MIRA
INFORM REPORT
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Report Date : |
13.08.2008 |
IDENTIFICATION
DETAILS
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Name : |
MAHINDRA AND MAHINDRA LIMITED |
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Registered Office : |
Gateway Building, Apollo Bunder, Mumbai - 400001, Maharashtra |
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Country : |
India |
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Financials (as on) : |
31.03.2008 |
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Date of Incorporation : |
02.10.1945 |
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Com. Reg. No.: |
004558 |
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CIN No.: [Company
Identification No.] |
L65990MH1945PLC004558 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
NGPM00599E |
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Legal Form : |
A Public Limited Liability Company. The Company’s Share are Listed on
the Stock Exchanges. |
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Line of Business : |
Manufacturers of Light Commercial Vehicles, Agricultural Tractors, Implements and Utility Vehicles. |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
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Maximum Credit Limit : |
USD 220000000 |
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Status : |
Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well established and reputed company of Mahindra Group. Available information indicates high financial responsibility of the company. Financial position is good. Payments are correct and as per commitments. The company can be considered good for any normal business dealings at usual trade terms and conditions. It can be regarded as a promising business partner in a medium to long run. |
LOCATIONS
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Registered Office : |
Gateway Building, Apollo Bunder, Mumbai - 400 001, Maharashtra, India |
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Tel. No.: |
91-22-22021031 |
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Fax No.: |
91-22-22028780/22875485 |
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E-Mail : |
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Website : |
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Factory : |
Located at:
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Branches : |
Located at :
Tel No.: 91-22-24905624/ 24975074 Fax No.:91-22-24900833 Email: investors@mahindra.com Website : http://www.mahindra.com |
DIRECTORS
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Name : |
Mr. Keshub Mahindra |
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Designation : |
Chairman |
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Name : |
Mr. Anand G. Mahindra |
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Designation : |
Vice Chairman and Managing Director |
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Name : |
Mr. R. K. Pitambar |
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Designation : |
Director |
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Name : |
Mr. Deepak S. Parekh |
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Designation : |
Director |
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Name : |
Mr. Nadir B. Godrej |
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Designation : |
Director |
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Name : |
Mr. M. M. Murugappan |
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Designation : |
Director |
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Name : |
Mr. David Friedman |
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Designation : |
Director |
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Name : |
Mr. V. K. Chanana |
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Designation : |
Director – Nominee of Unit Trust of India |
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Name : |
Mr. R. N. Bhardwaj |
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Designation : |
Director - Nominee of Life Insurance Corporation of India |
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Name : |
Mr. Narayanan Vaghul |
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Designation : |
Director |
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Name : |
Mr. A. S. Ganguly |
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Designation : |
Director |
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Name : |
Mr. R. K. Kulkarni |
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Designation : |
Director |
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Name : |
Mr. Anupam Puri |
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Designation : |
Director |
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Name : |
Mr. K. J. Davasia |
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Designation : |
Executive Director |
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Name : |
Mr. Bharat Doshi |
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Designation : |
Executive Director |
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Name : |
Mr. Alan E. Durante |
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Designation : |
Executive Director |
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Name : |
Mr. A. K. Nanda |
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Designation : |
Executive Director |
KEY EXECUTIVES
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Name : |
Mr. K. J. Davasia |
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Designation : |
President - Farm Equipment Sector |
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Name : |
Mr. Narayan Shankar |
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Designation : |
Company Secretary |
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Name : |
Mr. Bharat Doshi |
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Designation : |
President – Trade and Financial Services Sector |
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Name : |
Mr. Alan E. Durante |
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Designation : |
President – Automotive Sector |
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Name : |
Mr. A. K. Nanda |
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Designation : |
President – Infrastructure Development Sector |
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Name : |
Mr. Ulhas N. Yargop |
