auditor

BSR & Co LLP

Explore:

Analysis Beyond Consensus (ABC) is an initiative to provide a differentiated perspective on various non-routine and intricate Accounting and Corporate Governance issues. This research unit works independent of sector research teams and the views expressed in this report may vary with that of respective sector/stock analyst.

M&M’s domestic volumes fell 8% YoY in FY21; however, EBITDA grew in double digits as EBITDA margin expanded. Net losses at some loss-making subsidiaries widened to ~INR54bn in FY21 (from ~INR39bn in FY20) – led mainly by SSangYong Motor, which is now discontinued operations. On the other hand, some profit making subs improved in FY21. Group RoCE remained in single digit due to low standalone RoCE (automotive segment hit by covid-19) and losses in some large subsidiaries. Consolidated RoCE (ex-MMFS) was also low at ~6%.

Other highlights: i) Standalone OCF improved, from negative INR13bn to positive INR35bn due to a significant swing in working capital. ii) During FY17–21, it capitalised ~62% of R&D spend versus ~68% at Ashok Leyland and ~80% at TAMO. iii) During FY17–21, M&M invested ~32% (INR123bn) of its generated capital into subsidiaries/JV.

Losses from loss-making subsidiaries widen in FY21

Overall, M&M has 167 subsidiaries, 31 joint ventures and 28 associates. Net losses

at some of the key/large subsidiaries widened in FY21 to ~INR54bn, from ~INR39bn

in FY20. Excluding Ssangyong Motors, which was classified under discontinued

operations, these aggregate net losses stood at INR20bn vs INR18bn last year. Apart

from SSangYong Motors, net loss for Automobili Pininfarina surged to INR8.2bn

(from net loss of INR1.3bn in FY20); and Holiday Club Resorts slid into a net loss of

INR1bn from net profits in earlier years. On the other hand, net losses reduced at

Mahindra USA to INR2bn, from INR5bn+ in net loss in FY20. Among profit-making

subs, aggregate profit surged to INR20.7bn from INR8.5bn in FY20, mainly due to

Mahindra Vehicle Manufacturers reverting to profits. Capital infusion in some select

loss making subs have continued in FY21.

RoCE lower due to covid-19 and subsidiary losses

Group RoCE remained in single digit due to lower standalone RoCE and loss in some

large subsidiaries. Consolidated RoCE (ex-MMFS), though better YoY at 6.1%,

remains low. The automotive segment’s RoCE fell to 6% in FY21 owing to the hit

from covid-19. During FY17–21, M&M invested ~32% or INR123bn of its aggregate

generated capital into subsidiaries/JV.

Cash flows improve on better profitability and working capital

M&M’s standalone OCF improved from negative INR13bn to INR35bn in green, led

by higher cash profit after tax as well as a significant swing in working capital. While

inventories went up despite flat sales, receivables fell sharply and payables shot up.

At the consolidated level, OCF rose significantly to INR185bn and free cash flow

came in at INR104bn (up from negative INR67bn in FY20). Due to a large favourable

WC swing, M&M’s standalone cash conversion cycle for FY21 improved

meaningfully to 22–23 days in negative, which is similar to Ashok Leyland’s.

India Equity Research October 29, 2021

ANNUAL REPORT ANALYSIS Mahindra & Mahindra Limited

Alok Deshpande +91 (22) 6620 3163 [email protected]

Podcast Financial model

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https://www.edelweissresearch.com/CorporateAccess

https://www.edelweissresearch.com/Research/Company?Id=2914

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ANNUAL REPORT ANALYSIS

Edelweiss Securities Limited

2 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset

R&D capitalisation – In line with domestic peers

R&D cost capitalised (net of amortisation) stood negative, mainly due to other

adjustments, primarily SsangYong’s impairment. Adjusted for this, M&M capitalised

53% of R&D spend. This is much lower than earlier years. During FY18–20, M&M

capitalised 72% of R&D spend on average. Over the past five years, M&M

cumulatively capitalised ~62% of R&D spend. This is slightly lower than Ashok

Leyland’s ~68%. Tata Motors capitalised ~80% of R&D spend during FY17–21.

Other highlights

FY21 revenue for Mahindra Electric Mobility fell 25% YoY to INR2bn and net

losses widened from INR552mn to INR1.1bn.

Key movements in ESG metrics: Total 11% reduction in in FY21 (versus FY20) in

total scope 1 and scope 2 GHG emissions; 43% share of water recycled & reused

(versus 40% in FY20; share of renewable energy in total energy consumed was

5% in FY21 (versus 4% in FY20).



Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 3

Subsidiaries’ analysis

Overall, M&M has 167 subsidiaries, 31 Joint ventures and 28 associate companies,

which operate in over 100 countries, and 68 manufacturing facilities around the

globe. We look at two main buckets for analysis of subsidiaries (see tables below): i)

key subsidiaries split into loss-making and profit-making buckets; ii) key subsidiaries

and associates that Street generally incorporates in M&M’s SoTP valuation.

