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AN INDIAN ODYSSEY…

VIEWS: 16 PAGES: 47

									                      RESEARCH




                                 &
INITIATING COVERAGE




                                 AN INDIAN ODYSSEY…
RESEARCH




   Contents



    Investment Rationale                   ........................................................................................... 2



    Investment Risk                        ........................................................................................... 5



    Valuation & Recommendation ....................................................................................... 6



    Mahindra & Mahindra Group Structure ......................................................................... 8



    Business Analysis                      ........................................................................................... 9



    International Operations               ......................................................................................... 28



    Subsidiaries                           ......................................................................................... 31



        Systech (Auto Components segment) ....................................................................... 31



        Mahindra & Mahindra Financial Services Limited (MMFSL) ....................................... 34



        Infrastructure Development Sector ............................................................................. 35



        Tech Mahindra                      ......................................................................................... 38



    Financials                             ......................................................................................... 40
Initiating Coverage
Sector: Automobiles
BSE Sensex: 15,398
                                                                                                                                                     RESEARCH
                                                                                                                                                     BUY
                                                              MAHINDRA & MAHINDRA                                                                    CMP Rs813
                                                                                                                                                     TP Rs1,013

                                                                                                                                                       04 Sep 2009
                       AN INDIAN ODYSSEY...
                                                                                                             Vineet Hetamasaria, CFA              +91-22-6618 6388
                       Mahindra and Mahindra (M&M) after consolidating its
                                                                                                             vineet.hetamasaria@pinc.co.in
                       dominance in the India tractors market and Utility vehicles
                       segment is now pursuing growth in the other verticals of the                          Nikhil Deshpande                     +91-22-6618 6339
                       Indian automotive industry. At the group level, the company                           nikhil.deshpande@pinc.co.in

                       is aggressive in growing its business through a mix of organic
                       and inorganic options.

                       Core business on a strong footing
                       M&M has consolidated its leadership in the tractors market with                       STOCK DATA
                       acquisition of Punjab Tractors. In the utility vehicles segment too,                  Market Cap                              Rs221.6bn.
                       it has extended its leadership position with a market share of ~57%.                  Book Value per share                    Rs204
                                                                                                             Eq Shares O/S (F.V. Rs1)                272mn.
                       Foraying in 2-wheelers and Heavy Commercial vehicles                                  Free Float                              69.2%
                                                                                                             Avg Traded Value (6 mnths)              Rs786mn
                       M&M has now forayed in 2-wheelers segment through acquisition
 Initiating Coverage




                                                                                                             52 week High/Low                        Rs943/236
                       of assets of Kinetic Motors. Through its joint venture with Navistar,                 Bloomberg Code                          MM IN
                                                                                                             Reuters Code                            MAHM.BO
                       M&M will be launching Medium and Heavy commercial vehicles
                       (MHCV) in H2FY10.
                       Subsidiaries increasing their value for the parent
                                                                                                             TOP SHAREHOLDERS
                       M&M is engaged in various other businesses like Information
                                                                                                               Name                                         % holding
                       Technology, Financial Services, Automotive Components,
                                                                                                               Life Insurance Corporation of India            17.30
                       Hospitality, Real Estate etc. These businesses are growing at an
                                                                                                               ICICI Prudential Life                           2.19
                       accelerated pace thus increasing their contribution to M&M profits.
                                                                                                               First State Investment                          1.90
                       Initiate coverage with Buy rating                                                       HSBC Global Investment                          1.83

                       We initiate coverage on the company with a ‘BUY’ recommendation                         General Insurance Corporation                   1.81

                       and a price target of Rs1,013. For arriving at target price, we have
                       considered Sum of the Parts (SOTP) valuation methodology. We
                       have discounted FY10 core earnings 14x and taken a discount of                        PERFORMANCE (%)
                       20% for subsidiaries valuation.                                                                                    1M          3M         12M
                                                                                                             Absolute                  (12.2)        17.9        38.5
                       KEY FINANCIALS (STANDALONE)                                                Rs mn      Relative                   (9.4)        15.3        36.2
                                                     FY07       FY08       FY09      FY10E       FY11E
                       Net Sales                   96,277    108,046     126,491    145,416    160,677
                       YoY Gr.(%)                     20.5       12.2       17.1       15.0        10.5      RELATIVE PERFORMANCE
                       Op. Profits                  8,447       6,391      6,476     14,916     16,707
                                                                                                                              M&M               BSE (Rebased)
                       Op. Marg.(%)                   12.0       11.9         8.3      13.1        13.1      1,000
                       Adjusted Net Profit          9,947       9,382      8,287     13,982     15,284
                       YoY Gr.(%)                     47.7       (5.7)     (11.7)      68.7         9.3        800
                       KEY RATIOS
                                                                                                               600
                       Dil. EPS (Rs)                  42.2       39.3       32.4       50.4        53.3
                       ROCE (%)                       28.6       21.3       13.8       18.5        17.6        400
                       RoE (%)                        31.0       23.8       17.3       23.0        20.0
                       PER (x)                        19.3       20.7       25.1       16.1        15.3        200
                       EV/Net sales (x)                2.3        2.2         1.9        1.7        1.6          Sep-08     Dec-08       Mar-09     Jun-09     Sep-09
                       EV/EBDITA (x)                  18.8       17.4       22.6       12.6        11.7
                                       PINC Research reports are also available on Reuters, Thomson Publishers and Bloomberg PINV <GO>                                  1
                   RESEARCH
                                                                                                                                    Mahindra & Mahindra
                                   INVESTMENT RATIONALE

                                Investment Rationale

Growth in H1FY10 to             Marginal impact of deficient monsoons on tractor sales: Due to full impact of merger
neutralise the decline in       of Punjab Tractors (PTL), tractor volumes are likely to increase by 13% to 135k units in
H2FY10...                       FY10. On a comparable basis, this growth is 3%. YTDFY10 the company has achieved a
                                14% growth in tractor sales, however given the deficient monsoons during the current year
                                we expect sales to be adversely impacted in H2FY10 leading to 2% decline in sales. We
                                expect monsoon impact to be muted during the current year as tractor sales over the last
                                two years were subdued.

                                  Exhibit 1 - Tractor Sales
                                                     PTL             M&M             Industry              M&M grow th              Industry grow th

                                 400                                                                                                                        45


                                 300                                                                                                                        30


                                 200                                                                                                                        15


                                 100                                                                                                                        0


                                        0                                                                                                                   (15)
                                                 FY05         FY06         FY07             FY08             FY09          FY10E          FY11E

                                Source: Company, TMA


Non-tractor revenues to         Developing non-tractor revenue streams: Over the last three years, farm equipment
increase further...             segment (FES) is reducing its dependence over tractors by targeting non-tractor revenue
                                streams. Non-tractor revenues now contribute ~20% to the revenues of FES. In the initial
                                phase, company has targeted engines (Powerol) as the business area and within three
                                years, it has become Rs10bn business. Now, M&M is focusing on agriculture equipments
                                for incremental growth. Given the shortage of labor in rural economy due to National Rural
                                Employment Guarantee Scheme (NREGA), there is a big potential for farm equipment.

                                  Exhibit 2 - FES Non-Tractor Segment Revenues
                                                             MM Pow erol          MM Applitrac          Non Tractor Business Contribution (RHS)

                                            12,000                                                                                                     20


                                             9,000                                                                                                     15
                                Rs mn




                                             6,000                                                                                                     10
                                                                                                                                                                (%)




                                             3,000                                                                                                     5


                                                0                                                                                                      0
                                                           FY05            FY06                  FY07               FY08              FY09
                                Source: Company, PINC Research


vineet.hetamasaria@pinc.co.in                                                                                                                                    2
                   RESEARCH
                                                                                                                                                          Mahindra & Mahindra
                                   INVESTMENT RATIONALE

Strong product line-up to help   Utility vehicles on a strong wicket: New offering by the company and absence of any
maintain leadership...           major launches by the competition has helped M&M in consolidating its market leadership
                                 position further in the UV category. With Scorpio doing well despite launch of Xylo, the
                                 outlook on SUV segment remains strong. In the current year, Xylo will be the major growth
                                 driver while in FY11, we expect Scorpio to lead the growth charts with planned launch of a
                                 successor to existing Scorpio. Overall we expect UV sales to grow by 11% and 9% during
                                 FY10 and FY11 respectively.

                                  Exhibit 3 - M&M Utility Vehicle Sales
                                                               Non Scorpio                              Scorpio/Xy lo                         Grow th (%) (LHS)
                                 200                                                                                                                                              40



                                 150                                                                                                                                              30



                                 100                                                                                                                                              20



                                  50                                                                                                                                              10



                                    0                                                                                                                                             0
                                            FY03            FY04         FY05                FY06        FY07             FY08        FY09              FY10E       FY11E

                                 Source: Company

Commodity price correction       Raw material cost reduction to drive profitability: During FY09, profitability of the
to lead to margin                company was adversely impacted due to abnormal increase in raw material cost. The
improvement...                   problem was further aggravated by global financial crisis during H2FY09 leading to weak
                                 demand conditions. With correction in raw material prices and improvement in demand
                                 conditions, M&M is well positioned to expand its margins to FY08 levels.

                                  Exhibit 4 - Operating Margin
                                                                                EBITDA Rs mn (LHS)                               EBITDA Margins % (RHS)

                                          7,000                                                                                                                              16


                                          5,500                                                                                                                              12
                                  Rs mn




                                                                                                                                                                             (%)



                                          4,000                                                                                                                              8


                                          2,500                                                                                                                              4


                                          1,000                                                                                                                              0
                                                              Dec-06




                                                                                                        Dec-07




                                                                                                                                               Dec-08
                                                   Sep-06




                                                                       Mar-07


                                                                                    Jun-07


                                                                                               Sep-07




                                                                                                                 Mar-08


                                                                                                                            Jun-08


                                                                                                                                     Sep-08




                                                                                                                                                           Mar-09


                                                                                                                                                                    Jun-09




                                 Source: Company, PINC Research




vineet.hetamasaria@pinc.co.in                                                                                                                                                         3
                   RESEARCH
                                                                                                                         Mahindra & Mahindra
                                  INVESTMENT RATIONALE

Debt equity ratio comfortable   Leverage levels at its peak: At present, on the standalone balance sheet, M&M has
at 0.5x...                      gross debt of Rs40bn. We believe that this is the peak debt level for the company considering
                                the announced capex and investment plans of the company. At present, net debt/equity
                                level stands at 0.5x and we see it improving to 0.4x in FY10. For the purpose, we have
                                considered conversion of compulsorily convertible debentures of Rs7bn in FY10 and FCCBs
                                conversion of USD190mn in FY11. This provides further scope for fund raising to the company
                                in case of any future growth opportunity.

                                 Exhibit 5 - Total Debt
                                                                 Gross Debt (Rs bn)      Net debt equity (x )

                                        60                                                                                              0.8



                                        45                                                                                              0.6
                                Rs bn




                                        30                                                                                              0.4



                                        15                                                                                              0.2



                                        0                                                                                               0.0
                                             FY03      FY04      FY05       FY06      FY07      FY08            FY09   FY10E   FY11E
                                Source: Company, PINC Research

Holding treasury stock worth    Treasury stocks give flexibility for fund raising: M&M has created 26mn treasury
Rs21bn...                       stocks on merger of two subsidiaries – Mahindra Holding & Finance and Punjab Tractors
                                – during FY09. At the current market price, these treasury stocks are worth ~ Rs20bn.
                                M&M will be monetising these stocks at an opportune time. This will be very handy to the
                                company in raising funds without any further equity dilution.
Subsidiaries increasing their   Subsidiaries adding value to the company: The major subsidiaries of the company
importance in the group...      are doing well. Tech Mahindra has acquired Satyam Computers Services and is now in the
                                process of stabilizing the operations. The financial arm Mahindra & Mahindra Financial
                                Services should benefit from improved outlook for M&M’s vehicle sales and easing liquidity
                                conditions. Mahindra Holidays and Resorts have successfully launched their IPO. Mahindra
                                Lifespace Developers is progressing on development of its Jaipur SEZ and has commenced
                                work on residential projects at Chennai SEZ. However, auto components business remains
                                in a tight spot with major part of the capacity for the company located in European markets.
                                Given the fact that these capacities were acquired by M&M at the peak of the cycle, it
                                remains an area of concern.




vineet.hetamasaria@pinc.co.in                                                                                                                 4
                   RESEARCH
                                                                                                              Mahindra & Mahindra
                                 INVESTMENT RISKS

                                Investment Risks
Dependence on rural             Monsoons a concern: M&M derives a major part of their sales from rural areas which is
economy is very high...         dependent on the monsoons. During the current year, monsoons have been poor and are a
                                big concern for the agriculture. We estimate that dismal monsoons will be having marginal
                                impact on tractor sales as the North-west part of the country is having good irrigation facilities
                                thus mitigating the impact of monsoons. However, deficient monsoon can lead to lowering
                                of water levels and impact winter crops. This is a key risk to our growth assumptions in the
                                tractor segment. Even in the automobile segment, M&M has a high exposure to rural economy
                                and a weak performance in rural economy will adversely impact M&M sales.