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Designation : |
President - Telecom and Components Sector |
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Name : |
Mr. Uday Y. Phadke |
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Designation : |
Executive Vice President – Finance, Accounts and Legal Affairs |
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Name : |
Mr. Anjanikumar Choudhari |
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Designation : |
Executive Vice President – Human Resources and Corporate Services |
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Name : |
Mr. Raghunath Murthi |
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Designation : |
Executive Vice President - Business Development |
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Name : |
Mr. Hemant Luthra |
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Designation : |
Executive Vice President – Corporate Strategy |
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Name : |
Mr. R. R. Krishnan |
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Designation : |
Managing Director – Mahindra Intertrade Limited |
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Name : |
Mr. Rajeev Dubey |
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Designation : |
Executive Vice President- Human Resources and Corporate Services. |
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Audit Committee Deepak S. Parekh Chairman Nadir B. Godrej R. K. Kulkarni M.M.Murugappan V. K. Chanana |
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Remuneration/Compensation Committee Narayanan Vaghul Chairman Keshub Mahindra Nadir B. Godrej M.M.Murugappan |
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Share Transfer and Shareholders/
Investors Grievance Committee Keshub Mahindra Chairman Anand G. Mahindra Bharat Doshi A. K. Nanda R. K. Kulkarni |
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Loans and Investment Committee Bharat Doshi Alan E. Durante A. K. Nanda R. K. Kulkarni Anand G. Mahindra Vice-Chairman and
Managing Director Deepak S. Parekh Nadir B. Godrej M. M. Murugappan V. K. Chanana Nominee of Unit
Trust of India |
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Research and Development
Committee A. S. Ganguly R. K. Kulkarni Anupam Puri Bharat Doshi Executive
Director |
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MANAGEMENT BOARD Anand G. Mahindra Vice-Chaifman and
Managing Director Bharat Doshi President -–Trade
and Financial Services Sector Ulhas N.Yargop President
-–Telecom and Software Sector Uday Y. Phadke Executive Vice
President -–Finance, Accounts and Legal Affairs Anjanikumar
Choudhari President -–Farm Equipment
Sector Hemant Luthra President- MSAT
Sector Raghunath Murti Managing Director
-–Mahindra Intertrade Limited Rajeev Dubey Executive Vice
President- Human Resources and Corporate Services Pawan Goenka President
designate -–Auto Sector and Member of the Management Board designate A. K. Nanda Executive
Director and Secretary Rajeev Dubey President – HR,
After – Market and Corporate Services |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
(As on 31.03.2008)
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Names of Shareholders |
No. of Shares |
Percentage of
Holding |
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Promoters and promoter Group |
55590917 |
22.62 |
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Mutual Funds |
12706111 |
5.17 |
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Banks, Financial Institutions, Insurance Companies, State Government |
52315085 |
21.29 |
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FIIs/FFIs/FCs |
62701359 |
25.52 |
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Private Corporate Bodies |
15925273 |
6.48 |
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Indian Public |
25307730 |
10.30 |
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NRIs/OCBs |
1922946 |
0.78 |
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Bank of New York (for GDR Holders) |
19272392 |
7.84 |
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Total |
245741813 |
100.00 |
Note:
FIIs/FFIs/FCs/Foreign Bodies does not include shareholding aggregating 11.750 Millions Shares representing 4.78% of the paid-up share capital of the Company held by a FII as the same is included under the category of Promoters and Promoter Group.
BUSINESS DETAILS
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Line of Business : |
Manufacturers of Light Commercial Vehicles, Agricultural Tractors, Implements and Utility Vehicles. |
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Products : |
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PRODUCTION STATUS(As on 31.03.2008)
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Particulars |
Unit |
Licensed
Capacity |
Installed
Capacity |
Actual
Production |
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On
Road Automobiles having four or more wheels such as light, medium and heavy
commercial vehicles, jeep type vehicles and passenger cars covered under sub
heading (5) of Heading (7) of First Schedule [Note (iv) below] |
Nos. |
276000 |
229000 |
162400 |
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Three Wheelers |
Nos. |
111000 |
54000 |
34556 |
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Agricultural tractor |
Nos. |
189000 |
173000 |
95301 |
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Tractor Skids |
- |
- |
These are manufactured against spare capacity under 2 (a) |
3616 |
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Manufactured and purchased parts and accessories for sale |
Nos. |
- |
These are manufactured against spare capacityunder 1 and 2above |
242709 |
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Internal Combustion Piston Engines |
Nos. |
175000 |
136000 |
129236 |
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Petrol and Accessories of motor Vehicles |
Nos. |
500000 |
125000 |
80967 |
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Internal Combustion Engines |
Nos. |
60000 |
54000 |
47597 |
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D. G. Sets |
Nos. |
24000 |
Assembly at 3rd Party Locations |
16943 |
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Engines |
Nos. |
- |
These are manufactured against spare capacity under 2 (a) |
15129 |
Note:
- The installed
capacity has been certified by Presidents, which the auditors have relied
on without verification as this is a technical matter.