Our analysis shows aggregate net losses at some of the key/large subsidiaries

widened in FY21 to ~INR54bn, from ~INR39bn in FY20. Excluding Ssangyong Motors,

which was classified under discontinued operations, aggregate net losses at some of

the key/large subsidiaries stood at INR20bn vs INR18bn last year. These losses was

especially due to three reasons: SSangYong Motor, whose net loss widened to

INR34bn from INR21bn last year; Automobili Pininfarina, whose net loss surged to

INR8.2bn (from net loss of INR1.3bn in FY20); and Holiday Club Resorts, which slid

into a net loss of INR1bn from net profits in earlier years. On the other hand, net

losses reduced at Mahindra USA to INR2bn, from INR5bn+ of net losses in FY20.

(Refer to table 2 for this.)

Among profit-making companies, aggregate profit improved to INR20.7bn from

INR8.5bn, mainly due to Mahindra Vehicle Manufacturers reverting to a net profit

of INR6.5bn from a net loss of INR4bn in FY20.

Exhibit 1: Performance of M&M’s large subsidiaries and associates, generally considered for M&M’s S0TP value (INR bn)

Source: Annual reports, company filings, Edelweiss Research; ** SsangYong Motor filed for bankruptcy in FY21

Revenue PAT Revenue PAT Revenue PAT Revenue PAT Revenue PAT

Tech Mahindra 28.8 252.4 291.4 28.5 307.7 37.9 347.0 42.9 368.7 40.3 378.6 44.3

M&M Financial Services 52.3 157.8 71.9 5.1 79.1 11.9 104.3 18.3 120.0 10.8 123.8 7.7

Mahindra Vehicle Manufacturers Ltd 100.0 50.3 101.3 0.3 100.3 3.5 114.2 7.2 76.6 -4.2 57.6 6.5

Mahindra Lifespace Developers Ltd 51.5 14.5 7.6 1.0 5.7 1.0 5.9 1.2 6.1 -1.9 1.7 -0.7

Mahindra Holidays & Resorts India 67.6 0.5 22.7 1.5 23.2 1.3 22.3 0.6 23.7 -1.3 17.3 -0.1

Mahindra CIE* 11.4 50.3 53.2 1.7 64.3 3.6 80.3 5.0 79.1 3.5 60.5 1.1

Swaraj Engines 34.7 2.8 7.5 0.7 8.0 0.8 8.7 0.8 7.7 0.7 9.9 0.9

Mahindra Logistics 58.3 5.7 26.7 0.5 34.2 0.6 38.5 0.9 34.7 0.6 32.6 0.3

Ssangyong Motor Company Ltd** 74.7 -5.7 209.7 2.3 213.2 -5.5 226.0 -3.8 226.0 -21.1 206.6 -33.9

Total (including Ssangyong Motors) 792.0 41.5 835.6 55.1 947.2 73.0 942.5 27.4 888.5 26.1

Total (excluding Ssangyong Motors) 582.2 39.2 622.4 60.6 721.2 76.8 716.6 48.4 681.9 60.0

** Ssangyong Motors is discontinued operations

M&M 's economic share in

profits/losses % stake

Tech Mahindra 28.8 11.6 12.8

M&M Financial Services 52.3 5.6 4.0

Mahindra Vehicle Manufacturers Ltd 100.0 -4.2 6.5

Mahindra Lifespace Developers Ltd 51.5 -1.0 -0.4

Mahindra Holidays & Resorts India Ltd 67.6 -0.9 -0.1

Mahindra CIE* 11.4 0.4 0.1

Swaraj Engines 34.7 0.2 0.3

Mahindra Logistics 58.3 0.3 0.2

Ssangyong Motor Company Ltd** 74.7 -15.7 -25.3

Total (including Ssangyong Motors) -3.6 -1.8

Total (excluding Ssangyong Motors) 12.1 23.5

FY20 M&M

economic share

of PAT

FY21 M&M

economic share

of PAT

Net worthFY17 FY18 FY19 FY20 FY21

INR bn % stake




Exhibit 2: Performance snapshot of key subsidiaries (several not considered by Street for M&M’s SoTP valuation) (INR mn)

@ Mahindra First choice services 100% stake sold in FY21

Note: Assuming constant M&M stake for comparison and analysis purpose. Actual stake in FY17-20 may differ.

Source: Annual reports, company filings, Edelweiss Research

Note: @ Mahindra First Choice Services – 100% stake sold in FY21

INR mn % stake FY17 FY18 FY19 FY20 FY21

Loss making subsidiaries

Peugeot Motocycles S.A.S. 100.0 (1,608) (1,723) (2,820) (2,444) (456)

Mahindra Yueda (Yancheng) Tractor Company 51.0 (1,544) - - - -

Mahindra Tractor Assembly Inc. 100.0 (1,124) (1,345) (2,430) (2,216) (565)

Mahindra Reva Electric Vehicles Pvt Ltd 93.7 - - 0 0 0

Mahindra First Choice Services Ltd @ - (455) (404) (355) (311) -

Mahindra Aerospace Pvt Ltd. 91.6 (55) (1,331) (1,798) (3,194) (2,403)

Mahindra Sanyo Special Steel Pvt Ltd 22.8 (461) (280) - - (157)

Mahindra Electric Mobility 99.4 (1,132) (1,290) (530) (552) (1,071)

Mahindra Vehicle sales and services 100.0 - - - (2,476) (2,297)