                                Foray in the new segments in automotive segment: By acquiring assets of Kinetic
                                Motors, M&M has entered into 2-wheelers business. The domestic 2-wheelers business
                                has become very competitive with growth rate of single digits. Most of the manufacturers,
                                except the top two manufacturers are generating low return on their investments. Even a
                                company like TVS Motor with annual volumes of more than 1mn units has OPM of less
                                than 5%. In this environment, we see 2-wheelers to be a drag in the group performance. By
                                this year end, M&M will be launching its product in the Medium & Heavy commercial
                                vehicles (MHCV) segment. This business has remained a virtual duopoly in the domestic
                                market despite entry of new players. Given the fact that this segment doesn’t have any
                                synergy with the existing business in sales and distribution, it will be an uphill task for the
                                company to achieve a critical mass in this segment.

Auto components division        Passenger car and auto components are a drag on consolidated financials: In the
(Systech) remains a drag on     passenger cars segment, Logan sales have not matched up to the expectations after the
profitablility...               initial success. The joint venture company Mahindra Renault incurred a loss of Rs5bn
                                during FY09 on a sales volume of 13k units. The scenario remains challenging and M&M is
                                waiting for response of joint venture partner Renault on the future of the JV. In the auto
                                components business, M&M has pursued inorganic growth opportunity and most of these
                                acquisitions were done at the peak of cycle. Major parts of the capacity in the acquired
                                entities are in Europe which is still struggling to come out from the recession. This increases
                                the risks for the business.




vineet.hetamasaria@pinc.co.in                                                                                                    5
                     RESEARCH
                                                                                                                        Mahindra & Mahindra
                                          VALUATION & RECOMMENDATION

                                        Valuation & Recommendation

                                        Sum of the Parts Valuation

                                        M&M being a conglomerate, we value this company on Sum of the Parts (SOTP) valuation
                                        methodology. For the purpose, we have valued core earning of standalone entity through
                                        earnings multiple method. For listed subsidiaries, we have taken current market price as
                                        the reference point and given a 20% holding structure discount.

                                        The diluted core earnings of the company is likely to increase from Rs27.2 in FY09 to
                                        Rs48 in FY11 with a CAGR of 33%. In this interim, equity base of the company is likely to
                                        increase by 6% due to conversion of debentures and FCCBs.

 Exhibit 6 - SOTP Valuation Table
Company name                             Valuation    Per share
                                          Method         (Rs)     Multiple       Value (Rs)               Remarks               CMP Date
Mahindra & Mahindra (Standalone)               P/E      45.7        14              639            Core EPS for FY10E
Tech Mahindra                                  CMP      186.1       0.8             149          Discount of 20% to CMP         3-Sep-09
Mahindra Holiday & Resorts                     CMP      85.3        0.8             68           Discount of 20% to CMP         3-Sep-09
M&M Financial Services                         CMP      46.3        0.8             37           Discount of 20% to CMP         3-Sep-09
Mahindra Lifespace Developers                  CMP      27.2        0.8             22           Discount of 20% to CMP         3-Sep-09
Mahindra & Mahindra (Treasury Stocks) CMP               77.3        0.8             62           Discount of 20% to CMP         3-Sep-09
Swaraj Engines                                 CMP       4.5        0.8              4           Discount of 20% to CMP         3-Sep-09
Mahindra Forgings                              CMP      11.2        0.8              9           Discount of 20% to CMP         3-Sep-09
Mahindra Ugine Steel                           CMP       2.3        0.8              2           Discount of 20% to CMP         3-Sep-09
Mahindra Composites                            CMP       3.8        0.8              3           Discount of 20% to CMP         3-Sep-09
Mahindra Navistar                              P/BV     12.4        1.5             19        Book Value on 31st March 2009
SOTP Value (Rs)                                                                    1,013
Source: PINC Research




 Exhibit 7 - Consolidated Financials
 (Rs mn)                                                              FY09                       FY10E                     FY11E
 Mahindra & Mahindra (Standalone core profits)                        6,969                      12,664                   13,768
 Tech Mahindra*                                                       4,954                       3,163                       3,578
 Mahindra Holiday & Resorts                                               781                       997                       1,246
 M&M Financial Services*                                              1,289                       1,478                       1,637
 Mahindra Lifespace Developers*                                           337                       371                        631
 Mahindra & Mahindra (Treasury Stocks)                                       0                      259                        311
 Mahindra Systech Division                                            (789)                       (400)                        400
 Mahindra Renault                                                   (2,500)                      (1020)                       (500)
 Trading & Other business                                             3,013                       3,315                       3,646
 Consolidated Profits                                                14,054                      20,827                   24,717
 Consolidated diluted earnings (Rs)                                       54.9                     75.1                        86.2

Source: PINC Research, * Bloomberg Estimates




vineet.hetamasaria@pinc.co.in                                                                                                              6
                   RESEARCH
                                                                                                          Mahindra & Mahindra
                                 VALUATION & RECOMMENDATION

                                 Exhibit 8 - Peer Comparision
                                                                                    EPS (Rs)                   P/E (x)
                                 Company                        Basis
                                                                                 FY10          FY11     FY10             FY11
                                 Hero Honda                     Standalone       98.4       108.3       15.7             14.3
                                 Maruti Suzuki                  Consolidated     72.7          85.6     20.7             17.6
                                 Ashok Leyland*                 Standalone        1.9           2.6     20.8             15.0
                                 Tata Motors*                   Consolidated      6.1          20.5     83.0             24.9
                                 Mahindra & Mahindra            Consolidated     75.1          86.2     10.8              9.4
                                Source: PINC Research, * Bloomberg Estimates


                                Recommendation

Target Price of Rs1,013...      Our SOTP valuation for the company comes at Rs1,013. On a relative basis too, M&M is
                                trading at cheaper valuations as compared to its peers in the Indian market. The discount
                                on M&M valuation is steep which we believe is unjustified given the financial strength of the
                                company and business strength of its operations.

                                Currently the stock is trading at Rs813. We initiate coverage on the stock with a ‘BUY’
                                recommendation with target price of Rs1,013 giving an upside of 25% from the current
                                level.




vineet.hetamasaria@pinc.co.in                                                                                                   7
                     RESEARCH
                                                                                                     Mahindra & Mahindra
                                     M&M GROUP STRUCTURE


Mahindra & Mahindra – Group Structure

 Exhibit 9 - Group Structure



                                                   MAHINDRA & MAHINDRA




                           FARM              AUTO       INFRASTRUCTURE          FINANCIAL
   AUTOMOTIVE                             COMPONENTS                                            IT SERVICES
                         EQUIPMENT                        DEVELOPMENT           SERVICES
                                           (SYSTECH)


               DOMESTIC          MAHINDRA         MAHINDRA        MAHINDRA               MAHINDRA           TECH
              OPERATIONS         TRACTORS         FORGINGS       HOLIDAYS &               FINANCE         MAHINDRA
                                                                  RESORTS



              MAHINDRA            SWARAJ          MAHINDRA        MAHINDRA
                                                                                                          MAHINDRA
            RENAULT (MRPL)      DIVISION (PTL)   UGINE STEEL     LIFESPACES
                                                                                                           SATYAM


                                                                          MAHINDRA
                                                                            INFRA
                                                                         DEVELOPERS
              MAHINDRA           MAHINDRA        ENGINEERING
               NAVISTAR          APPLITRAC        SERVICES
             AUTOMOTIVES                                                  MAHINDRA
              LTD (MNAL)                                                    WATER
                                                                         UTILITIES LTD


                  MAHINDRA                                                MAHINDRA
                  NAVISTAR       MAHINDRA          GEARS                 WORLD CITY
                   ENGINES       POWEROL                                   JAIPUR
                                                                                                    INDEX
                   (MNEPL)
                                                                                                     DIVISION

                                                                          MAHINDRA
              MAHINDRA           MAHINDRA                                WORLD CITY
              VEHICLES             CHINA          STAMPINGS
                                                                           CHENNAI                  SUBSIDIARY
            (CHAKAN SPV)         TRACTORS


                                                                           MAHINDRA             JOINT VENTURE
            MAHINDRA TWO         MAHINDRA                                 WORLD CITY
              WHEELERS             USA           COMPOSITIES
                                                                         MAHARASHTRA




                                                  CASTINGS




Source: Company




vineet.hetamasaria@pinc.co.in                                                                                          8
                   RESEARCH
                                                                                                             Mahindra & Mahindra
                                      BUSINESS ANALYSIS

                                  Business Analysis
                                  Automotive Segment

                                  Utility Vehicles & Pick-up segment

Consistently maintained           M&M has maintained a leadership position in the domestic utility vehicles and pick-up
marketshare in excess of          space with a wide product portfolio. From assembling of jeeps in the 1950s, it has evolved
40% in UV segment...              in a company with strong research and development capabilities. In its product portfolio, it
                                  has a mix of mass market products like Bolero, Xylo to lifestyle products like Scorpio. In
                                  the UV segment, it has consistently maintained a marketshare in excess of 40% in the
                                  domestic markets.

                                      Exhibit 10 - Utility Vehicles Marketshare
                                                        MM               TTML           TOYOTA              OTHERS
                                      50.0



                                      37.5



                                      25.0
                                (%)




                                      12.5



                                       0.0
                                                 FY02   FY03      FY04          FY05   FY06       FY07       FY08      FY09

                                  Source: SIAM

In urban areas, growth in         The UV segment in India has witnessed CAGR of 12% over FY02-09. This growth is two
BPO business is a major
                                  pronged with contribution from both rural and urban India. In the urban segment, growth in
growth driver for UVs...
                                  business process outsourcing (BPO) segment has been the major demand driver besides
                                  the increased demand from commercial activity like tour operators etc. Over the last ten
                                  years, India has emerged as a major hub for global outsourcing purpose leading to growth
                                  in BPO centers and jobs in the country. The BPO industry provides conveyance facilities
                                  to its employees and this has led to surge in demand of UVs from the BPO industry.
                                  Increased economic activity has led to more movement of people and led to healthy growth
                                  in tour operator business.

                                  In the rural areas, UVs are used as a means of public conveyance due to their toughness.
                                  This is important given the poor road conditions and lack of proper service infrastructure. In
                                  the Pick-up segment also, M&M has a strong presence and again this product is targeted
                                  on rural and semi-urban areas. M&M currently enjoys market share of over 47% in UV
                                  segment (including pick-up).




vineet.hetamasaria@pinc.co.in                                                                                                  9
                   RESEARCH
                                                                                                                                     Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                 Exhibit 11 - Number of Employees in Indian IT Industry
                                                                 IT Serv ices & Softw are Ex ports                 BPO Ex ports
                                                                 Domestic Market                                   Grow th (LHS)
                                2,400                                                                                                              32


                                1,800                                                                                                              24
                                              .

                                1,200                                                                                                              16




                                                                                                                                                           %
                                  600                                                                                                              8


                                      0                                                                                                            0
                                                  FY02   FY03         FY04          FY05             FY06      FY07           FY08       FY09E

                                Source: Nasscom




                                 Exhibit 12 - Utility Vehicle Industry Sales
                                                                          Utility Vehicle Sales                     Grow th (LHS)
                                320                                                                                                                    30


                                240                                                                                                                    20
                                          .



                                160                                                                                                                    10


                                 80                                                                                                                    0


                                  0                                                                                                                    (10)
                                                  FY03    FY04            FY05             FY06             FY07            FY08          FY09


                                Source: SIAM




vineet.hetamasaria@pinc.co.in                                                                                                                              10
                   RESEARCH
                                                                                                         Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                Products in Utility vehicles and Pick-up segment

                                Bolero – MM’s warhorse

Bolero continues to be the      M&M launched the Bolero multi utility vehicle in 2000. This product has been clocking
largest selling brand in the    annual volumes of 50k for the past two years and is the highest selling product in domestic
UV segment...
                                UV segment. This product has its variants in Pick-up and UVs.

                                 Exhibit 13 - Bolero Sales
                                                                  Bolero               Marketshare
                                   60                                                                                 32.0



                                   45                                                                                 24.0



                                   30                                                                                 16.0


                                   15                                                                                 8.0



                                    0                                                                                 0.0
                                             FY05          FY06            FY07           FY08            FY09

                                Source: Company, SIAM


                                Over the FY05-09 period Bolero sales have grown at a CAGR of 22.5%. During FY09 while
                                the utility vehicles domestic market contracted by 7.9% to 225k units, Bolero registered
                                an impressive growth of 9.6% to 56k units. In the process the model achieved a marketshare
                                of 24.8%, thus expanding its market share by 400bps over FY08.

                                Scorpio – Giving an urbane touch to the company
Scorpio transformed the         With the launch of the Scorpio Sports Utility vehicle (SUV) in mid-2002, M&M demonstrated
image of the company...
                                its transition from predominantly a jeep manufacturer to a lifestyle vehicle maker. This
                                product is also instrumental in transforming the image of the company from manufacturer
                                of rugged vehicles to manufacturer of sophisticated products. This product has also helped
                                the company in changing its perception from a rural India player to a balanced player
                                catering to requirements of a much wider market. This product was indigenously developed
                                at a total capex of USD120mn, which is just a fraction compared to global standards of
                                USD1bn capex.