- The licensed
capacities include/represent, as the case may be, registrations granted
and Industrial Entrepreneur Memorandum filed with, and duly acknowledged
by, the Government pursuant to the schemes of de-licensing. [Also see note
(v) below].
- Within the
overall licensed capacity in item 1 above, the Company is permitted to
manufacture for outside sale 10,000 petrol/diesel engines and 4,000 tonnes
grey iron castings.
- Bullet proof
work and fabrication on base vehicles has been carried out at third party
facilities. 38 (2007: 190) vehicles were produced and sold using such
third party facilities and are included in item (A) 1(a).
- The installed
capacity mentioned against item no. (A) 1(a) above includes 48,000 (2007:
42,000) for production of vehicles for third parties.
GENERAL
INFORMATION
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No. of Employees : |
18821 |
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Bankers : |
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Facilities : |
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
A. F. Ferguson and Company Chartered Accountants |
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Address : |
Allahabad Bank Building, Mumbay Samachar Marg, Mumbai – 400001, Maharashtra, India |
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Name : |
Deloitte Haskins and Sells Chartered Accountants |
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Address : |
12, Dr. Annie Besand Road, Opposite Shiv Sagar Estate, Worli,. Mumbai
– 400018, Maharashtra, India |
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Associates : |
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Subsidiaries : |
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Joint Venture Company : |
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CAPITAL STRUCTURE
(As on 31.03.2008)
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
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375000000 |
Equity Share |
Rs.10/- each |
Rs.3750.000 Millions |
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2500000 |
Unclassified Share |
Rs.100/- each |
Rs.250.000 Millions |
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Total |
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Rs.4000.000
Millions |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
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|
245741813 |
Equity Share |
Rs.10/- each |
Rs.2457.400
Millions |
|
6668431 |
Less :Ordinary Share (Fully Paid up issued to ESOP Trust but not allotted to employees) |
Rs.10/- each |
Rs.66.700
Millions |
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Total |
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Rs.2390.700 Millions |
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
SOURCES OF FUNDS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
2390.700 |
2380.327 |
2333.996 |
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2] Employee Stock Options Outstanding |
40.000 |
31.812 |
15.873 |
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3] Share Application Money |
0.000 |
0.000 |
0.000 |
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4] Reserves & Surplus |
41070.000 |
33116.956 |
26738.840 |
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5] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
43500.700 |
35529.095 |
29088.709 |
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LOAN FUNDS |
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1] Secured Loans |
6172.600 |
1066.534 |
2166.760 |
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2] Unsecured Loans |
19698.000 |
15293.532 |
6667.062 |
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TOTAL BORROWING |
25870.600 |
16360.066 |
8833.822 |
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DEFERRED TAX LIABILITIES |
567.200 |
197.862 |
1467.500 |
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TOTAL |
69938.500 |
52087.023 |
39390.031 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
18144.500 |
15905.685 |
13752.593 |
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Capital work-in-progress |
5464.500 |
2805.991 |
1791.860 |
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INVESTMENT |
42150.500 |
22374.570 |
16690.884 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
10841.100
|
8784.837
|
8787.437 |
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Sundry Debtors |
10048.800
|
7008.867
|
6379.689 |
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Cash & Bank Balances |
8612.300
|
13260.719
|
7303.060 |
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Other Current Assets |
132.700
|
33.124
|
31.412 |
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Loans & Advances |
6918.800
|
8394.148
|
4988.983 |
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Total
Current Assets |
36553.700
|
37481.695
|
27490.581 |
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Less : CURRENT
LIABILITIES & PROVISIONS |
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Current Liabilities |