Automobili Pininfarina Gmbh 100.0 - - - (1,296) (8,197)

Mahindra USA 100.0 311 224 (5,493) (5,071) (1,954)

Erkunt Tractor 100.0 - (732) (468) (401) (704)

Holiday Club Resort Oy 67.6 54 300 157 17 (986)

Classic Legends Private Limited 60.0 (15) (12) (188) (61) (880)

Mahindra Agri Solutions Limited 98.8 (506) (633) (639) (192) (567)

Aggregate losses (excluding Ssangyong losses) (6,534) (7,225) (14,563) (18,196) (20,237)

Discontinued operations- Ssangyong Motors 74.7 2,312 (5,484) (3,797) (21,082) (33,920)

Aggregate losses (include Ssangyong losses) (a) (4,222) (12,709) (18,360) (39,278) (54,157)

M&M's economic interest in above losses (b) (3,688) (11,070) (17,212) (33,651) (44,567)

Profitable subsidiaries

Mahindra & Mahindra Financial Services Ltd 52.3 5,120 11,850 18,270 10,750 7,730

Mahindra Vehicle Manufacturers Ltd. 100.0 250 3,487 7,206 (4,183) 6,548

Mahindra Rural housing finance Limited 52.0 830 1,455 2,505 1,486 1,510

Mahindra Two Wheelers Ltd 100.0 (4,716) 22 8 7 247

Mahindra Holidays and Resorts Limited 67.6 1,490 1,320 600 (1,320) (130)

Mahindra Heavy Engines Pvt Ltd 100.0 273 130 526 391 2,573

Mahindra Retail Pvt Limited 100.0 1,751 (395) (228) (215) 600

Bristlecone group (consolidated) 74.9 197 1,249 420 396 571

Mahindra & Mahindra South Africa (Pty) Ltd 100.0 56 (17) (218) (107) 118

Mahindra Susten Private Limited # 100.0 419 470 630 418 61

Mahindra Intertrade Ltd 100.0 597 623 773 365 599

Mahindra Logistics Ltd 58.3 460 640 860 551 300

Aggregate profits (c) 6,727 20,834 31,352 8,539 20,728

M&M economic interest in above profits (d) 3,163 13,477 20,779 2,798 16,090

Aggregate (net) (a+c) 2,505 8,125 12,993 (30,739) (33,429)

Aggregate (net) (a+c) (Excluding Ssangyong) 193 13,609 16,789 (9,657) 491

M&M economic interest in losses (net) (b+d) (524) 2,407 3,567 (30,854) (28,477)

% of Standalone PAT (1.3) 5.5 7.4 (231.9) (1,060.0)




Exhibit 3: Investment in key loss making subsidiaries in the past five years

Source: Annual reports, company filings, Subsidiary financials; Edelweiss Research

Exhibit 4: Dividend income received from subsidiaries

Ssangyong Motor Company (“Ssangyong”) – Extract from the Annual report for FY21

During the year, the Board of your Company decided not to make any further equity investment in Ssangyong Motor Company, a subsidiary in South Korea. Pursuant to the decision, Ssangyong management initiated a search for a potential investor to invest equity. During the year under review, the Members of the Company have, by way of a Postal Ballot, approved the proposal of Transfer/Dilution of stake in Ssangyong and/or cessation of control of the Company over Ssangyong. Following a global search, one North America based investor expressed an interest to invest and acquire a majority stake in Ssangyong. However, a term sheet could not be concluded due to regulatory constraints. Following Ssangyong’s inability to pay bank loans which were due in December, 2020, Ssangyong applied to Korean Courts for commencement of rehabilitation procedure. The Court allowed three months to Ssangyong to arrive at a private investment agreement with the said investor. Since that could not be concluded within the stipulated time, the Court initiated rehabilitation process on 15th April, 2021 and appointed a Court receiver who took over the day-to-day management of Ssangyong. An examiner appointed by the Court will determine whether Ssangyong should be sold as a going concern or liquidated. If the examiner recommends a sale, the receiver will oversee the preparation of a rehabilitation plan which may include a combination of capital reduction, debt waiver, debt-to-equity conversion and other similar actions. The rehabilitation plan is expected to be submitted to the Court by July, 2021. Pursuant to the admission in the Autonomous Restructuring Support (ARS) program and following the guidance under Ind AS 110 – Consolidated Financial Statements, the Company has ceased consolidating Ssangyong as a subsidiary from 28th December, 2020 and has classified the investment to be measured at fair value as per Ind AS 109 – Financial instruments. Accordingly, the losses from operations, resultant gain on deconsolidation of Ssangyong and impairments/ provisions for the exposures of the Company to Ssangyong have been recognised and presented under ‘Profit/(loss) before tax from discontinued operation’ in the Consolidated Statement of Profit and Loss. However, Ssangyong continues to be a subsidiary of the Company under the Companies Act, 2013.