                                During the period FY04-08, Scorpio sales grew at a CAGR of 14.2% to peak at 40k units
                                in FY08, garnering a marketshare of 16.3% in the domestic UV segment. However, in
                                FY09 sales slumped by 24.9% due to economic slowdown and increase in excise duty on
                                the product. In Q4FY09, M&M launched their new product Xylo which has further led to
                                some cannibalization of Scorpio. The company is currently working on a new Scorpio
                                which is expected to be launched in FY11.




vineet.hetamasaria@pinc.co.in                                                                                                11
                   RESEARCH
                                                                                                                                                              Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                 Exhibit 14 - Scorpio Sales Trend
                                                                                               Scorpio                             Grow th
                                  50                                                                                                                                                 30.0



                                  38                                                                                                                                                 15.0



                                  25                                                                                                                                                 0.0


                                  13                                                                                                                                                 (15.0)



                                   0                                                                                                                                                 (30.0)
                                                    FY05                 FY06                             FY07                        FY08                            FY09

                                Source: Company

                                M&M in overdrive with Xylo
Xylo enriching the product      In Jan’09 M&M launched its latest offering, the multi purpose vehicle Xylo on an entirely
offering in the UV space...     new platform. Developed at a total cost of Rs5.5bn, the vehicle is being marketed as an
                                alternative to the sedan. Xylo is targeted towards personal as well as commercial use. The
                                Xylo is pitted against the Toyota Innova which is the second largest selling utility vehicle in
                                the country.

                                The excellent performance of the vehicle coupled with an aggressive pricing has helped
                                boost the demand for the vehicle. During the Jan’09-Apr’09 period the Xylo has clocked
                                sales of 10k units with total bookings exceeding 16k units. The vehicle has however
                                cannibalised a Scorpio sales to a small extent. M&M has also launched the Xylo in South
                                Africa and has received a warm response for the same.


                                 Exhibit 15 - Xylo Monthly Sales
                                                                                  Innov a                             Scorpio                        Xy lo
                                 4,800


                                 3,600


                                 2,400


                                 1,200


                                       0
                                                                         Oct-08




                                                                                                 Dec-08
                                           Jul-08


                                                       Aug-08


                                                                Sep-08




                                                                                                             Jan-09


                                                                                                                          Feb-09


                                                                                                                                       Mar-09


                                                                                                                                                Apr-09




                                                                                                                                                                         Jun-09


                                                                                                                                                                                  Jul-09
                                                                                      Nov-08




                                                                                                                                                             May-09




                                Source: Company, SIAM




vineet.hetamasaria@pinc.co.in                                                                                                                                                              12
                   RESEARCH
                                                                                                                     Mahindra & Mahindra
                                        BUSINESS ANALYSIS

                                3-wheelers Segment

                                Passenger Carriers

Passenger 3-wheeler industry    The Indian 3-wheelers market is dominated by the passenger carriers. In this segment,
dependent on replacement        Bajaj Auto is the largest player. There are two distinct segments in 3-wheelers passenger
demand...                       carriers industry – regulated and non-regulated. In the regulated market, state governments
                                decide about the number of permits to be issued and generally in this market demand is for
                                environment friendly products. This segment is dominated by Bajaj Auto with ~90% market
                                share. The non-regulated market is in tier II towns and semi-urban areas. In this market,
                                demand is for bigger 3-wheelers with higher passenger carrying capacity. Piaggio is the
                                market leader in this segment. Over the last few years, demand has been largely contributed
                                by non-regulated market. In the regulated market replacement demand is the mainstay for
                                industry as very few new permits have been issued in the last five years. This has led to
                                subdued CAGR of 7.8% for the industry over FY02-09. However during FY09, passenger 3-
                                wheelers industry has shown a growth of 15.6% amidst decline in almost all other automobile
                                segments. We expect growth in the segment to taper-off to a low single digit growth.


                                      Exhibit 16 - 3-Wheelers Industry Sales
                                                                    Passenger 3W          Goods 3W          Grow th (LHS)
                                                480                                                                                40



                                                360                                                                                25
                                Units ('000s)




                                                240                                                                                10



                                                120                                                                                (5)



                                                 0                                                                                 (20)
                                                      FY02   FY03        FY04      FY05    FY06      FY07     FY08          FY09

                                Source: SIAM

                                M&M’s offering

                                Till FY08 M&M was only a marginal player in the passenger 3-wheelers segment as its
                                portfolio had only one offering i.e. the 6-seater Champion diesel. However in Feb’09, M&M
                                launched the 3-seater Alfa Passenger catering a much wider market. In FY09 this segment
                                clocked volumes of 26k units for M&M leading to an overall market share of 10% in passenger
                                3-wheelers up from 1% in FY08.




vineet.hetamasaria@pinc.co.in                                                                                                            13
                       RESEARCH
                                                                                                                                                  Mahindra & Mahindra
                                                  BUSINESS ANALYSIS

 Exhibit 17 - Passenger 3-wheelers Marketshare                                              Exhibit 18 - Goods 3-wheeler Marketshare
               BJAUT            Piaggio                       M&M             Others                  BJAUT            M&M                  Piaggio                Others
                                                                                            60%
 100%


  75%                                                                                       45%



  50%                                                                                       30%



  25%                                                                                       15%


   0%                                                                                        0%
          FY02    FY03   FY04      FY05            FY06        FY07    FY08     FY09                  FY02    FY03   FY04     FY05   FY06      FY07       FY08     FY09

Source: SIAM

                                          Goods Carriers
Tata ACE had a big impact                 In India, 3-Wheelers goods carriers are used as the ‘Last-mile’ connectivity in the supply
on 3-wheeler cargo                        chain. Demand for this segment has been adversely impacted over the last three years
segment...
                                          due to launch of sub 1-tonne 4-wheeled Tata ACE which revolutionized the SCV (Small
                                          commercial vehicle) space. Despite a higher price tag, the ACE found acceptance due to
                                          the vehicle stability and flexibility in overloading. Piaggio is the market leader in this segment
                                          with a market share of 40% followed by M&M with market share of ~25%. Both these
                                          players have now launched products in the SCV segment; however they remain a marginal
                                          player in this segment. M&M has two offerings in the goods 3-wheelers segment, the Alfa
                                          and Champion models. Both the products are available in diesel and CNG variants. The
                                          Champion has a 0.75mt payload while Alfa has a 0.5mt payload.

                                                Exhibit 19 - Low tonnage LCV cannibalising 3-wheelers goods category
                                                                                        Total Goods 3W                 LCVs < 3.5MT
                                                                                        Grow th Goods 3W               Grow th LCVs <3.5 MT           Tata ACE launched
                                                        200                                                                                                          100.0



                                                        150                                                                                                          60.0
                                          Units '000s




                                                        100                                                                                                          20.0



                                                        50                                                                                                           (20.0)



                                                          0                                                                                                          (60.0)
                                                                    FY03         FY04          FY05           FY06          FY07      FY08               FY09
                                          Source: SIAM




vineet.hetamasaria@pinc.co.in                                                                                                                                               14
                   RESEARCH
                                                                                                                     Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                Passenger car segment
M&M is a marginal player in     M&M entered the passenger car segment through Mahindra Ford India, which started as
the passenger car               an equal joint venture with Ford Motor Company, USA (Ford) in 1995. However, M&M
segment...
                                diluted their stake in the venture to 28% in 1998 by not subscribing to the enhanced capital
                                of the company. In FY05, M&M exited this venture by selling its stake to Ford.
                                In Sep'05, M&M announced another joint venture Mahindra Renault (MRPL) for passenger
                                cars with French automobile manufacturer Renault. M&M has a 51% holding in this venture.
                                MRPL is essentially a single product JV formed to manufacture and market Renault Logan
                                in India. This product is contract manufactured by M&M for the JV at its Nasik Plant and
                                marketed through the exclusive M&M distribution chain. The car was launched in India in
                                May 2007. After initial success, this product has been on a continuous decline and the
                                partners are in negotiations regarding the future of this venture. The fate of this venture will
                                be linked to Renault's India plan. Renault is constructing a passenger car plant at Chennai
                                in association with Nissan Motor Company. Earlier M&M was a partner in this project too,
                                however later on they exited this venture.

                                 Exhibit 20 - Renault Logan Sales
                                                            Logan Sales                Marketshare Midsize segment (LHS)
                                10,000                                                                                               16



                                 7,500                                                                                               12



                                 5,000                                                                                               8



                                 2,500                                                                                               4



                                     0                                                                                               0
                                          Q1FY08   Q2FY08   Q3FY08        Q4FY08   Q1FY09   Q2FY09     Q3FY09      Q4FY09   Q1FY10

                                Source: SIAM

                                Commercial Vehicles
                                In the commercial vehicles segment, M&M is currently a marginal player with offerings in
                                the light commercial vehicles segment. The company classifies its Pick-ups in utility vehicles
                                segment. However, the auto manufacturers association classifies Pick-ups in LCVs
                                categories.
                                Light Commercial Vehicles
In the LCV segment M&M is       In the LCV segment, M&M has a major presence through its Pick-ups. In the traditional
largely present through pick-   LCV space, it is a marginal player with annual volumes of ~10k units. Indian LCV market
ups...                          has been a fast growing market with CAGR of 23% over FY02-09. However, this market has
                                undergone a transition with low tonnage vehicles gaining prominence. The low tonnage
                                vehicles segment has grown by 42% over the similar time frame. Tata Motors (TTMT) through
                                their low tonnage vehicle ‘Ace’ is the market leader in the LCV goods segment. M&M is
                                present through their pick-up range of vehicles. To participate in fast growing ‘Ace’ category,
                                M&M is working on a similar kind of product which is expected to hit the market by end
                                FY10. We believe that this segment is in secular growth trend due to emergence of hub and


vineet.hetamasaria@pinc.co.in                                                                                                        15
                    RESEARCH
                                                                                                                              Mahindra & Mahindra
                                            BUSINESS ANALYSIS

                                        spoke model in the goods transportation segment. This segment caters to last mile
                                        connectivity and with development of highways and road congestion in consumption centers,
                                        their will be increasing demand for these vehicles.

 Exhibit 21 - LCV Goods Segment Sales                                         Exhibit 22 - LCV Passenger Segment Sales
                 LCV Goods ('000s)          Grow th (%) (RHS)                              LCV Pass ('000s)          Grow th (%) (RHS)
   250                                                                 45     35                                                                60


   200                                                                 30     30                                                                40


   150                                                                 15     25                                                                20


   100                                                                 0      20                                                                0


    50                                                                 (15)   15                                                                (20)
          FY03    FY04    FY05       FY06    FY07     FY08      FY09               FY03   FY04    FY05        FY06   FY07    FY08        FY09

Source: SIAM


                                        Medium and Heavy Commercial vehicles

                                        The Indian MHCV industry is a classic case of Duopoly with the top two manufacturers
                                        namely TTMT & Ashok Leyland (AL) together enjoying ~90% market-share in both passenger
                                        as well as the goods segment.

                                        Passenger segment

MHCV passenger segment                  In the passenger segment both TTMT as well as AL each command a 45% marketshare.
to do well due to demand                Over the FY03-09 period the industry sales have grown at a CAGR of 9.8% to 35k units in
from STUs...                            FY09. The passenger segment has been a steady segment unlike the goods segment
                                        where there is a big volatility in the demand trend. Traditionally, this market was dependent
                                        on state transport undertakings for demand. However, in the last few years, development on
                                        national highways has led to increased demand from private operators. In FY09, the central
                                        government as a part of its economic stimulus package provided capital support to STU’s
                                        for replacement of old vehicles. This is expected to be a demand driver during the current
                                        year. Beside this additional demand is expected from Delhi government, due to
                                        Commonwealth games in Delhi in 2010.

                                        M&M currently is not a participant in this market and doesn’t have any plan to move in this
                                        segment in the near future.




vineet.hetamasaria@pinc.co.in                                                                                                                        16
                      RESEARCH
                                                                                                                                       Mahindra & Mahindra
                                               BUSINESS ANALYSIS

 Exhibit 23 - MHCV Passenger Segment Sales                                           Exhibit 24 - MHCV Pass. Segment Mkt Share
                    MHCV Pass ('000s)            Grow th (%) (RHS)                             Ashok Ley land            Tata Motors             Others
  50                                                                        45.0     60.0


  40                                                                        30.0     45.0


  30                                                                        15.0     30.0


  20                                                                        0.0      15.0


  10                                                                        (15.0)    0.0
            FY04    FY05      FY06        FY07      FY08        FY09                        FY03    FY04        FY05   FY06    FY07      FY08      FY09

Source: SIAM

                                           Goods segment

MHCV goods segment is a                    MHCV goods segment after displaying an impressive CAGR of 20% over FY03-08, declined
duopoly betwenn Tata Motors                by 37% during FY09. The prime reason for the decline has been economic slowdown,
and Ashok Leyland...                       slump in exim trade, higher interest rates and unavailability of financing. Increase in vehicle
                                           cost due to inflationary pressure and increase in fuel prices during This segment was
                                           undergoing a transformation over the last few years due to development of highways. This
                                           led to increased demand for high capacity vehicles which are cost efficient. However,
                                           FY09 was marked by the reversal of the trend with steep decline in high tonnage vehicles.
                                           We expect this to be temporary phase and maintain our view that MHCV segment will
                                           move towards heavy tonnage vehicles due to their cost efficiencies.