23075.500
|
19502.191
|
15208.412 |
|
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Provisions |
9434.600
|
7154.252
|
5308.021 |
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Total
Current Liabilities |
32510.100
|
26656.443
|
20516.433 |
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Net Current Assets |
4043.600
|
10825.252
|
6974.148 |
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MISCELLANEOUS EXPENSES |
135.300 |
175.525 |
180.546 |
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TOTAL |
69938.500 |
52087.023 |
39390.031 |
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PROFIT & LOSS
ACCOUNT
|
PARTICULARS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
|
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Sales Turnover |
108046.400 |
96277.109 |
79887.679 |
|
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Other Income |
8670.000 |
6175.131 |
3377.715 |
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Total Income |
116716.400 |
102452.240 |
83265.394 |
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Profit/(Loss) Before Tax |
14067.700 |
14376.710 |
10995.049 |
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Provision for Taxation |
3034.000 |
3692.845 |
2424.000 |
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Profit/(Loss) After Tax |
11033.700 |
10683.865 |
8571.049 |
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Earnings in Foreign Currency : |
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Export Earnings |
7953.800 |
6149.608 |
4651.026 |
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Commission Earnings |
389.000 |
518.641 |
111.575 |
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Other Earnings |
492.800 |
460.417 |
318.171 |
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Total Earnings |
8835.600 |
7128.666 |
5080.772 |
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Imports : |
|
|
|
|
|
|
Raw Materials |
46.300 |
179.623 |
368.566 |
|
|
Stores & Spares |
1211.100 |
1074.559 |
978.694 |
|
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Capital Goods |
1447.000 |
827.237 |
290.716 |
|
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Others |
85.700 |
80.014 |
92.139 |
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Total Imports |
2790.100 |
2161.433 |
1730.115 |
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Expenditures : |
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|
|
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Raw Materials, Finished and Semi Finished
Products |
77259.100 |
62519.169 |
54780.044 |
|
|
Excise Duty |
181.800 |
(21.380) |
116.105 |
|
|
Personnel |
8524.500 |
6661.533 |
5517.839 |
|
|
Interests, Commitment Charges |
242.400 |
(674.543) |
(184.016) |
|
|
Depreciation & Amortization |
2386.600 |
2095.865 |
2000.053 |
|
|
Finance Charges |
14054.300 |
13185.727 |
10040.320 |
|
|
Other Expenditure |
0.000 |
4309.159 |
0.000 |
|
Total Expenditure |
102648.700 |
88075.530 |
72270.345 |
|
QUARTERLY RESULTS
|
PARTICULARS |
|
|
30.06.2008 1st
Quarterly |
|
|
|
|
|
|
Sales Turnover |
|
|
32934.500 |
|
Other Income |
|
|
383.500 |
|
Total Income |
|
|
33318.000 |
|
Total Expenditure |
|
|
30465.500 |
|
Operating Profit |
|
|
2852.500 |
|
Interests |
|
|
97.300 |
|
Gross Profit |
|
|
2755.200 |
|
Depreciation |
|
|
621.100 |
|
Tax |
|
|
32.000 |
|
Reported PAT |
|
|
1593.000 |
KEY RATIOS
|
PARTICULARS |
31.03.2008 |
31.03.2007 |
31.03.2006 |
|
Debt Equity Ratio |
0.54 |
0.39 |
0.40 |
|
Long Term Debt Equity Ratio |
0.51 |
0.37 |
0.37 |
|
Current Ratio |
1.19 |
1.29 |
1.18 |
|
TURNOVER RATIOS |
|
|
|
|
Fixed Assets |
3.75 |
3.58 |
3.27 |
|
Inventory |
13.11 |
12.40 |
11.08 |
|
Debtors |
15.09 |
16.27 |
15.80 |
|
Interest Cover Ratio |
14.88 |
72.64 |
33.02 |
|
Operating Profit Margin (%) |
11.98 |
15.13 |
12.00 |
|
Profit Before Interest and Tax Margin (%) |
10.13 |
13.21 |
9.80 |
|
Cash Profit Margin (%) |
9.26 |
11.73 |
9.71 |
|
Adjusted Net Profit Margin (%) |
7.41 |
9.81 |
7.51 |
|
Return on Capital Employed (%) |
21.59 |
32.25 |
26.33 |
|
Return on Net Worth (%) |
24.20 |
33.20 |
28.03 |
LOCAL AGENCY
FURTHER INFORMATION
History:
The Mahindra brothers joined hands with a distinguished
gentleman called Ghulam Mohammed and to make the birth of Mahindra &
Mahindra in October 2nd, 1945 as Mahindra & Mohammed, a franchise for
assembling jeeps from Willys, USA. Two years later, India became an independent
nation and in 1948 Mahindra & Mohammed changed its name to Mahindra &
Mahindra (M & M). The Steel trading business was commenced in association
with suppliers in UK. Since then, Mahindra & Mahindra has grown steadily in
size and stature and evolved into a Group that occupies a premier position in
almost all key sectors of the economy. Mahindra Group is among the top 10
industrial houses in India. Its products and services are grouped into seven
groups, such as Automotive, Farm Equipment, Trade & Financial Services,
Information Technology, Infrastructure Development, Systech and Speciality
Business.