INR mn FY17 FY18 FY19 FY20 FY21

Mahindra First Choice Services Ltd 297 - 320 340 -

Mahindra Tractor Assembly Inc. 1,790 727 301 2,616 492

Peugeot Motocycles S.A.S. - - - -

Ssangyong Motor Company - - 3 -

Mahindra Aerospace Pvt Ltd. 1,267 2,088 1,162 552 1,562

Mahindra Electric Mobility 1,666 1,348 937 403 912

Mahindra Vehicle sales and services - 110 2,204 2,236 1,558

Automobili Pininfarina Gmbh - - 2,534 5,432 4,729

Erkunt Tractor - - - - -

Classic Legends Private Limited 60 547 235 302 183

Mahindra Agri Solutions Limited 2,653 - - 493 400

Total 7,732 4,820 7,695 12,374 9,836

INR mn FY17 FY18 FY19 FY20 FY21

Divdend 796 706 857 635 54

M&M’s capital infusion in some of the

selective losses subsidiaries has continued

at the steady during the past five years




Profitability & Capital allocation analysis

Exhibit 5: Standalone – Profitability and Capital allocation (INR bn)


Note: * Adjusted for income from subsidiaries, JVs & Associate

# adjusted for investment in subsidiaries, JVs & associates & loans & advances to subsidiaries, JVs

& associates and acceptances

*# Calculated using adjusted PBIT & Adjusted capital employed

Exhibit 6: Consolidated RoCE (ex M&M Financial Services)


Particulars FY17 FY18 FY19 FY20 FY21

Sales 440.5 486.9 536.1 454.9 450.4

EBITDA 59.0 73.5 84.2 75.6 79.6

Adjusted PBIT* 37.2 53.3 56.1 43.0 51.8

Gross margin (%) 52.0 52.2 57.3 49.7 44.4

EBITDA margin (%) 13.4 15.1 15.7 16.6 17.7

ROCE (%) 16.0 18.4 18.5 14.1 13.9

Adjusted ROCE (%)*# 25.6 36.5 33.5 24.5 32.5

Net fixed assets (Ex CWIP) 76.3 78.6 100.8 103.9 101.8

CWIP 4.1 10.8 7.1 12.0 17.1

Devlopment expenditure (inc under development) 16.3 20.5 17.1 28.1 31.2

Fixed asset turnover 6.1 6.3 6.0 4.4 4.4

Net current assets 5.4 (3.8) 11.6 (11.0) (16.7)

Equity shareholders' funds (A) 267.9 302.9 342.1 344.7 345.0

Loan funds (B) 28.2 29.6 25.7 30.7 70.9

Reported capital employed (A+B) 296.0 332.5 367.8 375.4 416.0

Adjusted total capital employed (A+B)# 140.5 151.5 183.2 167.6 150.9

D/E Ratio 0.1 0.1 0.1 0.1 0.2

INR bn FY17 FY18 FY19 FY20 FY21

Capital employed

Consolidated 785 927 1,108 1,225 1,222

M&M Financial services 70 99 113 120 158

Consolidated (ex MMFS) 715 828 996 1,106 1,064

EBIT

Consolidated 96 117 137 119 126

M&M Financial services 70 53 73 70 60

EBIT (ex M&M financial) 26 63 64 49 66

Adjusted RoCE (average) (%) 1.3 8.2 7.0 4.7 6.1

Owing to subsidiaries’ low profitability,

consolidated RoCE (ex M&M Financial

Services) stood at ~6.1% versus ~14%

for standalone

Automotive segment, reeling from

covid’s fallout, reported the lowest

RoCE in FY21

Gross margin declined by more than

500bps to ~44%, even as EBITDA margins

expanded

Reported RoCE was the lowest in the past

decade




Exhibit 7: Segment-wise performance (revenue, EBIT and RoCE) – Standalone and consolidated (INR bn)


Exhibit 8: Source and application of funds (INR mn)


INR bn FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21

Segment Revenue

Automotive 535.4 524.3 590.5 484.9 258.3 320.2 321.1 353.5 284.1 250.1

Farm Equipment 187.4 216.3 220.8 208.6 246.0 139.0 160.9 168.7 154.0 184.3

Financial Services 74.9 86.0 103.1 118.0 119.7

Others 92.2 106.1 132.8 140.2 118.8 18.0 16.0 17.3 16.8 15.9

889.8 932.6 1,047.2 951.8 742.8 477.3 498.0 539.5 454.9 450.4

Segment results

Automotive 21.4 20.7 21.4 (9.2) 7.4 14.1 21.5 20.3 12.6 4.9

Farm Equipment 26.1 30.5 23.8 22.8 41.6 25.6 31.5 32.7 29.3 41.9


Others (5.2) 3.1 1.1 1.2 1.5 (3.8) 0.6 0.5 0.7 0.3

51.9 72.8 73.3 29.3 55.9 36.0 53.6 53.4 42.6 47.0

Segment margins (%)

Automotive 4.0 3.9 3.6 (1.9) 2.8 4.4 6.7 5.7 4.4 1.9

Farm Equipment 13.9 14.1 10.8 10.9 16.9 18.4 19.5 19.3 19.0 22.7


Others (5.6) 2.9 0.8 0.9 1.3 (21.0) 3.9 2.9 4.3 1.6

5.8 7.8 7.0 3.1 7.5 7.5 10.8 9.9 9.4 10.4

Segment net assets

Automotive 149.3 146.5 165.5 181.0 126.6 63.5 61.2 70.4 93.5 80.4

Farm Equipment 45.0 58.2 76.6 58.3 38.6 29.8 29.4 45.5 37.6 25.1


Others 80.3 109.2 88.4 84.7 97.2 3.6 4.9 5.1 5.4 5.1

335.1 408.8 427.4 405.7 334.2 96.9 95.5 121.0 136.5 110.6

Return on segment net assets (%)