                                           In MHCV goods segment, TTMT is the market leader with a marketshare of ~65% while AL
                                           has been maintaining its share in ~ 22%. Both these players have been maintaining their
                                           market share despite entry of new players in the segment.

 Exhibit 25 - MHCV Goods Segment Sales                                               Exhibit 26 - MHCV Goods Segmentwise Sales

                     MHCV Goods ('000s)             Grow th (%) (RHS)                          Ashok Ley land            Tata Motors              Others
   300                                                                        50     80.0


   225                                                                        25     60.0


   150                                                                        0      40.0


       75                                                                     (25)   20.0


       0                                                                      (50)    0.0
             FY03   FY04     FY05       FY06     FY07    FY08        FY09                   FY03   FY04         FY05   FY06     FY07      FY08     FY09

Source: SIAM




vineet.hetamasaria@pinc.co.in                                                                                                                              17
                   RESEARCH
                                                                                                                                     Mahindra & Mahindra
                                      BUSINESS ANALYSIS

M&M is entering into MHCV       Considering the demand potential in India, global majors are attracted towards Indian MHCV
segment in JV with              market. A joint venture with a local partner is a preferred method to enter the market. Swedish
Navistar...
                                major Volvo has tied with Eicher for its foray while MAN is operating in partnership with
                                Force Motors. Daimler had a JV agreement with the Hero group, however later on Hero
                                group pulled out of the JV.

                                M&M has entered into a 51% joint venture Mahindra Navistar with US based International
                                Truck & Engine Corp (ITEC) for the manufacture of MHCV. This JV will manufacture MHCV
                                at the upcoming Chakan, Pune plant of M&M. The plant with an initial capacity of 30k
                                vehicles will start operation in Q4FY10. The first product to be launched is a 25 MT rigid
                                truck.

                                    Exhibit 27 - MHCV Goods Segmentwise Sales
                                                                        ICV          MDV          Multiax le           Tractor Trailer
                                               300


                                               225
                                Units '000s




                                               150


                                                75


                                                    0
                                                         FY03    FY04         FY05         FY06                 FY07            FY08         FY09

                                Source: SIAM




                                    Exhibit 28 - MHCV Goods Segentwise Composition
                                                                        ICV          MDV           Multiax le            Tractor Trailer
                                  100.0


                                      75.0


                                      50.0


                                      25.0


                                              0.0
                                                        FY03    FY04          FY05         FY06                 FY07            FY08          FY09

                                Source: SIAM




vineet.hetamasaria@pinc.co.in                                                                                                                        18
                   RESEARCH
                                                                                                                           Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                2-wheelers

Entered into the business       M&M is a new entrant in the 2-wheelers segment. In July 2008, M&M entered this segment
last year by buying assets of   by purchasing the assets of Kinetic Motor Company (KMCL) for Rs1.1bn. For this, M&M
Kinetic Motor...                has formed a joint venture Mahindra Two Wheeler Ltd in which M&M holds 80% stake. In
                                Jan’09, this JV re-launched two scooters namely the 125cc-Flyte & the 135cc-Nova. These
                                products were earlier being sold under the Kinetic brand. The products are being rolled out
                                from the Pithampur, MP plant. M&M has plans to launch motorcycles in the future.

                                2-wheelers industry structure

                                Indian 2-wheelers industry is dominated by motorcycles. Over the last five years, scooters
                                have also made a comeback as a second vehicle in a household. However, Indian 2-wheelers
                                industry is dominated by two players – Hero Honda and Bajaj Auto. These two manufacturers
                                enjoy high returns on their automotive business and this gives them ample firepower to take
                                on competition. We believe that M&M will be facing tough challenge from the incumbent
                                players and will need big investments.

                                 Exhibit 29 - 2-wheeler Industry Sales
                                                             2-w heeler Sales (mn units)               Grow th %
                                  8.0                                                                                                  30.0


                                  6.0                                                                                                  20.0
                                        .
                                  4.0                                                                                                  10.0


                                  2.0                                                                                                  0.0


                                  0.0                                                                                                  (10.0)
                                            FY01   FY02   FY03      FY04        FY05        FY06          FY07      FY08      FY09


                                Source: SIAM


                                 Exhibit 30 - Scooter Segment Marketshare
                                                          HH                           HMSI                         TVSM
                                                          BJAUT                        Kinetic Motor                OTHERS
                                  60



                                  45



                                  30



                                  15



                                   0
                                            FY01   FY02    FY03         FY04        FY05           FY06          FY07      FY08      FY09

                                Source: SIAM


vineet.hetamasaria@pinc.co.in                                                                                                                   19
                   RESEARCH
                                                                                                                           Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                Farm Equipment Segment

                                Tractors

Tractor industry had a CAGR     Indian tractor industry is highly cyclical in nature being dependent on the vagaries of the
of 3% over FY00-09...           monsoon. The penetration of irrigation has a high positive effect on the tractor sales. With
                                the increase in irrigation facilities, dependence of farmers reduce on monsoons leading to
                                better certainty on the output. This has a favorable impact on farmer’s decision making for
                                the purchase of farm equipments.

                                During the period FY00-09, the industry has reported a modest CAGR of 3%. At present,
                                the size of the domestic market is ~300k units and exports contribute another 45k units.

                                 Exhibit 31 - Domestic Tractor Sales
                                                          Domestic Sales        Agricultural GDP Grow th         Tractor Grow th
                                 400                                                                                                      40



                                 300                                                                                                      20



                                 200                                                                                                      0


                                 100                                                                                                      (20)



                                   0                                                                                                      (40)
                                         FY00      FY01     FY02      FY03    FY04       FY05       FY06       FY07     FY08       FY09

                                Source: TMA, www.mospi.nic.in




                                 Exhibit 32 - Tractor Exports
                                                                             Ex ports                Grow th
                                 60                                                                                                       90



                                 45                                                                                                       60



                                 30                                                                                                       30



                                 15                                                                                                       0



                                  0                                                                                                       (30)
                                        FY00      FY01      FY02     FY03     FY04       FY05       FY06       FY07     FY08       FY09

                                Source: TMA




vineet.hetamasaria@pinc.co.in                                                                                                                  20
                     RESEARCH
                                                                                                                                   Mahindra & Mahindra
                                         BUSINESS ANALYSIS

                                       Tractor Penetration

Tractor penetration in India is        In India there are 72mn farming households and around 70% of this household is small and
low and lopsided...                    marginal farmers. Out of these 72mn farming households, only 4.5mn households own
                                       tractors and a major part of this is owned by big farmers. The overall penetration of tractors
                                       in India is 11 tractors per 1000 acres of area as against global levels of 29. This reflects an
                                       under-penetration of tractors in the Indian market.

                                                           Land holding size                              % of tractor ownership
                                                           <5 acres                                                  1
                                                           5-20 acres                                                18
                                                           >20 acres                                                 81
                                                          Source: Company

                                       Tractor financing
Tractor sales highly                   90-95% of tractors sales are on financing. Public sector banks due to their penetration in
dependent on financing                 the rural areas are the major provider of tractor financing. M&M through its subsidiary Mahindra
support...
                                       and Mahindra Financial Services is the largest private sector player in the tractor financing.
                                       It finances approximately 30-35% of M&M tractor sales. This financing support through
                                       MMFSL provides an edge over the competition.
                                       Consolidation in the Indian Tractor Industry
Over the last 5 years the              The Indian tractor industry consists of approximately 10 players with M&M being the largest
tractor industry has                   single player. Till 2005 there were 6 major players namely M&M, Tractors & Farm Equipment
consolidated...                        (TAFE), Punjab Tractors (PTL), Escorts, Eicher and International Tractors (Sonalika). Each
                                       manufacturer had its geographical strength and inorganic growth was the only method to
                                       gain marketshare in a highly competitive market. TAFE was strong player in the southern
                                       market while was relatively weaker in the lucrative northern markets. This led to acquisition
                                       of Eicher tractor division in 2005 at a cost of Rs3bn. Further, TAFE’s inherent strength was
                                       in the >30hp range while Eicher was more dominant in the sub 30hp range. With a
                                       complimentary strength geographically as well as on product TAFE consolidated its position
                                       as number two player in the market and closed on to M&M. In another round of consolidation
                                       in the industry, M&M acquired PTL in 2007. With this acquisition M&M regained its lead
                                       over TAFE. The top two tractor manufacturers in the country now have ~65% market-share
                                       between themselves.

 Exhibit 33 - Tractors Market Share FY04                                       Exhibit 34 - Tractors Market Share FY09
                                 5%    4%      5%                                                                  5%       3%
                                                                                                          6%
                   10%
                                                                                               9%



                                                                 28%
        13%
                                                                                     14%
                                                                                                                                             41%



              9%

                                                    13%
                           13%                                                                         22%
                         M & M group   Punjab Tractors     TAFE Group       Eicher   Escorts        Sonalika   John Deere   New Holland   Others

Source: TMA, Comapny
vineet.hetamasaria@pinc.co.in                                                                                                                      21
                    RESEARCH
                                                                                                                         Mahindra & Mahindra
                                      BUSINESS ANALYSIS

                                     Ancillary business in Farm Equipment Segment

                                     Powerol

High growth business with            Extending its field of operations from tractors and expertise in diesel engines, M&M in FY02
revenue of Rs10bn...                 entered the power genset business with its ‘Powerol’ brand. Currently M&M Powerol has
                                     products in the low and medium duty range of 5kVA to 320kVA and is a major supplier to the
                                     telecom industry. Over the last five years the rapid growth in the telecom infrastructure and
                                     power shortage woes have fueled the demand for captive gensets in India. With a strong
                                     brand name and about 55 exclusive branded showrooms across India, the Powerol business
                                     has grown from a modest Rs500mn in FY05 to Rs10bn in FY09, an impressive 115% CAGR
                                     growth.


 Exhibit 35 - Mahindra Powerol Revenues                                      Exhibit 36 - Mahindra Applitrac Revenues
           Rev enues (Rs mn) (LHS)           Grow th (%) (RHS)                      Rev enues (Rs mn) (LHS)          Grow th (%) (RHS)

 12,000                                                          240         600                                                         240


  9,000                                                          180         450                                                         180
                                                                       (%)




  6,000                                                          120




                                                                                                                                               (%)
                                                                             300                                                         120


  3,000                                                          60          150                                                         60


     0                                                           0             0                                                         0
             FY05          FY06       FY07          FY08                           FY05          FY06         FY07         FY08

Source: Company

                                     Indian Rural Economy

                                     Characteristics of the Indian rural economy

65% of the Indian population         The rural economy in India is predominantly agriculture dependent. With roughly 65 percent
living in the rural areas...         of the India population living in the rural areas this represents a substantial portion of the
                                     country. Although the share of agriculture in the total GDP has decreased from 24 percent
                                     in 1999-00 to 17 percent in 2008-09, it still continues to have a large bearing on the state of
                                     the national economy.

                                     Agriculture and related activities are the major employment drivers for the rural economy.
                                     Availability of cheap labour and fragmented land holdings has restrained the Indian farming
                                     sector from adapting mechanization in a big way. However, tractors are becoming a part of
                                     a farmer’s lifestyle due to its multi-functional utility. Besides helping the farmer in cultivation,
                                     tractors are also used for carrying the farm output to market place. They are also used for
                                     commuting purpose. For an Indian farmer, tractors are a symbol of his prestige in the
                                     society. Tractors are also used by the farmers to generate income by giving them on hire.

                                     The ‘Farm Credit Package’ was announced by the Government in Jun’04 to enhance the
                                     flow of credit to the agriculture sector. Boosted by a strong growth in credit from the commercial
                                     banks credit flow to the agriculture sector has grown at a CAGR of 25 percent over the
                                     period FY04-09.

vineet.hetamasaria@pinc.co.in                                                                                                                   22
                   RESEARCH
                                                                                                                                                                                               Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                 Exhibit 37 - Credit Flow to Agriculture Sector (Rs bn)
                                                                                Credit Flow to Agriculture Sector                                                Grow th % (RHS)
                                  3,000                                                                                                                                                                                         60.0


                                  2,250                                                                                                                                                                                         45.0


                                  1,500                                                                                                                                                                                         30.0


                                   750                                                                                                                                                                                          15.0


                                      0                                                                                                                                                                                         0.0
                                                   FY04                         FY05                            FY06                        FY07                         FY08                        FY09P

                                Source: India Economic Survey


                                Dependence on monsoons
Indian agriculture remains      Indian agriculture remains dependent on monsoons despite progress on irrigation facilities.
dependent on monsoons...        This is corroborated by the fact whenever monsoons have been insufficient; there has been
                                a decline in agricultural GDP. The impact is more on the Kharif season crop which is more
                                dependent on monsoons unlike Rabi crop which uses irrigation facilities. However, dependence
                                of Indian economy on agricultural GDP is coming down gradually and now contribution of
                                agricultural GDP to total GDP stands at 17%. This has reduced the monsoon impact on
                                economic growth.