The first business was with Mitsubishi Corporation commenced and 5000 tons of
wagon building plates from Yawata Iron & Steel were supplied during the
period of 1950. In the year 1953 Otis Elevator Company (India) was established.
A joint venture was made with Rubery Owen & Company Limited, UK and
established a company under the name of Mahindra Owen. The company's Machine
Tools Division was commenced its operations in the year 1958. During the year
1960 the Mahindra Sintered Products Limited was established based on a joint
venture with Bir Field (GKN Group, UK) and the year later, the Mahindra Ugine
Steel Company was established with a joint venture between the company and
Ugine Kuhlmann, France. The company's major milestone was happened in the year
1963, the International Tractor Company of India established - a joint venture
with International Harvester Company, USA and now the thing Subject is the only
Indian company among the top three tractor manufacturers in the world. The
company entered into light commercial vehicles segment also, the manufacture of
light commercial vehicles was commenced in the year 1965. Vickers Sperry of
India Limited established - a joint venture with Sperry Rand Corporation, USA
in the same year. 1969 was the year to company; M&M entered the world
market with export of utility vehicles and spare parts.
Mahindra Engineering & Chemical Products Limited was originated its
operations during the year 1970. In the year 1977, the International Tractor
Company of India merged with Mahindra & Mahindra to become its Tractor
Division and within two years Mahindra brand of tractors was launched. The
company entered into Information Technology by the way of leading Tech Mahindra
(formerly known as Mahindra British Telecom) established - a joint venture with
British Telecommunications Plc (BT), UK. During the year 1991 the company
introduced Commander range of vehicles and the Mahindra Financial Services
Limited was established as a wholesale fund provider. Merged diverse activities
of Steel, Machine Tools and Graphics into Intertrade Division in the year 1992.
In 1993 M & M incorporated the Mahindra British Telecom International Inc.,
USA a wholly owned subsidiary of Mahindra British Telecom. The company
established Mahindra Steel Service Centre Limited in association with
Mitsubishi Corporation and Nissho Iwai Corporation of Japan. The company and
Acres International Limited (Canada) was jointly instituted the Mahindra Acres
Consulting Engineers Limited to provide multidisciplinary engineering
consultancy service. During the period of 1994, Mahindra Realty &
Infrastructure Developers Limited was brought its existence.
Mahindra USA Inc. was established for distribution of tractors in the USA. The
EAC Graphics (India) Limited also was established in the same year by
collaboration with The East Asiatic Company Limited A/S, Denmark. Mahindra
Allwyn Nissan Limited was merged with the company. In the year 2005, Mahindra
Holding & Finance Limited became a subsidiary of M & M to carry out
business as an investment company and the company made a technical
collaboration with Mitsubishi / Samcor to manufacture the Mitsubishi L300.
During the year 1996 the company made prestigious actions, the USA's Ford Motor
Company was joined with the company and established Mahindra Ford India Limited
to manufacture passenger cars. The company made a Foreign Currency Convertible
Bond (FCCB) issue of US$ 115 million. The Mahindra Holidays & Resorts India
Limited was established and also the Mahindra Consulting (now Bristlecone) was
established in the equivalent year.
A public private partnership initiative between Mahindra World City and Southern
Railway, the Paranur railway station was the first to be redesigned and
maintained by the corporate sector in the year 2007. During the same year 2007,
the company's Farm Equipment Sector (FES) showcased India's first bio-diesel
tractor at the Kisan Mela in Pune on December 14, 2007. Mahindra World City,
Jaipur signed MoU with Deutsche Bank on the sidelines of the Resurgent
Rajasthan - Partnership Summit' being held in Jaipur to set up campuses. M
& M launched the Scorpio V-series, a new line-up of India's leading SUV,
with the introduction of the Scorpio VLX. A wholly owned affiliate of Navistar
International Corporation (Other OTC: NAVZ), signed a joint venture agreement
with the company to produce diesel engines for medium and heavy commercial trucks
and buses in India. As in part of Corporate Social Responsibility, the company
inaugurated Impact India Foundation's Lifeline Express, world's first hospital
on rails on October of the year. The company has been awarded the ISO/IEC
27001:2005 certificate. This completes the company's successful migration from
BS 7799 to ISO 27001. Mahindra inaugurated its state -of-the-art Blanking Line
facility in Nashik backed by German technology. Company Auto Sector's
Zaheerabad plant has won the First Prize in the National Energy Conservation
Awards - 2007.