Automotive 14.9 14.0 13.7 (5.3) 4.8 22.3 35.1 28.8 13.5 6.0

Farm Equipment 54.9 59.2 35.3 33.7 85.8 86.0 107.1 71.8 77.7 166.9


Others (6.3) 3.3 1.1 1.4 1.7 (103.9) 12.8 9.9 13.4 5.1

Consolidated Standalone

Sources of Funds (FY17-21) INR mn % Application of Funds (FY17-21) INR mn %

Cash profit after tax and interest 2,40,264 63.0 Capital expenditure 1,44,836 38.0

Investment income 49,884 13.1 Investment in Subs/JV 1,23,327 32.3

Borrowings 43,675 11.4 In Investment / Cash 46,898 12.3

Release of working capital 34,140 8.9 Dividend paid 42,548 11.2

Miscelleneous 13,571 3.6 Inter Corporate Deposits (net) 23,924 6.3

Total 3,81,533 100.0 Total 3,81,533 100.0




Capital allocation roadmap presented in the Annual Report

In the FY21 Annual Report, M&M has further updated about its strategy regarding

capital allocation going ahead. As described back in the FY20 annual report, the

company has created three categories to bucket the subsidiaries which either need

more assistance or complete exits. The below table captures this from the FY21

Annual Report.

Exhibit 9: Capital Allocation road map in the Annual Report

Source: Annual reports, Edelweiss Research

Exhibit 10: M&M expects the profitability from international subsidiaries to improve – the chart below is a snapshot is from

M&M FY21 Annual Report


The above chart is a snapshot from the FY21 Annual Report.

Category Thought process Entities Statement by M&M in the AR

Category AEntities with clear path to

profitability

Magna AG North America, Peugeot

Motorcycles, Erkunt

MAGNA (Mahindra USA Inc.), Peugeot Motocycles and

Erkunt - each of these entities has developed a business plan that

lays out a clear path to profitability.

betwee A&B

Mahindra Automotive North America and Automobili

Pininfarina, after a fair amount of restructuring, straddle Category

A and B.

Category BQuantifiable strategic

impact

Mitsubishi Mahindra Agricultural

Machinery, Sampo Rosenlew, Hisarlar AG

Machinery

Mitsubishi Mahindra Agricultural Machinery, Sampo Rosenlew

and Hisarlar - these entities were added

to Category B considering their importance to the farm equipment

business in developing a strong farm machinery portfolio for

domestic as well as international markets.

Category CUnclear path to

profitability. Exit.Ssangyong, Gippsaero, Z genZe, MFCS

Have taken quite a few tough calls, starting from Board's

decision to stop investing in SsangYong in April 2021 to exiting

GippsAero, Genze and Mahindra First Choice Services (MFCS).




Exhibit 11: M&M has identified growth areas ‘9 Growth Gems’ that can scale up

significantly in the next 3-5 years, as per the FY21 Annual Report – the chart

below is a snapshot is from M&M FY21 Annual Report


The above chart is a snapshot from the FY21 Annual Report.




Cash flow analysis

Exhibit 12: M&M cash flows


Exhibit 13: Working capital and cash conversion cycle analysis vs peers


Standalone

Profit before tax 51.3 51.2 (33.3) (20.8) 18.0 30.4

Non-operating expenses/ (income) (2.0) 0.5 1.2 (0.2) (0.8) 0.3

Non-cash adjustments 21.8 20.7 39.6 24.7 61.4 45.3

Direct taxes paid (10.8) (10.6) (11.7) (7.9) (22.6) (18.5)

Dividend from subsidiaries (10.4) (5.5) 10.4 5.5 (0.9) (0.1)

Cash profit after tax 49.9 56.2 6.2 1.3 55.2 57.4

(Increase)/Decrease in inventories 4.4 (5.5) 8.8 7.8 13.2 2.3

(Increase)/Decrease in trade and other

receivables20.5 2.5 (35.7) 46.5 (15.2) 49.0

Increase/(Decrease) in trade and other payables (38.0) 38.0 (29.8) 32.4 (67.8) 70.5

(Increase)/Decrease in working capital (13.1) 35.0 (56.6) 86.7 (69.7) 121.7

Net cash from operating activities 36.8 91.2 (50.5) 88.0 (14.6) 179.1

Change in acceptances 3.6 (3.3) 20.1 9.6 23.7 6.3

Adjusted operating cash flows 40.4 87.9 (30.4) 97.6 9.2 185.4

Interest expenses paid (1.6) (3.7) (4.7) (4.4) (6.2) (8.1)

Net cash from operating activities post interest 38.8 84.2 (35.1) 93.2 2.9 177.3

Capex (60.5) (70.7) (9.5) (2.8) (70.0) (73.5)

Free cash flow (21.7) 13.5 (44.5) 90.4 (67.1) 103.8

ParticularsConsolidatedSubsidiary (derived)

FY21FY20 FY20 FY21 FY20 FY21

(8)

9

5

(11)

3

(18)

(13)

(3)

(23)

(12)

(16)(18)

(23)

(14)

(22)

-30

-20

-10

0

10

20

M&M TAMO Ashok Leyland

Ad

just

ed c

ash

co

nve

rsio

n c

ylce

(d

ays)

FY17 FY18 FY19 FY20 FY21

M&M’s standalone OCF improved from

negative INR13bn to INR35bn in green,

led by higher cash profit as well as a

significant swing in working capital.