                                 Exhibit 38 - Monsoons - A big impact on agricultural GDP
                                                                                                  Agricultural GDP                                        % of LPA Rainfall
                                700,000                                                                                                                                                                                               130

                                600,000
                                                                                                                                                                                                                                      115
                                500,000

                                400,000
                                                                                                                                                                                                                                      100
                                300,000

                                200,000
                                                                                                                                                                                                                                      85
                                100,000

                                      0                                                                                                                                                                                               70
                                          FY84
                                                 FY85
                                                        FY86
                                                               FY87
                                                                      FY88
                                                                             FY89
                                                                                    FY90
                                                                                           FY91
                                                                                                  FY92
                                                                                                         FY93
                                                                                                                FY94
                                                                                                                       FY95
                                                                                                                              FY96
                                                                                                                                     FY97
                                                                                                                                            FY98
                                                                                                                                                   FY99
                                                                                                                                                          FY00
                                                                                                                                                                 FY01
                                                                                                                                                                        FY02
                                                                                                                                                                               FY03
                                                                                                                                                                                      FY04
                                                                                                                                                                                             FY05
                                                                                                                                                                                                    FY06
                                                                                                                                                                                                           FY07
                                                                                                                                                                                                                  FY08
                                                                                                                                                                                                                         FY09




                                Source: Ministry of Agriculture, India Economic Survey




vineet.hetamasaria@pinc.co.in                                                                                                                                                                                                         23
                   RESEARCH
                                                                                                                                                                                               Mahindra & Mahindra
                                  BUSINESS ANALYSIS

                                 Exhibit 39 - Reducing dependence on agricultural GDP
                                40.0



                                30.0



                                20.0



                                10.0



                                 0.0
                                       FY83
                                              FY84
                                                     FY85
                                                            FY86
                                                                   FY87
                                                                          FY88
                                                                                 FY89
                                                                                         FY90
                                                                                                FY91
                                                                                                       FY92
                                                                                                              FY93
                                                                                                                     FY94
                                                                                                                            FY95
                                                                                                                                   FY96
                                                                                                                                          FY97
                                                                                                                                                 FY98
                                                                                                                                                         FY99
                                                                                                                                                                FY00
                                                                                                                                                                       FY01
                                                                                                                                                                              FY02
                                                                                                                                                                                     FY03
                                                                                                                                                                                            FY04
                                                                                                                                                                                                   FY05
                                                                                                                                                                                                          FY06
                                                                                                                                                                                                                  FY07
                                                                                                                                                                                                                         FY08
                                                                                                                                                                                                                                FY09
                                Source: www.mospi.nic.in

                                Reduction in dependence of agricultural GDP to food-grains cultivation

Foodgrain contribution to       The contribution of agricultural GDP on food-grains production is also reducing. During
agriculture GDP is on a         FY03 which was the last drought year, food-grain production was lower by 18% while
consistent decline...           agriculture GDP contracted by 7%. In the following year, while food-grain production increased
                                by 22%, agricultural GDP expanded by 10%. This reflects the fact that our rural economy is
                                now much more diversified in its composition.

                                 Exhibit 40 - Agricultural GDP less dependent on foodgrains
                                                                          Kharif                       Rabi                   Grow th in Kharif                               Grow th in Rabi
                                240                                                                                                                                                                                             35.0


                                180                                                                                                                                                                                             20.0


                                120                                                                                                                                                                                             5.0


                                 60                                                                                                                                                                                             (10.0)


                                  0                                                                                                                                                                                             (25.0)
                                         FY98


                                                        FY99


                                                                      FY00


                                                                                        FY01


                                                                                                       FY02


                                                                                                                     FY03


                                                                                                                                   FY04


                                                                                                                                                  FY05


                                                                                                                                                                  FY06


                                                                                                                                                                                FY07


                                                                                                                                                                                               FY08


                                                                                                                                                                                                                 FY09




                                Source: Ministry of Agriculture, India Economic Survey

                                Irrigation

                                Irrigation is a major prosperity driver for the rural economy. There has been a substantial
                                emphasis on irrigation in the five year plans implemented by the government. However there
                                is still scope for creation of irrigation potential and usage. India has an overall irrigation
                                potential of ~140mn hectares. As of 2007, the irrigation potential created was ~102mn
                                hectares while irrigation potential utilised is ~ 87mn translating into a utilization percentage
                                of just over 60 percent.



vineet.hetamasaria@pinc.co.in                                                                                                                                                                                                          24
                   RESEARCH
                                                                                                                        Mahindra & Mahindra
                                  BUSINESS ANALYSIS

North India has better          The geographical spread of this utilization level is quite diverse. Northern states namely
irrigation facilities though    Punjab, Haryana & Uttar Pradesh have an utilization level of over 75%. Punjab has the
South India is catching up in
                                highest irrigation utilization level of ~98%. In the Southern states, Tamil Nadu has the
the recent years...
                                highest irrigation penetration of 65%. Andhra Pradesh has created substantial irrigation
                                potential in the Xth Five Year Plan and current potential is around 60%. Madhya Pradesh
                                has the lowest irrigation potential created at ~20%.

                                Northern states with a higher irrigation availability and prosperity account for majority of the
                                domestic sales. In the 1998-99, the north accounted for ~55% of all the domestic sales
                                followed by West with 29%, while the South and East each accounted for 8% of the domestic
                                sales. During the FY99-FY08 period, the tremendous growth in irrigation in the southern
                                states helped drive tractor sales and as of FY08 the share of South has increased to 26%
                                while that of North has been reduced to 38%. In number terms while the industry grew at a
                                flat rate of 2% CAGR, the South India tractor market grew at a substantially higher 13.9%
                                CAGR while north India market contracted by 2% CAGR. The Western and Eastern region
                                has maintained their market-share at 27% and 9% respectively.

                                Minimum support price mechanism

MSP for major crops has         The minimum support price (MSP) mechanism of the government is directed at providing
increased steeply in the last   insurance to the farmers against any sharp fall in produce prices. The farmers are free to
two years...                    sell their produce in the open market or to the government agencies at the MSP. The MSP
                                thus establishes the base, further below which prices cannot fall. The government reviews
                                the MSP on a yearly basis.

                                The increase in MSP is one of the drivers of the rural economy. The profitability of farmers is
                                driven by the MSP and thus affects the expenditure potential. The MSP for the two major
                                crops paddy (common grade) and wheat has increased at a CAGR of 6.8% over the
                                1999-2009 decade. The last five years have however seen a higher growth of 9.1% CAGR for
                                paddy and 11.4% for wheat. The increase in MSP has been steep since 2006 with prices for
                                paddy in FY09 49.1% and that for wheat 66.2% higher than their FY06 levels. This had led
                                to improvement in profitability of the farmer and had a favorable impact on tractor sales from
                                the 247k units in FY05 to 342k units in FY09 i.e. a growth of 8.5% CAGR.

                                 Exhibit 41 - Minimum support price (MSP) trend
                                                                                  Paddy (Common)                Wheat
                                  1,200


                                  1,000


                                    800


                                    600


                                    400
                                           FY01      FY00     FY01     FY02      FY03    FY04   FY05   FY06   FY07   FY08   FY09   FY10


                                Source: Ministry of Agriculture, India Economic Survey



vineet.hetamasaria@pinc.co.in                                                                                                             25
                   RESEARCH
                                                                                                                                                                          Mahindra & Mahindra
                                  BUSINESS ANALYSIS

Productivity improvement is     Area under cultivation and productivity
the prime reason behind
agriculture growth...           The total area under foodgrain cultivation is stagnating at ~125 mn hectares. During the
                                period 1971-2009, area under cultivation has remained at ~123 mn hectares; however, output
                                of major food-grains has almost doubled. This reflects the productivity improvement in Indian
                                agriculture due to higher usage of modern tools of agriculture like tractors, fertilisers,
                                pesticides etc.

                                 Exhibit 42 - Area under cultivation and Yield
                                                                            Area Under Production (mn hectares)                                  Yeild (kg/hectare)
                                130.0                                                                                                                                                              2,000


                                125.0                                                                                                                                                              1,500


                                120.0                                                                                                                                                              1,000


                                115.0                                                                                                                                                              500


                                110.0                                                                                                                                                              0
                                        FY67
                                               FY69
                                                      FY71
                                                             FY73
                                                                    FY75
                                                                           FY77
                                                                                  FY79
                                                                                         FY81
                                                                                                FY83
                                                                                                       FY85
                                                                                                              FY87
                                                                                                                     FY89
                                                                                                                            FY91
                                                                                                                                   FY93
                                                                                                                                          FY95
                                                                                                                                                  FY97
                                                                                                                                                         FY99
                                                                                                                                                                FY01
                                                                                                                                                                       FY03
                                                                                                                                                                              FY05
                                                                                                                                                                                     FY07
                                                                                                                                                                                            FY09
                                Source: Ministry of Agriculture

                                Changes in Indian Farming

                                Advent of Contract farming
Contract farming taking its     The agriculture landscape in India is undergoing change albeit at a slower pace. The major
shape in Indian agriculture     change over the last 4-5 years has been an increasing penetration of organized retail in
sector...
                                India. Large corporates such as Reliance, Aditya Birla Group, RPG etc have expanded the
                                reach of retail in India. Before the advent of the retail giants the access for the farmer or
                                producer to the market was through the middlemen. These traders have traditionally exploited
                                the illiterate or under informed farmers. With the advent of retailers the middlemen have
                                been sidelined and thus improving realizations at the hands of farmers. Also with the advances
                                in technology, information is more readily available in the rural areas today.

                                There has also been a beginning made in terms of contract farming in India. A lot of corporates
                                are entering into agreement with farmers for contract farming. They provide seeds, technology
                                etc for maintaining the quality of products and also help farmers with working capital. This
                                helps the farmer in getting a committed price for his output before he starts farming. Although
                                this has not percolated to all states, experiments in a few states like Punjab, Haryana,
                                Maharashtra and Madhya Pradesh have been successful. We expect contract farming trend
                                to increase further in the coming years which will lead to higher levels of mechanization in
                                the farming.

                                Farm Mechanization in India

Mechanization at low level      Mechanization of farming in India is still at a nascent stage. There are various reasons for
due to small land holding...    the low penetration of farm equipment in the country. Small farm-holding size and scattered
                                holdings are the principal reasons for the low levels of mechanization in the country. Small

vineet.hetamasaria@pinc.co.in                                                                                                                                                                          26
                   RESEARCH
                                                                                                              Mahindra & Mahindra
                                 BUSINESS ANALYSIS

                                and marginal farmers continue to constitute 70 percent of the total farming population. Lack
                                of purchasing power further restricts the farmer from purchasing costly equipments.

Scarcity of labour to lead to   However rising wage rates for labour and shortage of labour especially during the peak
higher level of                 sowing and harvesting season is making the case for mechanized equipment stronger. This
mechanization...                problem has further aggravated in the recent years due to government schemes like National
                                Rural Employment Guarantee Scheme (NREGA) which ensures a minimum number of
                                days of work at a government fixed rate for rural population. This has been visible in state
                                like Punjab and Haryana which are dependent on migrant labours from Bihar for cultivation
                                jobs. However due to local job availability through NREGA, migration has reduced and this
                                is compelling farmers for to rely on mechanization for cultivation process.

                                M&M entered the mechanized farm equipment business as a natural extension to its tractor
                                business. Although the business is still in the nascent stage there is a tremendous potential
                                for growth in India. The company is currently concentrating on the labour intensive crops
                                such as sugarcane and paddy for developing new products.

                                Growth in Rural Infrastructure

                                Under the Pradhan Mantri Gram Sadak Yogana (PMGSY), the government embarked on an
                                ambitious plan to connect approximately 16mn unconnected habitations with all weather
                                roads. In the ongoing eleventh plan an investment requirement of Rs400bn is projected for
                                rural roads. In the first two years of the Eleventh plan an expenditure of Rs257bn has been
                                incurred under the PMGSY while an allocation of Rs120bn has been made for FY09-10.
                                This growth in roads alongwith a similar expansion in rural electrification is helping to improve
                                the standard of living in rural India.

                                This expenditure in rural India has also boosted construction activity, which has further
                                provided employment in the rural areas as well as requirement of tractors and trailers to
                                assist in the construction activity.




vineet.hetamasaria@pinc.co.in                                                                                                 27
                   RESEARCH
                                                                                                              Mahindra & Mahindra
                                  INTERNATIONAL OPERATIONS

                                International Operations

                                Farm Equipment segment

USA is the major export         M&M has spread its footprint across the globe and M&M branded tractors are available
market for M&M tractors...      across six continents spanning more than 25 countries. Along with the Indian sub-continent,
                                M&M has entered in the US, Australia, Europe and African markets. Through its Indian
                                operations, M&M is exporting finished tractors as well as CKDs across the globe. Tractor
                                exports declined 25.8% in FY09 due to slump in demand in mainly the US markets. We
                                expect the down trend to continue further in FY10 with exports declining 25% to 5k units.