Subject was awarded the 'Excellence in Innovation' Award at the Indira
International Innovation Summit (3i's Summit) in February 2008. The company won
the BSE award for Best Corporate Social Responsibility Practice at the Social
and Corporate Governance Awards (Innovative strategies - Measurable Impacts),
presented by BSE and NASSCOM Foundation. As like above the company credited lot
of awards from various reputed raters and sources. Acquired Auto Designing co.,
G.R. Grafica Ricerca Design S.r.l (GRD), an Italian auto designing, feasibility
and styling company based out of Turin, Italy during the year 2008. Mahindra
Holidays & Resorts India Limited (MHRIL) signs an MOU with West Bengal
Tourism Development Corp. (WBTDC) & Sunderban Infrastructure Development
Corp. (SIDC) for development of Tourism in West Bengal in February 2008. On
March 2008, Mahindra signs MoU with Government of Maharashtra to invest an
additional Rs.15000.000 Millions in Chakan Greenfield. As on April of the same
year, a consortium of Subject (M&M) and ICICI Venture Funds Managements
Limited, India's leading PE player with AUM of over $ 2 billion, has signed a
definitive agreement agreeing to acquire 100% stake in Metalcastello S.p.A, a
leading Italian independent gear manufacturer and in the same month of the same
year launched Mahindra Scorpio SUV in Chile in partnership with Fortaleza of
the Automotores Gildemeister Group. Mahindra launched new After-Market Business
Vertical, Inaugurates first multi-brand car service centre in Mumbai on April
2008. As on May 2008, the company launched the Mahindra Pik up Double Cab in
Paraguay, in partnership with the Rieder Group.
Performance Review
Automotive Sector:
For the sixth consecutive year the Company’s vehicle
production and sales recorded outstanding performance levels despite the
industry slowdown during the year. A total of 200132 vehicles and 34556
three-wheelers were Produced as against 144090 vehicles and 34892 three
wheelers in the last year. These include 11,079 light commercial vehicles
(LCVs) and 26653 cars (previous year 8,811 LCVs and 614 cars) manufactured and
supplied to two of the subsidiaries, Mahindra International Limited (MIL) and
Mahindra Renault Private Limited (MRPL).
The Company recorded sales of 161001 vehicles and 34076
three-wheelers as compared to 135961 vehicles and 33,718 three-wheelers in the
previous year registering a growth of 18.4% and 1.1% in vehicles sales and
three wheeler sales respectively.
The total domestic sales volume of 148791 vehicles was
higher by 16.3% than the previous year’s volume of 127958 vehicles.
The Company reported a record sale of 148761 multi utility
vehicles (MUV or MUVs) in the domestic market in the year as against sale of
127856 MUVs in the previous year. The Company’s domestic MUV sales volume grew
a very healthy 16.4%, against the industry MUV sales growth of 5.1%.
The Company strengthened its dominant position in the
domestic MUV sub-segment by increasing its market share to 51.5% over the
previous year’s market share of 46.6%.
The small pick up model, Maxi Truck, was responsible for the
Company pick up volumes registering a growth of 17% while the pick up
sub-segment industry de-grew by 4%. As a result, the Company’s market share
jumped to 76.9% from the previous year’s market share of 63.2%.
In the Overseas Markets, the Company’s initiatives resulted
in a strong growth of 54% in export volumes - from 8,021 vehicles [including
254 vehicles sourced from MIL] in the previous year to 12,359 vehicles
[including 363 vehicles sourced from MIL].
Spare parts sales for the year stood at Rs.3883.000 Millions
as compared to Rs.3073.300 Millions in the previous year.
Farm Equipment Sector:
The Company registered a production of 98,917 Tractors for
the year under review as compared to 103847 Tractors in the previous year. This
was despite the material supply constraints faced by domestic tractor industry
in the Financial Year 2008. In addition, 31,922 Engines were produced for the
Mahindra Powerol brand. The strategy of increasing production at the Company’s
Rudrapur Plant, compared to earlier dependence on the Kandivali Plant, and has
significantly contributed to lowering the manufacturing cost.
The Company recorded sales of 99042 Tractors, as compared to
102531 Tractors sold in the previous year. Sale of domestic Tractors was 90,509
Tractors compared to 95,006 Tractors sold in the previous year (a de growth of
4.7%). This was in a year that witnessed industries degrowth of 5.1%, following
four consecutive years of Industry growth. The de-growth was mainly due to slow
down in bank financing on account of higher NPA’s, and tightening of lending
norms. The situation was further aggravated by increased interest rates.