While inventories went up despite flat

sales, receivables fell sharply and

payables went up sharply.

At the consolidated level, OCF was

significantly up to INR185bn and free

cash flows were INR104bn (versus

negative INR67bn last year).

Due to a large favourable WC swing,

M&M’s standalone cash conversion

cycle for FY21 has improved significantly

to 22–23 days in negative, and is now

similar to Ashok Leyland’s




Exhibit 14: M&M - Working capital and cash conversion cycle analysis


Exhibit 15: Tata Motors - Working capital and cash conversion cycle analysis


FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21

Trade receivables 29,388 31,730 39,463 29,990 23,429 71,993 84,898 86,779 69,283 60,078

Add: Inventories 27,580 27,017 38,393 34,009 39,555 88,860 93,356 1,22,002 1,11,119 96,154

Add: Advance to suppliers - - - - - - - - 702 959

Less: Trade Payables 68,811 86,034 96,782 67,858 99,882 1,47,969 1,82,873 2,09,922 1,49,854 1,55,058

Less: Advance from customers 2,241 3,145 - 7,118 6,471 5,155 8,442 - 19,031 19,611

Trade working capital -14,083 -30,433 -18,926 -10,977 -43,369 7,729 -13,062 -1,141 12,219 -17,478

Less: Contract l iabilities / Deferred income - - 5,381 8,498 7,555 19,249 23,884 67,263 72,533 67,270

Add: Acceptances 7,263 8,469 8,761 5,127 8,402 33,619 39,981 44,389 20,663 14,322

Adjusted Trade working capital -6,820 -21,964 -15,546 -14,348 -42,522 22,099 3,035 -24,015 -39,651 -70,426

Trade working capital to sales (%) -3.2 -6.3 -3.5 -2.4 -9.6 0.9 -1.4 -0.1 1.3 -2.0

Adjusted Trade working capital to sales (%) -1.5 -4.5 -2.9 -3.2 -9.4 2.6 0.3 -2.3 -4.2 -7.9

Trade receivable as % to sales 6.7 6.5 7.4 6.6 5.2 8.6 9.2 8.3 7.3 6.7

Cash conversion cycle

Receivable days 23 23 24 28 22 28 31 30 30 27

Add: Inventory days 23 20 22 29 30 39 36 38 45 42

Less: Payable days 56 58 62 66 68 61 66 68 69 63

Less: Advance from customer days 3 2 1 3 6 3 3 1 4 8

Add: Advance to suppliers days 0 0 0 0 0 0 0 0 0 0

Cash conversion cycle -14 -17 -17 -12 -22 3 -1 -2 2 -1

Less: Contract l iabilities / Deferred income days - - 2 6 7 8 9 16 27 29

Add: Acceptances 6 6 6 6 5 13 15 15 12 7

Adjusted Cash Conversion cycle -8 -11 -13 -12 -23 8 5 -4 -12 -23

Standalone ConsolidatedINR mn

Particulars FY17 FY18 FY19 FY20 FY17 FY17 FY18 FY19 FY20 FY21

Trade receivables 21,280 34,798 32,506 19,781 20,875 1,40,756 1,98,933 1,89,962 1,11,727 1,26,791

Inventories 55,530 56,701 46,620 38,319 45,517 3,50,853 4,21,376 3,90,137 3,74,569 3,60,886

Advance to suppliers 2,427 3,724 4,208 5,981 6,097 6,844 23,982 21,369 26,987 30,883

Trade Payables -1,14,622 -1,42,256 -1,35,021 -1,08,439 -1,59,881 -6,25,326 -7,69,398 -7,16,907 -6,63,982 -7,60,402

Advance from customers -8,504 - - -6,558 -11,469 -17,112 - - -42,566 -57,359

Trade working capital -43,889 -47,033 -51,687 -50,917 -98,861 -1,43,985 -1,25,107 -1,15,439 -1,93,266 -2,99,202

Add: Contract l iabilities / Deferred income 4,281 4,354 2,230 2,388 4,699 69,264 94,133 75,109 81,470 81,654

Acceptances 43,793 48,146 30,933 27,417 78,731 48,342 49,014 31,771 27,713 78,603

Adjusted Trade working capital -4,377 -3,242 -22,984 -25,888 -24,829 -1,64,906 -1,70,226 -1,58,776 -2,47,023 -3,02,252