                                 Exhibit 43 - M&M Tractor Exports
                                                                        Ex ports           Grow th % (RHS)
                                10,000                                                                                     40.0


                                 7,500                                                                                     20.0


                                 5,000                                                                                     0.0


                                 2,500                                                                                     (20.0)


                                    0                                                                                      (40.0)
                                           FY04       FY05       FY06        FY07   FY08   FY09       FY10E      FY11E

                                Source: Company, PINC Research


                                In the US, Mahindra USA (MUSA) has established 3 assembly plants in the states of
                                Texas, Georgia and California. With its compact and utility range (35 series) of tractors,
                                MUSA mainly targets hobby and recreational farmers. The economic crisis in FY09 led to a
                                sharp fall in the US tractor sales decreasing 31% to 6,450 units and a net income of
                                USD100mn. The company had maintained a run rate of 10k units over the FY06 to FY08
                                period.

                                Like the US, Mahindra Australia is also primarily focused on the compact (20-30 HP range)
                                and utility (45-80 HP range) range of tractors through its assembly operations in Brisbane.
                                In Africa, M&M has established assembly plants in Ghana, The Gambia and Nigeria while
                                establishing a presence across 14 countries in the African continent.

                                China Operations

In China, M&M has two           China alongwith India and US comprise the top three tractor markets in the world. M&M
tractor JVs...                  forayed into the Chinese tractor market in Jul’05 with a joint venture with Jiangling Motors
                                Co, China. M&M holds 80% stake in the joint venture with remaining held by Jiangling
                                Motors. The JV christened Mahindra (China) Tractor Company Limited (MCTCL) started
                                operations with tractors branded ‘Fengshou’ and an annual capacity of 12k units in the 18-
                                33hp range. The sales for the company have grown from 2,718 units in FY06 to 5,417 units
                                and revenue of Rs913mn in FY09.



vineet.hetamasaria@pinc.co.in                                                                                                     28
                    RESEARCH
                                                                                                                   Mahindra & Mahindra
                                          INTERNATIONAL OPERATIONS

                                      In a further consolidation move in the Chinese market, in Aug’08 M&M formed its second JV
                                      in China with Jiangsu Yueda Yancheng Tractor Manufacturing Co. named as Mahindra
                                      Yueda Yancheng Tractor Company (MYYTCL). M&M has a 51% stake in the joint venture
                                      with an investment to the tune of USD26mn through its Mauritius based investment arm.
                                      The Jinma tractor brand of Yancheng is the 4th largest tractor brand in China. The tractor
                                      related assets of Yancheng motors estimated at USD50mn were transferred to the JV. The
                                      company is a strong player in the higher power tractor segment with models upto 125hp.
                                      The total capacity of the unit is approximately 48k units per annum.


 Exhibit 44 - Mahindra USA Sales                                        Exhibit 45 - Mahindra China (MCTCL) Sales
                    Mahindra USA            Grow th % (RHS)
                                                                                 Mahindra China (MCTCL)          Grow th % (RHS)
  12,000                                                       40.0     6,000                                                      40.0


   9,000                                                       20.0     4,500                                                      30.0


   6,000                                                       0.0      3,000                                                      20.0


   3,000                                                       (20.0)   1,500                                                      10.0


       0                                                       (40.0)      0                                                       0.0
             FY05     FY06         FY07      FY08       FY09                    FY06        FY07          FY08         FY09

Source: Company




vineet.hetamasaria@pinc.co.in                                                                                                        29
                   RESEARCH
                                                                                                              Mahindra & Mahindra
                                  INTERNATIONAL OPERATIONS

                                Automobile Segment

To commence exports to          M&M started first as an assembler for Willys, USA jeeps in the pre independence era. In the
USA in Q4FY10...                1960s M&M started its first exports with the jeeps to the Yugoslavian market. Since then
                                M&M has expanded its geography across the globe starting with the African markets like
                                Nigeria, Kenya in the 70s. Today M&M has a presence in 15 countries in the African continent
                                including a CKD (Completely Knocked Down) operation in Egypt and operations in South
                                Africa through a subsidiary.

                                In the Indian sub-continent M&M has significant presence in the neighboring countries like
                                Nepal, Sri Lanka, Bhutan. Established in 2005, Mahindra Europe marked M&M’s entry to
                                Europe with the launch of Scorpio in Italy christened as Mahindra Goa. Following Italy,
                                M&M took the Goa to France and Spain as well.

                                In South America, M&M has established a SKD (semi Knocked Down) facility in Uruguay
                                (2004) and Brazil (2008) for the manufacture of the Scorpio SUV and Bolero Pik-up (named
                                Cimarron) range. The company plans to foray into the US with its pick-up range following its
                                presence in the farm equipment business.

                                During the FY03-08 period, M&M exports surged at a CAGR of 63% from just about 1k units
                                in FY03 to 12k units in FY08. FY08 was the peak and since then export volumes have
                                slumped largely owing to the global financial crisis. FY09 exports dropped 31% to 8.5k
                                units. We expect export volumes to pick up in H2FY10. However for the whole year FY10
                                we expect volumes to remain at the FY09 levels.

                                 Exhibit 46 - M&M Automobile Exports
                                                                Auto Ex ports           Grow th % (RHS)
                                16,000                                                                                     120.0


                                12,000                                                                                     80.0


                                 8,000                                                                                     40.0


                                 4,000                                                                                     0.0


                                     0                                                                                     (40.0)
                                           FY04     FY05     FY06        FY07    FY08      FY09       FY10E      FY11E

                                Source: Company




vineet.hetamasaria@pinc.co.in                                                                                                     30
                      RESEARCH
                                                                                                                       Mahindra & Mahindra
                                         SUBSIDIARIES

                                    Subsidiaries

                                    Systech (Auto Components segment)

Adopted inorganic growth            The Systech division of the company was established in 2004 to capitalize on the growth
strategy...                         potential in the auto components business. For the purpose, this division has adopted
                                    inorganic growth strategy in both domestic and overseas market. The aspiration of M&M
                                    was to create a business with turnover of a billion US dollars with a market capitalization of
                                    similar amount by 2010. The division is on course to achieve its turnover targets; however
                                    profitability is under strain due to demand destruction in the developed markets.

                                    Forging is the major revenue driver for the division with a contribution of over 50% of the
                                    revenue. Besides forging, Systech has manufacturing units for metal stampings, castings
                                    and gears. The stampings and steel business generates 25% of the revenue.


 Exhibit 47 - Systech Corporate Structure



                                                          SYSTECH




           Forgings                       Steel &     Castings &                                    Engineering
                                                                                Gears                                      Others
                                        stampings      Ferrites                                      Services




                                                                                                              Mahindra
                      Mahindra       Mahindra                      Mahindra             Metal Castello       Engineering
                      Forgins       Ugine Steel                    Castings                                   Services




                                                                   Mahindra                                             Mahindra
                                                                                        Mahindra SAR                   Engineering
                             Schoneweiss                            Hindoay             Transmission                    Services
                                                                   Industries
                                                                                                                        (Europe)




                                                                                                                         Mahindra
                                 Jeco
                                                                                                                       Technologies




                                                                                                                        Engines
                             Stokes Group                                                                              Engineering




Source: Company, PINC Research




vineet.hetamasaria@pinc.co.in                                                                                                          31
                       RESEARCH
                                                                                                             Mahindra & Mahindra
                                   SUBSIDIARIES

 Exhibit 48 - Systech Revenue Productwise                             Exhibit 49 - Systech Revenue Grographywise

           Steel & Stampings
                  25%                                                           India
                                                                                42%                              Italy
                                        Castings & Ferrites                                                      11%
                                                6%

                                               Gears
                                               10%


                                               Engineering Services
                                                       5%
                                           Others
                                            1%

                  Forgings                                                                      Germany
                    53%                                                                           47%

Source: Company

                                  Inorganic Growth Strategy

Forging capacity of               Identifying the potential in the automobile forging segment especially in exports, M&M
300k tpa...                       entered the segment with the acquisition of Amforge’s Chakan (Pune) unit with a forging
                                  capacity of 42k tpa. Amforge was a key supplier to MM’s auto division along with a host of
                                  other key OEM manufacturers.

                                  In a bid to increase its foot print across the globe and to get an entry into Europe, Mahindra
                                  Forging made three major acquisitions within a period of just over a year. Two of these
                                  acquisitions were in Germany with one in England. Currently MFL is one of the top five
                                  forging companies in the world with an estimated combined capacity in excess of 300k tpa
                                  and FY09 turnover of Rs22.4bn.

                                  Acquisition in England

                                  The first overseas acquisition was when MFL acquired 98.6 percent stake in Stokes Group
                                  Ltd in May’06. Stokes, the largest automotive forgings company in England, had an installed
                                  capacity of 36k tpa and a topline of GBP25mn. The company has three manufacturing units
                                  in the Midlands of England. In FY09, due to the economic slowdown severely affecting the
                                  automobile sector, the company decided to restructure the business. Consequently out of
                                  the three plants, MFL has decided to shut the Walsall facility and relocate the machinery
                                  and other manufacturing facility to sites in Dudley and Brierley Hill.

                                  Acquisition in Germany

                                  Following the English acquisition, MFL acquired 67.9% stake in Germany based Jeco
                                  Holdings. At the time of acquisition, JECO had a combined capacity of 100k tpa spread over
                                  its four manufacturing units in Germany. With a turnover of Euro180mn in CY05, Jeco was
                                  one of the top five forging companies in Germany.

                                  Close on the heels of the its first German acquisition, MFL acquired 90.47% stake in
                                  Schoneweiss & Co. With a forging capacity of 50k tpa over 3 plants and turnover of Euro90m,
                                  Schoneweiss is a leading automobile parts supplier in Germany. It specializes in suspension,
                                  power-train, engine parts etc and is one of the top five axle beam manufacturers in the
                                  world.


vineet.hetamasaria@pinc.co.in                                                                                                 32
                   RESEARCH
                                                                                                                           Mahindra & Mahindra
                                          SUBSIDIARIES

                                        Major acquisition done by Systech

 Exhibit 50 - Major Acquisitions done by Systech
Target Acquired          Location         Date      Stake     Capacity
                                                                               Key Customers               Revenues           Comments
                                                   Acquired   (in TPA)

                                                                           M&M,      International     FY09 turnover   Acquired 51% stake in
                                                                           Tractors, New Holland,      of Rs737mn      the Rajkot based gear
SAR Transmission            India        Jan-05       51.0       -
                                                                           TVS,    Eaton     USA,                      manufacturer      for
                                                                           Metalcastello                               Rs146mn

                                                                           M&M, Tata Motors, Maruti    FY07 turnover   Acquired Chakan plant
                                                                           Suzuki, Ashok Leyland,      of INR2.17bn    of Amforge
Amforge                     India        Apr-05      100.0     42,000
                                                                           Kirloskar Oil Engines,
                                                                           Escorts

                                                                                                                       Operations in Aisa,
                                                                                                                       Germany, UK and USA.
Plexion Technologies        India        Dec-05       88.4       -         -                           -
                                                                                                                       Focused on Aerospace
                                                                                                                       &          Automotive
                                                                                                                       Engineering

                                                                           Koyo Bearings, Land         FY07 turnover   UK's largest automotive
                                                                           Rover, ZF, Bosch,           of GBP25mn      forging group with 3
Stokes                     England       Jan-06       98.6     36,000
                                                                           Visteon, Ford, Jaguar                       plants

                                                                           DaimlerChrysler Group,      FY07 turnover   Focused on commercial
                                                                           ZF, MAN, Volvo, Linde,      of Euro193mn    vehicles segment
Jeco                      Germany        Sep-06       67.9    100,000
                                                                           Renault, Agco, Kessler,
                                                                           Kolbenschmidt

                                                                                                       FY07 turnover   JV with Hitachi Metals
                                                                           -                           of Rs2.5 bn     Japan manufactures
DGP Hinoday Industries      India        Nov-06       66.0     24,000
                                                                                                                       castings & ferrites

                                                                           DaimlerChrysler Group,      FY07 turnover   With 3 manufacturing
                                                                           MAN,          Scania,       of Euro92mn     facilities, specialises in
Schoneweiss               Germany        Jan-07       90.5     50,000
                                                                           Volkswagen                                  suspension, power train
                                                                                                                       & engine parts

                                                                                                       FY08 Trunover   Independent        gear
                                                                                                       of US$100 mn    manufacturer in Europe
Metalcastello                   Italy    Apr-08      100.0*      -         -
                                                                                                                       catering to off-highway
                                                                                                                       segment, tractors and
                                                                                                                       construction equipment

                                                                           Benelli, Beta, Ducati,      FY08 turnover   Two wheelers design
                                                                           Gilera, Honda, LEM,         of US$12 mn     and developing of
Engines Engineering             Italy    Jun-08      100.0       -
                                                                           Malaguti, Yahama.                           motorcycle prototype

Source: Company



                                         Systech - Financial performance
                                         (Rs mn)                         FY07                         FY08                     FY09
                                         Revenues                       17,400                    36,550                     41,310
                                         EBIDTA                          2,096                        3,910                    2,960
                                         EBIT                            1,657                        2,048                      212
                                        Source: Company




vineet.hetamasaria@pinc.co.in                                                                                                                  33
                   RESEARCH
                                                                                                                                   Mahindra & Mahindra
                                        SUBSIDIARIES

AUM CAGR of 30% over last             Mahindra & Mahindra Financial Services Limited (MMFSL)
five years...
                                      MMFSL, the financing arm of MM, is a non banking finance company (NBFC) predominantly
                                      focused on the semi urban areas. With over 400 branches all over India MMFSL has a
                                      widespread presence in India and piggybacks on Mahindra’s brand recall and spread.
                                      Over the last five years MMFSL’s assets under management (AUM) has grown at a CAGR
                                      of 30 percent to Rs74bn. Automotive segment and tractors mainly constitute MMFSL’s
                                      portfolio. While utility vehicles accounts for 38 percent, tractors constitute 25 percent while
                                      cars account for 24 percent of the portfolio.