In this challenging scenario, the Company has maintained its
market leadership in the domestic market for the 25th consecutive
year.
Against the backdrop of strengthening of the Rupee against the
US dollar, exports of the Company’s Tractors have actually increased to 8,533
Tractors, a growth of 13.4%, compared to 7,525 Tractors exported last year. The
Company’s Tractors are now being sold in 6 continents of the world. Apart from
the US market and the African Countries, the neighbouring countries of Sri
Lanka, Bangladesh and Nepal are the other large overseas markets. Forays have
also been made into new markets, namely New Zealand and the Latin American
Countries of Brazil and Chile.
A number of new products were introduced, in both the
domestic and international space, with many more in the pipeline.
In the domestic market, the 30-40 HP Segment is the largest,
comprising nearly 55% of the market. The Company introduced the 295 DI Super
Turbo, which was the first turbo, charged Tractor in this Segment. Also, the
595 DI Super Turbo (greater than 40 HP Segment) was upgraded. The Arjun Ultra-1
has now been transformed into a versatile product which has demonstrated
superlative performance both on and off the field. Mahindra Shaan - a 25 HP
multi-utility Tractor, which was launched by your Company in 2007, won the
‘Outstanding Innovation Award’ from ASABE (American Society for Agricultural
and Biological Engineers), USA. This Award has acknowledged the Company’s
ability to conceive and deliver innovative products.
On the International front, Tier III and Tier IV compliant
Tractors were introduced in the US market and to meet the demand of the higher
HP Segment in Africa, the ‘8000’ Tractor series was launched there. To leverage
domain expertise in logistics and to enhance effectiveness of the supply chain
in operation, the Company outsourced a significant part of its Logistics
operations to Mahindra Logistics, a Division of the Company. Additional savings
have been accrued as a result of this move.
Under the Mahindra Powerol Brand, the Company sold 31,922 engines during the year, as
against 24,141 engines last year, a growth of 32%. From having a single
institutional customer in the Financial Year 2002, today the engine business
has 22 corporate clients. Mahindra Powerol has retained its market leadership in gensets market, catering
primarily to the telecom segment. The Company expanded the Mahindra
Powerol genset product range up to 62.5 KVA with
the introduction of 40, 50 and 62.5 KVA engines. Mahindra Powerol was recognised with the Frost and Sullivan ‘Voice of the
Customer’ Award for being the ‘Most Preferred Genset Brand in the Telecom
Segment’.
The Company has been awarded the Japan Quality Medal (JQM) in
2007, by the Union of Japanese Scientists and Engineers (JUSE), Tokyo, Japan.
JQM is a rare honour given to a Company for excellence in Total Quality
Management (TQM). The Company is the only Tractor Company in the world to win
this Award. The Company had also won the Deming Application Prize in 2003. Both
of these prizes are recognition of the Company’s customer focus, commitment to
TQM practices and demonstration of results by significantly improving product
and process quality.
Mahindra
Defence Systems Division:
The Company provides world class armouring solutions for light
combat vehicles and SUVs as well as high mobility vehicles for defence use. The
Company developed the AXE, a high mobility fast attack vehicle. This Vehicle
was awarded the “Indigenous Design of the Year” by Overdrive. The Marksman is
another modern light armoured vehicle developed during the year.
The Company continues to develop competencies in special
vehicles and is in the advanced stages of construction of the Mahindra Special
Military Vehicles facility at Faridabad. This is the first such dedicated
defence vehicle facility in the private sector.
The Company has established a manufacturing facility for
underwater systems at Pune and is now well placed to deliver Sea Mines and
Decoy Launchers to the Indian Navy. The Company has obtained an export order
from Ghana for up-armoured Scorpios during the year under review.
Mahindra Logistics Division:
The Logistics arm of the Company continues its impressive growth
by recording revenues of Rs.6070.000 Millions as compared to Rs.3830.000
Millions in the previous year, registering a sustained increase of over 50% on
a year on year basis for the past few years. The business has acquired its
leadership position in the Automotive / BPO and ITES Industry Segments and is
now building its presence in Retail and other Industry Segments.