Trade working capital to sales (%) -10 -8 -7 -12 -21 -5 -4 -4 -7 -12

Trade receivable as % to sales 5 6 5 5 4 5 7 6 4 5

Receivable days 17 18 18 22 16 19 21 24 21 17

Inventory days 55 44 34 43 39 65 67 67 74 76

Payable days -105 -101 -91 -122 -126 -120 -120 -123 -134 -148

Advance from customer days -7 -3 - -3 -7 -1 -1 - -3 -7

Advance to suppliers days 2 2 3 5 6 2 3 4 5 6

Cash conversion cycle -38 -39 -37 -55 -72 -35 -31 -29 -37 -55

Add: Contract l iabilities / Deferred

income days 3.52 2.72 1.74 1.92 2.75 8.48 10.23 10.23 10.95 11.92

Add: Acceptances 34 29 21 24 41 6 6 5 4 8

Adjusted Cash Conversion cycle -7 -13 -17 -33 -34 -38 -35 -34 -44 -59

Standalone Consolidated




Exhibit 16: Ashok Leyland - Working capital and cash conversion cycle analysis


R&D expenses and Gratuity analysis

Exhibit 17: Research & development capitalisation analysis (consolidated) (INR bn)


Exhibit 18: Research & development capitalisation analysis (consolidated) (INR bn)



Trade receivables 10,644 9,448 25,055 11,884 28,160 12,384 11,755 27,172 15,047 30,209

Add: Inventories 26,310 17,583 26,847 12,380 21,423 29,010 22,077 30,634 15,364 24,959

Add: Advance to suppliers 1,020 670 514 259 499 1,067 887 1,134 486 1,202

Less: Trade Payables 31,170 48,879 50,189 30,373 51,647 34,501 50,535 51,790 32,766 53,462

Less: Advance from customers 2,472 9,116 7,902 6,112 4,794 2,274 9,194 8,148 5,975 4,738

Trade working capital 4,332 -30,295 -5,675 -11,963 -6,359 5,686 -25,010 -998 -7,845 -1,831

Less: Contract l iabilities / Deferred income - - - - - - - - - -

Add: Acceptances - - - - - - - - - -

Adjusted Trade working capital 4,332 -30,295 -5,675 -11,963 -6,359 5,686 -25,010 -998 -7,845 -1,831

Trade working capital to sales (%) 2.2 -11.5 -2.0 -6.8 -4.2 2.5 -8.4 -0.3 -3.6 -0.9

Adjusted Trade working capital to sales (%) 2.2 -11.5 -2.0 -6.8 -4.2 2.5 -8.4 -0.3 -3.6 -0.9

Trade receivable as % to sales 5.3 3.6 8.6 6.8 18.4 5.4 4.0 8.2 6.9 15.5

Receivable days 21 14 22 39 48 22 15 21 35 42

Add: Inventory days 39 30 28 41 40 38 31 29 38 38

Add: Advance to suppliers days 2 1 1 1 1 2 1 1 1 2

Less: Payable days 51 55 62 84 98 49 52 56 70 81

Less: Advance from customer days 5 8 11 15 13 4 7 10 12 10

Cash conversion cycle 5 -18 -23 -18 -22 9 -12 -14 -7 -9

Less: Contract l iabilities / Deferred income days - - - - - - - - - -

Add: Acceptances - - - - - - - - - -

Adjusted Cash Conversion cycle 5 -18 -23 -18 -22 9 -12 -14 -7 -9

Standalone ConsolidatedINR mn


Development expenditure capitalised:

Opening net block 18.7 17.9 26.8 42.1 33.5

Capitalised during the year 5.3 16.4 26.5 7.3 8.9

Amortised/ Impaired during the year -5.6 -7.8 -11.4 -14.0 -8.8

Other adjustments -0.4 0.2 0.2 -1.8 -12.0

Closing net block 17.9 26.8 42.1 33.5 21.6

Net expenditure capitalised (A) -0.4 8.6 15.1 -6.7 0.1

Change in intangibles under development (B) 7.7 0.6 -1.5 20.0 -9.1

Amount capitalised (C = A+B) 7.3 9.3 13.6 13.3 -9.0

PBT 54.5 92.2 75.0 6.1 18.8

Capitalised R&D as a % of PBT 13.5 10.1 18.2 216.5 -48.1


Development expenditure grouped under

intangible assets (A) 17.9 26.8 42.1 33.5 21.6

Intangible assets under development (B) 16.3 32.0 23.1 43.0 33.9

Total (A+B) 34.2 58.8 65.1 76.5 55.5

As % of net worth 11.5 16.0 16.3 19.1 13.4

R&D cost capitalised (net of amortisation)

stood negative, mainly due to other

adjustments, which primarily include

impairment of SsangYong Motor

Development expenditure (intangible

assets) declined to INR55.5bn (FY20: INR

76.5bn) in FY21




Exhibit 19: Research & development cost (P&L charge) (INR bn)


Exhibit 20: Share of R&D spend capitalised (%)


Exhibit 21: FY17-21 cumulative share of R&D spend capitalised (%)


Particulars FY17 FY18 FY19 FY20 FY21 Adj FY21

Development expenditure capitalised in:

Intangible assets 5.3 16.4 26.5 7.3 8.9 8.9

Intangible assets under development 0.0 15.7 -9.0 20.0 -9.1 0.0

Total capitalised expenditure (A) 5.2 32.2 17.5 27.3 (0.2) 8.9

R&D expenditure charged to P&L (B) 13.5 14.3 8.1 6.9 7.8 7.8

Total R&D (A+B) 18.8 46.4 25.7 34.2 7.5 16.6

Adjusted R&D capitalised (%) 27.9 69.3 68.4 79.9 (3.0) 53.4

R&D as % of sales 2.2 5.0 2.5 3.6 0.8 1.9

0

20

40

60

80

100

M&M (FY21 adj forimpairment)