                                      After ~175k incremental contracts in FY07 and FY08, new contract acquisition declined 10
                                      percent to 157k contracts on back of the slowdown in the economy especially in the sales
                                      of utility vehicles.

 Exhibit 51 - Growth in AUM                                                      Exhibit 52 - AUM Breakup FY09
                       AUM (Rs bn)          Grow th % (RHS)
                                                                                                 Tractors
   80                                                                       80                     25%
                                                                                                                            Cars
                                                                                                                            24%
   60                                                                       60


   40                                                                       40
                                                                                                                                Commercial Vehicles
                                                                                                                                       7%
   20                                                                       20


                                                                                                                           Refinance & Others
       0                                                                    0
                                                                                   Auto/Utility Vehicles                           6%
           FY05       FY06       FY07         FY08            FY09                         38%


 Exhibit 53 - Incremental Customer Contracts                                     Exhibit 54 - Total Income
 200                                                                             16,000



 150                                                                             12,000



 100                                                                              8,000



  50                                                                              4,000



   0                                                                                 0
           FY05       FY06           FY07        FY08            FY09                         FY05           FY06   FY07        FY08            FY09

Source: Company

                                        Systech - Financial performance
                                        Rs mn                        FY07             FY08                  FY09      FY10E              FY11E
                                        Revenues                 8,446              12,268                 13,846     9,668              9,911
                                        Net Income               1,329                1,770                 2,145     2,459              2,724

                                      Source: Company, PINC Research

vineet.hetamasaria@pinc.co.in                                                                                                                          34
                     RESEARCH
                                                                                                                        Mahindra & Mahindra
                                        SUBSIDIARIES

                                      Infrastructure Development Sector

                                      M&M’s presence in infrastructure development is broadly divided into three segments:

                                            Hospitality

                                            Real Estate Development – commercial and residential

                                            Infrastructure maintenance services

                                        Exhibit 55 - Infrastructure Develop[ment Swctor Structure


                                                                          Infrastructure Development Sector




                                              Mahindra Holiday and Resorts                            Mahindra Lifespace Developers



                                                                                               Commercial and residential Real Estate
                                       Ownership of holiday resorts, time-sharing
                                                                                                Development SEZ development, SEZ
                                                       holidays
                                                                                                operators, Utilities services operator

                                      Source: Company, PINC Research


                                      Mahindra Holidays and Resorts (MHIL)

Time sharing holiday                  MHIL is the hospitality arm of the group and is involved in the business of vacation ownership
business...                           on time-sharing basis. The company has 28 resorts located in India and Thailand. Beside
                                      this, it has tie-up with RCI which entitles MHIL members to access 4,192 RCI affiliated
                                      resorts across the world.
                                      High growth business
                                      MHIL has reported high growth in its business with membership CAGR of 35% over
                                      FY04-09. In the same time frame, its revenues and EBIDTA had a CAGR of 42% and 59%
                                      respectively.

 Exhibit 56 - Time sharing gaining traction                                Exhibit 57 - High growth business
                       Memberships          Grow th % (LHS)                                  Rev enues (Rs mn)      Grow th % (LHS)
  100,000                                                            60     8,000                                                      80


   75,000                                                            45     6,000                                                      60


   50,000                                                            30     4,000                                                      40


   25,000                                                            15     2,000                                                      20


        0                                                            0         0                                                       0
              FY05      FY06         FY07       FY08          FY09                   FY05      FY06        FY07     FY08        FY09

Source: Company

vineet.hetamasaria@pinc.co.in                                                                                                              35
                   RESEARCH
                                                                                                                     Mahindra & Mahindra
                                         SUBSIDIARIES

                                       Financial

                                       Multifaceted revenue stream

                                       MHIL has developed a business model which is a combination of annuity and recurring
                                       income. In a typical membership scheme, it has large upfront cash inflows. This is followed
                                       by recurring income like interest income, annual subscription fees, resort revenues etc.

                                       Exhibit 58 - Rev. stream is a healthy mix of upfront fees and recurring income




                                       Source: Company



 Exhibit 59 - EBIDTA trend                                             Exhibit 60 - Profit trend
                      EBIDTA (Rs mn)         Grow th % (LHS)                           Net Profit (Rs mn)    Grow th % (LHS)
  2,000                                                          100   1,000                                                       180



  1,500                                                          75      750                                                       130


  1,000                                                          50      500                                                       80


    500                                                          25      250                                                       30


      0                                                          0         0                                                       (20)
            FY05      FY06       FY07         FY08        FY09                 FY05      FY06         FY07    FY08        FY09

Source: Company




vineet.hetamasaria@pinc.co.in                                                                                                           36
                    RESEARCH
                                                                                                                              Mahindra & Mahindra
                                           SUBSIDIARIES

                                         Mahindra Lifespace Developers

                                         Mahindra Lifespace Developers (MLDL), the real estate arm of the group is involved in the
                                         business of residential and commercial real estate. It is the pioneer in the Indian Special
                                         Economic Zone segment and developed India’s first special economic zone (SEZ) in the
                                         private sector at Chennai.

                                         Public-Private partnership (PPP model) for SEZ

                                         All SEZ of the company are in partnership with the state government agencies and this has
                                         helped the company in expediting the land acquisition and regulatory approval processes.
                                         Its Chennai SEZ has created a strong brand image for the company and existing tenant at
                                         Chennai facility recommended the company for a new SEZ at Jaipur.

                                         Asset light model

                                         Unlike its peers in the real estate business which went out on land acquisition spree at
                                         crazy valuations, MLDL has been very conservative. Most of its land holding have been
                                         acquired at low cost and this reduces the risk associated with the project. This has further
                                         helped the company in keeping its balance sheet insulated from credit crunch faced by the
                                         industry during FY09.

 Exhibit 61 - Revenue Growth                                                    Exhibit 62 - EBIDTA Trend
                     Rev enues (Rs mn)          Grow th % (LHS)                                 EBIDTA (Rs mn)        Grow th % (LHS)
  4,000                                                              70         1,200                                                        180



  3,000                                                              50          900                                                         130



  2,000                                                              30          600                                                         80



  1,000                                                              10          300                                                         30



      0                                                              (10)          0                                                         (20)
            FY05       FY06       FY07          FY08        FY09                         FY05   FY06           FY07    FY08        FY09

Source: Company, PINC Research




                                          Financials
                                                                      FY07              FY08           FY09           FY10E               FY11E
                                          Revenues (Rs mn)           2,240              2,650          3,710          3,826               5,620
                                          EBIDTA (Rs mn)                  380            990           1,020           1,114              1,666
                                          Net Profit (Rs mn)              190            660            660             727               1,236

                                         Source: Company, PINC Research




vineet.hetamasaria@pinc.co.in                                                                                                                     37
                   RESEARCH
                                                                                                            Mahindra & Mahindra
                                  SUBSIDIARIES

                                 Tech Mahindra
Leading provider of IT           Tech Mahindra is a leading provider of IT solutions and services to the global
solutions in the Telecom         telecommunications industry. It was formed in 1986 as a joint venture between Mahindra &
Space...                         Mahindra Ltd and British telecommunications. It mainly caters to the telecom vertical and
                                 has increased presence in the European market. The company recently acquired Satyam
                                 Computer services in March 2009. This acquisition will help them in winning large clients
                                 across various other verticals like BFSI, retail and manufacturing

                                 Telecom Industry adopts the cost efficiency route

                                 In the current economic slowdown, the large telecom players which have been adversely
                                 affected are searching for various options to curtail costs. This would enhance the demand
                                 for outsourcing of various activities that would benefit Tech Mahindra which is a niche player
                                 in this segment. The telecom service providers are in a process to transform their systems,
                                 processes and networks which will provide them the required competitive edge. The worldwide
                                 IT spending by the communication vertical is expected to reach USD427bn in 2012 from
                                 USD368bn in the current year.

 Exhibit 63 - Tech Mahindra Headcount                           Exhibit 64 - Revenues
 32,000                                                                    60



 24,000                                                                    45
                                                                 (Rs bn)




 16,000                                                                    30



  8,000                                                                    15



     0                                                                     0
            FY05       FY06     FY07      FY08       FY09                       FY05   FY06      FY07      FY08       FY09

Source: Company

                                 The acquisition of Satyam Computers – A Thumbs up

Acquired Satyam Computer         After the take over, Satyam is in the midst of a transformation phase which will help Tech
recently...                      Mahindra to reap benefits in the long term. There has been a complete shift in the Satyam
                                 management and this will enable the company to get the business on track. There have
                                 been some concerns regarding the ability of Satyam to maintain all its clients but the
                                 management has been confident that the client attrition faced by Satyam was negligible
                                 and it was even able to maintain its billing rates in the previous quarter. The financials of
                                 Satyam computers are currently being rebased and will be published by Dec 2009 which
                                 will give a clear picture about the company’s status. We believe that in the medium term
                                 Tech Mahindra and Satyam will emerge as a merged entity and Tech Mahindra would be a
                                 bigger benefactor of this merger.
                                 Strong operating cash flows – Prove the strength of the business model
                                 The company has been able to generate a strong operating cash flow of Rs12.2bn in FY09
                                 which was primarily due to higher profits and a major dip in the requirement of working
                                 capital.
vineet.hetamasaria@pinc.co.in                                                                                                38
                     RESEARCH
                                                                                                                  Mahindra & Mahindra
                                               SUBSIDIARIES


 Exhibit 65 - Profitability Trend                                               Exhibit 66 - Geographical Split of Revenues
                  Net Profit (Rs bn)          OPM (%)         NPM (%)
  12                                                                    30
                                                                                                                      Others
                                                                                                                       8%

   9                                                                    25



   6                                                                    20

                                                                                  Europe
                                                                                   67%
   3                                                                    15
                                                                                                                       North America
                                                                                                                            25%
   0                                                                    10
          FY05          FY06           FY07        FY08         FY09

Source: Company




                                              Financials
                                                                        FY05               FY06    FY07       FY08              FY09
                                              Headcount (nos)           5,617         10,493      19,749     22,884            24,972
                                              Sales (Rs bn)               9.4              12.4     29.2       37.6              44.6
                                              Op. Profit (Rs bn)          1.3               2.7      7.2        8.2              12.8
                                              Net Profits (Rs bn)         1.0               2.3      6.1        7.7              10.1
                                          Source: Company




vineet.hetamasaria@pinc.co.in                                                                                                           39
                   RESEARCH
                                                                                                                                     Mahindra & Mahindra
                                    FINANCIALS

                                Financials
                                Revenues
Tractor sales to increase by    Net revenues are likely to have a CAGR of 13% over FY09-11E. During FY10, FES revenue
13% during FY10...              will be boosted due to full impact of merger of PTL with the company. This merger was done
                                w.e.f. August 2008. We expect vehicles and tractor sales to grow by 10% and 8% during
                                FY10 and FY11 respectively. Tractor sales are likely to grow by 13% during the current year
                                while FY11 growth will taper off to 3%. Next year tractor growth is expected to be down due
                                to lag impact of dismal monsoon during the current year. In the automotive segment, UVs
                                will remain the mainstay of the company with growth of 11% and 9% respectively. Beside
                                this, other business like engines, diesel gensets etc will contribute incremental revenue.

