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auto | IST

M&M: We want to get back to Rs 5,000 crore of cash flow; auto sector recovery will take longer

Mahindra and Mahindra's deputy MD and group CFO Anish Shah shares his views and outlook post Indian auto major's first quarter results.

Mahindra and Mahindra reported a 97 percent decline in profits in Q1 of FY21 and 37 percent drop in revenue. Vehicle sales declined 78 percent and tractors sales were down 22 percent. The company is now working on a reboot strategy. The auto major’s deputy MD and group CFO Anish Shah shared his views and outlook.
Speaking about auto sector recovery, he said, "As we think about recovery, I would put it at three levels. The first level is getting back to business as usual. The auto business is taking longer. The capacity utilisation is about 50 percent, the demand isn’t as strong as we would like it to be and that is something that we are hoping gets back. Second is to get back to the cash generation levels of Rs 5,000 crore of free cash flow, which is what we have done for the last three years on average. The third level is to what Mr Mahindra referred to in terms of what happened in 2002 and beyond that. For seventeen years after that we were the best performing stock in Nifty from 2002 till August 2018 we had a great run. That run was fuelled by high EPS growth of 34 percent, ROE of 22 percent on average and free cash flow of Rs 2,400 crore every year. We need to get back to the similar run for M&M. We feel confident we can do it.”
“Timelines for recovery will always be earlier than one expects. The bar is very high. The first two levels of recovery will be less than a year. For the third level of getting back to our 17-year run, it will take a little more work and what we are planning to do there is by end of this year is address all our loss-making international subsidiaries because that is the biggest factor that impacts it,” he added.
“We are looking at every single business. It is a detailed evaluation and what we have promised is that every quarter we will come back with some more results and by end of this year, we will complete the evaluation. Also, recognize that many of these businesses will possibly see a very good turnaround and a positive good ROE, they were put in with that hope and there are a lot of strengths in some of these businesses as well. So what we are looking for is – can we have something that is tangible either from a financial return standpoint or a strategic standpoint or to the extent we have that, we will grow that business. International business – we will continue where it makes sense,” said Shah.
In terms of SsangYong, he further mentioned, “We are in talks with investors. Board has decided at the March meeting that it would not make any further investments in SsangYong.”
Post Q1FY21 results, the management had said that the company has identified 10 in-house unicorns as growth drivers. When asked how the company is going to be concentrating on these businesses and what would be the order of priority, he replied, “I would say all of them are important. The reason being that they are very well positions in their sectors and they have a well-defined right to win and an ability to scale.”
“There is tremendous potential in the used cars business. There is a whole host of things that the business is doing and we see a huge market for used cars in the future,” Shah said.
Watch the video for the full report