Mahindra and Mahindra Ltd Q2 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : I just had a follow-up to the first question on the cost side. Now on the Farm segment, you did point out, these are the record margins that we've seen. Now as some of the costs come back and the supply side normalizes, what is the range that we should keep in mind for this business? I mean typically, in past, you've guided to somewhere in the range of sub-20%, but we have exceeded that by a mile in this quarter. So any color on that?

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : Okay. Got it. Let me just then move the conversation to the capital allocation. Now, I mean, it is good to see the aerospace, you've taken a call on that. If you can just give some -- if I look at the financials for aerospace, there was about INR 300 crores of loss that this business had. So it's fair to assume that incrementally, there are going to be no losses from this subsidiary? And the large part of investment writeoff which we have seen in this quarter is coming because of Aerospace. If you can clarify that as well? Anish Shah - Mahindra & Mahindra Limited - Group CFO, Deputy MD. Member of the Group Executive Board & Additional Director So Gunjan, Aerospace has 2 parts to it. One is aircraft, which was GippsAero business; and second is aero structures. The aircraft business has been shut down. There have been losses in the past. And there will be no losses going forward except for a very small amount, which is as a result of a service arm that we have to keep open to meet our obligations for the next couple of years or so. So that's going to be a very small amount. And we will see in future numbers as well, but I would -- really would not rather say that is a significant amount. On aero structures, that's a business that gives a longer sub-term -- business, a long cycle business that's essentially making parts for Boeing and Airbus and its Tier 1 suppliers. We're actually very well positioned in it now. We are one of the leading players in India for this business. And we've got a very good reputation with the Tier 1 as well as with Boeing and Airbus directly. All the hard work is behind us for this. Any new part there takes a long time for it to get certified as well. We have a number of parts that have been certified already. And we see a lot more upside in that business going forward. But that will be in sort of with a 3- to 5- or 5- to 7-year window. That is not a business that takes up a lot of cash either. So in -- after that clarification, just to directly answer your question, yes, we see all the issues for both aircraft and aero structures behind us.

Question: Gunjan Prithyani - JPMorgan Chase & Co, Research Division - Analyst : Okay. Just last question, if I can squeeze on the tractor segment. Clearly, supply chain issues, we've kind of lost some market share. But as you look at the remainder of the year, which is not going to be as peak a season, do we expect to recoup the market share? Or we should assume that for this year, our growth is going to lag the industry growth on a full year basis on F '21? Rajesh Ganesh Jejurikar - Mahindra & Mahindra Limited - Additional Director & Executive Director of Automotive and Farm Sectors On a full year basis, we will lag the industry because it's -- there isn't enough volume left to recoup what is lost, unfortunately. Because as you know, bulk of the industry happens in May, June, July, and then October, November. So bulk of the industry volume is at that time. Jan, March market shares typically can't outweigh. We may make something back, but we can't probably make up everything that we've lost. That would be our current input right now. But we don't see this as a fundamental loss because we -- our brands have been in very, very strong demand. And it's just unfortunate that we haven't had, as you saw on the index stock chart, enough tractors on the ground to convert them into sales. So we don't see this as a fundamental loss at all in our positioning.