                                   Exhibit 67 - Net Sales (Standalone)
                                                                                 Net sales (LHS)                   Grow th % (RHS)
                                                200                                                                                                 40



                                                150                                                                                                 30
                                    Rs bn




                                                100                                                                                                 20



                                                50                                                                                                  10



                                                 0                                                                                                  0
                                                        FY03    FY04     FY05      FY06         FY07        FY08        FY09     FY10E      FY11E

                                Source: Company, PINC Research
                                Operating Profit

Margin to expand to 13%         Profitability of the company was adversely impacted by high raw material cost and losses
during FY10...                  on foreign currency derivatives during FY09. For the first time in the last seven years,
                                EBIDTA margins contracted by 360bps during FY09. However, in recent months, commodity
                                prices have corrected from their peak levels. This is having a favorable impact on the
                                profitability of the company. After the disappointment of previous year, we expect EBIDTA to
                                increase by 81% with margins of 13% during FY10. We expect margins to stabilize at
                                these levels.
                                   Exhibit 68 - EBIDTA (Standalone)
                                                                  EBIDTA (LHS)           Grow th % (RHS)            EBIDTA margin % (RHS)
                                        25                                                                                                          90


                                        20
                                                                                                                                                    60

                                        15
                                Rs bn




                                                                                                                                                    30
                                        10

                                                                                                                                                    0
                                            5


                                            0                                                                                                       (30)
                                                      FY03     FY04    FY05       FY06        FY07         FY08       FY09      FY10E       FY11E

                                Source: Company, PINC Research
vineet.hetamasaria@pinc.co.in                                                                                                                            40
                        RESEARCH
                                                                                                                                                                       Mahindra & Mahindra
                                                   FINANCIALS

                                             Profit and earnings
PAT growth of 69% in
                                             During FY04-08, profits for the company had a CAGR of over 30%, however performance
FY10...
                                             during FY09 was adversely impacted due to reasons discussed earlier. With sharp
                                             improvement in profitability expected in the current year, M&M will be able to compensate
                                             for the disappointment witnessed in FY09. Adjusted PAT for the year is likely to grow by
                                             69% to Rs14bn. During the current year, we expect equity dilution of 3.4% on conversion of
                                             compulsorily convertible debentures, thus leading to earnings growth of 56%. We expect
                                             further equity dilution of 3.2% during FY11 on conversion of FCCBs.

 Exhibit 69 - Net Profits (Standalone)                                                               Exhibit 70 - EPS (Standalone)
                             Adj. Profit (LHS)                  Grow th % (RHS)                                               Adj. Earnings (LHS)              Grow th % (RHS)
          20                                                                                275            60                                                                           300


          15                                                                                200            45                                                                           200
  Rs bn




          10                                                                                125            30                                                                           100

                                                                                                      Rs
          5                                                                                 50             15                                                                           0


          0                                                                                 (25)           0                                                                            (100)




                                                                                                                                                                        FY10E

                                                                                                                                                                                FY11E
                                                                                                                FY03

                                                                                                                       FY04

                                                                                                                                FY05

                                                                                                                                        FY06

                                                                                                                                               FY07

                                                                                                                                                        FY08

                                                                                                                                                                FY09
                                                                            FY10E

                                                                                    FY11E
               FY03

                      FY04

                             FY05

                                    FY06

                                           FY07

                                                         FY08

                                                                   FY09




Source: Company, PINC Research

                                             Low leverage
                                             Currently the net debt equity ratio on the standalone balance sheet is 0.5x. We expect this
                                             to further improve to 0.4x with conversion of debt into equity during FY10-11. We see the
                                             current gross debt of Rs40bn as the peak debt level given the growth plans of the company.
Gross debt to peak at the
                                             During FY10, debentures of Rs7bn will be converted into equity at a conversion price of
current levels...
                                             Rs745 per share. During FY11, FCCBs of USD195mn is due for redemption. We see high
                                             probability of these FCCBs getting converted in equity and hence taken it in diluted equity
                                             for FY11.

                                                  Exhibit 71 - Debt (Standalone)
                                                                                                      Gross Debt (Rs bn)                   Net debt equity (x )
                                                          60                                                                                                                                0.8



                                                          45                                                                                                                                0.6
                                                 Rs bn




                                                          30                                                                                                                                0.4



                                                          15                                                                                                                                0.2



                                                            0                                                                                                                               0.0
                                                                          FY03       FY04          FY05     FY06       FY07            FY08           FY09      FY10E           FY11E

                                                 Source: Company, PINC Research

vineet.hetamasaria@pinc.co.in                                                                                                                                                                 41
                   RESEARCH
                                                                                                               Mahindra & Mahindra
                                   FINANCIALS

                                 Satisfactory return ratios during investment phase

Return ratios adversely          M&M has been in a growth phase entailing huge investments in capacity expansion and
impacted due to capex and        subsidiaries. Despite this, it has maintained a satisfactory RoE and RoCE. Over the
investment in subsidiaries...    last two years, the company has been in an aggressive capex phase across all its business
                                 segments. This is having an adverse impact on the return ratios in the near term,
                                 however, we believe that once these capex becomes productive, the return ratios will move
                                 towards 25%.
                                  Exhibit 71 - Debt (Standalone)
                                                                   Total Debt           Net debt/Equity (x )
                                           60                                                                              0.60


                                           45                                                                              0.45
                                   Rs bn




                                           30                                                                              0.30


                                           15                                                                              0.15


                                           0                                                                               0.00
                                                FY05        FY06   FY07         FY08   FY09          FY10E       FY11E


                                 Source: Company, PINC Research


                                 Equity dilution
Equity dilution over two years   We don’t expect equity dilution in the company except for conversion of existing debentures
due to conversion of             and FCCBs. Even in case the company requires fund, it can do so by monetizing the
debentures and FCCBs...          treasury stocks being held through trusts. These treasury stocks were created on merger of
                                 subsidiaries Mahindra Holding & Finance Ltd and Punjab Tractors Ltd during FY09. The
                                 total treasury stock with the company represents 9.3% of the existing equity and is worth
                                 ~Rs20bn at the current market price.




vineet.hetamasaria@pinc.co.in                                                                                                     42
                        RESEARCH

                                                                                                                                                       Mahindra & Mahindra
                                                                                                                                          Year Ended March (Figures in Rs mn)

 Incom e Statement               FY07       FY08       FY09       FY10E      FY11E       Cash Flow Statement                      FY07        FY08      FY09       FY10E        FY11E
 Net sales                      96,277    108,046    126,491    145,416     160,677      Pre-tax profit                          14,086     14,068     10,650      17,478       19,105
 Growth (%)                       20.5       12.2       17.1        15.0       10.5      Depreciation                             1,289      2,026      4,846       3,836        4,706
 Operating profit                8,447      6,391      6,476      14,916     16,707      Total tax paid                          (4,494)     (2,788)   (3,295)      1,038       (3,468)
 Other operating income          3,509      7,366      4,446       4,823      5,061      Chg in w orking capital                  3,754        195      9,185      (11,418)        272
 EBITDA                         11,956     13,758     10,923      19,738     21,768      Other operating activ ities               (192)        -         -            -           -
 Growth (%)                       30.8       15.1      (20.6)       80.7       10.3      Cash flow from oper. (a)                14,442     13,500     21,386      10,935       20,615
 Depreciation                   (2,099)    (2,393)    (2,915)     (3,836)    (4,706)     Capital ex penditure                    (4,456)     (6,923) (13,380) (10,303) (10,770)
 Other income                    3,498      1,926      3,596       3,576      4,043      Chg in inv estments                     (5,684) (19,776) (15,714)          (6,695) (15,000)
 EBIT                           13,355     13,292     11,603      19,478     21,105      Other inv esting activ ities               -           -         -            -           -
 Interest paid                    (198)      (876)    (1,341)     (2,000)    (2,000)     Cash flow from inv. (b)             (10,139) (26,699) (29,094) (16,998) (25,770)
 PBT (before E/o items)         13,157     12,416     10,262      17,478     19,105      Free cash flow (a+b)                     4,303     (13,199)   (7,708)      (6,063)     (5,155)
 Tax prov ision                 (3,210)    (3,034)    (1,975)     (3,496)    (3,821)     Equity raised/(repaid)                     (70)       325       (132)      6,975        3,165
 E/o Income / (loss)              929       1,652       388          -          -        Debt raised/(repaid)                     7,526      9,511     14,657         124       (3,615)
 Net profit                     10,876     11,034      8,675      13,982     15,284      Chg in Minorities int.                     -           -         -            -           -
 Adjusted net profit             9,947      9,382      8,287      13,982     15,284      Div idend (incl. tax )                  (4,880)     (1,149)   (3,211)      (3,121)     (3,959)
 Growth (%)                       47.7       (5.7)     (11.7)       68.7        9.3      Other financing activ ities               (921)       (137)      -            -           -
 Diluted EPS (Rs)                 42.2       39.3       32.4        50.4       53.3      Cash flow from fin. (c)                  1,655      8,551     11,314       3,978       (4,409)
 Diluted EPS Growth (%)           45.8       (6.8)     (17.6)       55.7        5.7      Net chg in cash (a+b+c)                  5,958      (4,648)    3,605       (2,085)     (9,564)



 Balance Sheet                   FY07       FY08       FY09       FY10E      FY11E       Key Ratios                               FY07        FY08      FY09       FY10E        FY11E
 Equity capital                  2,412      2,431      2,792       2,860      2,957      OPM (%)                                   12.0        11.9       8.3         13.1        13.1
 Reserves & surplus             33,117     41,070     49,829      66,758     81,017      Net margin (%)                            10.3         8.7       6.6          9.6         9.5
 Shareholders' funds            35,354     43,365     52,314      69,312     83,667      Div idend y ield (%)                       1.5         1.5       1.3          1.5         1.5
 Preference Share Capital          -          -          -           -          -        Net debt/Equity (x )                       0.1         0.4       0.5          0.4         0.4
 Total Debt                     16,360     25,871     40,528      40,652     37,037      Net Working Capital (day s)                (21)        (12)      (44)         (13)        (14)
 Capital Employed               51,714     69,236     92,842    109,964     120,703      Asset turnov er (x )                       1.4         1.2       1.0          1.0         1.0
 Net fix ed assets              18,712     23,609     32,143      38,610     44,674      ROCE (%)                                  28.6        21.3      13.8         18.5        17.6
 Cash & Cash Eq.                13,261      8,612     15,744      13,659      4,095      RoE (%)                                   31.0        23.8      17.3         23.0        20.0
 Net other Current Assets       (2,435)    (4,569)   (13,093)     (3,912)    (4,318)     EV/Net sales (x )                          2.3         2.2       1.9          1.7         1.6
 Inv estments                   22,375     42,151     57,864      64,559     79,559      EV/EBITDA (x )                            18.8        17.4      22.6         12.6        11.7
 Net Deferred Tax Assets          (198)      (567)      183       (2,952)    (3,306)     PER (x )                                  19.3        20.7      25.1         16.1        15.3
 Total assets                   51,714     69,236     92,842    109,964     120,703      Price/Book (x )                            5.4         4.5       4.0          3.3         2.8



 P/E Band                                                                                EV/EBITDA Band

1,200                                                                                    320,000
                                                                                22X                                                                                               15X

 900                                                                            18X
                                                                                         240,000                                                                                  12X

                                                                                14X
                                                                                                                                                                                   9X
 600                                                                                     160,000
                                                                                10X
                                                                                                                                                                                   6X
 300                                                                                6X     80,000
                                                                                                                                                                                   3X

    0                                                                                            0
     Sep-05            Sep-06             Sep-07         Sep-08             Sep-09                   Jul-05             Jul-06             Jul-07         Jul-08              Jul-09



abhinavb@pinc.co.in
              RESEARCH



                                                 T E A M


EQUITY DESK
Gealgeo V. Alankara      Head - Institutional Sales                 alankara@pinc.co.in   91-22-6618 6466

Sailav Kaji              Head Derivatives & Strategist              sailavk@pinc.co.in    91-22-6618 6344




SALES
Anil Chaurasia                              anil.chaurasia@pinc.co.in                     91-22-6618 6483

Alok Doshi                                  adoshi@pinc.co.in                             91-22-6618 6484

Sundeep Bhat                                sundeepb@pinc.co.in                           91-22-6618 6486

Gagan Borana                                gagan.borana@pinc.co.in                       91-22-6618 6485




DEALING
Amar Margaje                                amar.margaje@pinc.co.in                       91-22-6618 6327

Ashok Savla                                 ashok.savla@pinc.co.in                        91-22-6618 6400

Raju Bhavsar                                rajub@pinc.co.in                              91-22-6618 6301

Manoj Parmar                                manojp@pinc.co.in                             91-22-6618 6326

Hasmukh D. Prajapati                        hasmukhp@pinc.co.in                           91-22-6618 6325

Pratiksha Shah                              pratikshas@pinc.co.in                         91-22-6618 6329




DIRECTORS
Gaurang Gandhi                              gaurangg@pinc.co.in                           91-22-6618 6400

Hemang Gandhi                               hemangg@pinc.co.in                            91-22-6618 6400

Ketan Gandhi                                ketang@pinc.co.in                             91-22-6618 6400




COMPLIANCE
Rakesh Bhatia            Head Compliance                            rakeshb@pinc.co.in    91-22-6618 6400
                                                                  Infinity.com
                                                                  Financial Securities Ltd
                          bright thinking                         SMALL WORLD, INFINITE OPPORTUNITIES




Member : Bombay Stock Exchange & National Stock Exchange of India Ltd. : Sebi Reg No: INB 010989331. Clearing No : 211
1216, Maker Chambers V, Nariman Point, Mumbai - 400 021; Tel.: 91-22-66186633/6400 Fax : 91-22-22049195

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