TAMO (FY21 adj forimpairment)

Ashok Leyland Maruti

FY17 FY18 FY19 FY20 FY21

61.9

79.7

67.8

23.7

0

18

36

54

72

90

M&M TAMO Ashok Leyland Maruti

FY17-21 Cumulative R&D capitalised (%) of the total R&D spend

M&M development cost capitalisation

stood at 0.8% of sales (lowest among

peers) followed by Maruti (1.2% of sales),

Ashok Leyland (2.1% of sales) and TAMO

(2.5% of sales)

Over the past five years, M&M

cumulatively capitalised ~62% of R&D

spend. This is slightly lower than Ashok

Leyland’s ~68%. Tata Motors capitalised

~80% of R&D spend during FY17–21.




Exhibit 22: R&D cost analysis (P&L charge) – Ashok L (INR bn) Exhibit 23: R&D ost analysis (P&L charge)–Ashok TAMO(INR bn)


Exhibit 24: R&D cost analysis (P&L charge) – Maruti (INR bn)


Exhibit 25: Gratuity liability (consolidated)


Exhibit 26: KMP remuneration (INR mn)


Exhibit 27: Board of directors




Intangible assets 3.7 5.7 0.6 7.0 3.0

Intangible assets under development 2.7 14.0 1.9 -2.5 -0.3

Total capitalised expenditure (A) 6.4 19.7 2.5 4.5 2.7

R&D expenditure charged to P&L (B) 9.1 1.3 2.0 3.2 1.3

Total R&D (A+B) 15.5 21.0 4.5 7.7 4.1

R&D capitalised (%) 41.3 93.6 55.5 58.2 67.1

R&D as % of sales 0.6 7.0 1.4 3.5 2.1



Intangible assets 79.4 164.6 120.5 120.2 167.4

Intangible assets under development 41.4 3.8 -5.4 36.8 -144.4



Total R&D (A+B) 141.4 195.5 144.7 189.7 62.0

R&D capitalised (%) 85.5 86.2 79.5 82.8 37.1

R&D as % of sales 5.1 6.6 4.7 7.2 2.5



Intangible assets 2.9 3.2 0.4 0.6 -0.4

Intangible assets under development 0.0 0.0 0.0 0.0 2.3



Total R&D (A+B) 6.4 8.3 7.1 7.6 8.5

R&D capitalised (%) 44.9 39.0 5.8 7.7 22.1

R&D as % of sales 0.8 1.0 0.8 1.0 1.2

Unfunded Funded


Gratuity expense (in P&L)

Current service cost 2.4 2.4 2.7 2.9 2.1 0.8 0.8 0.9 1.1 1.0

Interest cost 0.5 0.5 0.6 0.6 0.4 0.2 0.2 0.2 0.1 0.0

Actuarial (gains)/loss - - - - - - - - - -

Past service cost - - - - - - - - (0.1) (0.2)

Others - - - - - (0.0) (0.0) - - -

Total expense 2.9 2.9 3.3 3.5 2.6 1.0 1.0 1.1 1.1 0.8

Gratuity liability (in BS)

Present value of Defined benefit obligation 18.4 19.8 22.9 25.7 3.1 10.0 10.7 11.7 12.1 12.4

Fair value of plan assets - - - - - 6.9 7.9 9.3 10.8 11.6

Net liability (18.4) (19.8) (22.9) (25.7) (3.1) (3.1) (2.8) (2.4) (1.3) (0.8)

Name Designation 2019 2020 2021 YoY %

Dr. Pawan Goenka MD & CEO (ceased to be MD and CEO from 2 April 21) 122 100 102 1.6%

Dr. Anish Shah

Deputy Managing Diretor and Group CFO (Appointed

as MD and CFO w.e.f 1 April 2020) - - 94 NA

Mr. Rajesh Jejurikar

Executive Director, Automotive and farm sectors

(appointed as ED w.e.f. 1 April 2020) - - 68 NA

Mr. Anand G. Mahindra Executive Chairman 87 87 89 1.6%

Independent and NED 36 36 37 5.1%

Mr. V S Parthasarathy Group CFO & CIO (ceased from 1 April 2020) 70 51 - NA

Total 315 274 390 42.3%

As % of PBT 0.4 1.7 1.2


Total directors 11 10 10 10 13

No. of Independent directors 8 7 7 7 7

Ratio 0.73 0.70 0.70 0.70 0.54

Regulatory norms 0.33 0.33 0.33 0.33 0.33

Women director 1 1 1 2 3

Regulatory norms 1 1 1 1 1

Both funded and unfunded net liability

reduced significantly




Exhibit 28: Auditor history


Exhibit 29: Auditor remuneration (INR mn)


Year Auditor

FY21

FY20

FY19

FY18

FY17 Deloitte Haskins & Sells LLP

For B S R & Co. LLP

Particulars FY17 FY18 FY19 FY20 FY21 YoY %

Payment to Auditors 57 45 50 53 56 7




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