Profits:
The Profit for the year before Depreciation, Interest,
Exceptional items and Taxation was Rs.15044.700 Millions as against Rs.14578.300
Millions in the previous year registering an increase of 3.20%. Profit after
tax was Rs.11033.700 Millions as against Rs.10683.900 Millions in the previous
year recording an increase of 3.27%. The Company continues with its rigorous
cost restructuring exercises by efficiency improvements which have resulted in
significant savings through value engineering, cost re-engineering and
economising, optimum utilisation of available manufacturing locations,
outsourcing of service activities, optimisation of plant capacity utilisation,
cost competitiveness and right sizing in almost all areas.
Finance:
The Company raised resources from the capital markets to
part finance its various ongoing modernisation and expansion programmers. The
Company successfully accessed both overseas and domestic markets with diverse
instruments, maturities and interest rate fixings.
The Company raised Unsecured External Commercial Borrowing
(ECB) of US$ 50 million. The ECB was raised at an average maturity of six years
at highly competitive rates.In the domestic market; the Company raised
Rs.2000.000 Millions by way of Private Placement of Secured, Non-Convertible
Redeemable Debentures with a bullet maturity of 3 years. ICRA has assigned a
“LAA+” rating to these Debentures indicating high credit quality. The Company
also raised Rs.1000.000 Millions through FCNR (B) Loan from a Consortium Bank
at a highly competitive rate.
In order to meet short-term mismatches, the Company utilised
its fund based working capital limits from time to time, apart from making
regular use of non-fund based limits. Your Company inter alia raised
Rs.1000.000 Millions through issue of Commercial Paper at very competitive
rates. The Paper was rated “P1+” by CRISIL, the highest rating for a short term
paper. The Consortium of Bankers continues to brate the Company as a prime
customer and extends facilities/ services at prime rates.
The Company follows a prudent financial policy and aims to
maintain optimum financial gearing at all times. The
Company’s total Debt to Equity Ratio was 0.60 as at 31st
March, 2008.
During the year, CRISIL has reaffirmed the “AA+ with a
Negative outlook” rating assigned by it to the Company’s outstanding Debentures
in the previous financial year. CRISIL’s rating indicates high safety on timely
payment of interest and principal. Subsequent to 31st March, 2008, the Board of
Directors of the Company have considered and approved, subject to receipt of
requisite approvals and consent of the Shareholders by means of a Postal Ballot,
issuance of 9395974, 9.25% p.a. Unsecured Fully and Compulsorily Convertible
Debentures (“FCD” or “FCDs”) of the Face Value of Rs.745 each aggregating
Rs.700,00,00,630 to Golboot Holdings Limited, an entity controlled by Goldman
Sachs, each FCD being convertible into one Equity Share of Rs.10 each in the
Company at a price of Rs.745 per Share (including premium of Rs.735 per Share)
in accordance with Chapter XIII of the Securities and Exchange Board of India
(Disclosure & Investor Protection) Guidelines, 2000.
The FCDs shall be convertible into Equity Shares at anytime
within 18 months from the date of allotment of FCDs at the option of the
Investor and mandatorily convertible into Equity Shares on the date falling 18
months from the date of allotment. The Company will utilise the amount raised
through this preferential offer towards its Automobile and Farm Equipment
businesses.
MANAGEMENT
DISCUSSION & ANALYSIS
Industry
Structure
The Automotive Sector
The automotive industry is one of the key contributors to
the Indian manufacturing economy. The Indian automotive industry achieved a
turnover in excess of Rs.1650000.000 Millions in 2005-06. It accounted for over
13 mn direct and indirect jobs and 17% of the total indirect taxes as per the
Automotive Mission Plan 2016, Government of India.
The total production of Multi Utility Vehicles (MUVs), Light
Commercial Vehicles (LCVs) and three wheelers in India during the year under
review grew by 1% over the previous year and stood at 1,100,303 vehicles.
(Source: SIAM). The Company produced 208,035 vehicles during the same period, a
growth of 16% over the previous year. The Company accounted for 18.9% of the
Indian production of MUVs, LCVs and three wheelers in the year under review.
MUVs are a family of vehicles capable of versatile
applications such as passenger transport, goods transport or a combination of
the two. There are six manufacturers of multi utility vehicles in India. The
Company is the largest manufacturer of MUVs in India, offering a range of over
20 models. 288,600 MUVs were sold in India in the year F-08, a growth of 5.1 %
over F-07 (Source: Industry and internal). MUVs are further categorized into
soft tops, hard tops and pick-ups.
LCVs (carrying a payload of 2MT to 4 MT) are commercial
vehicles used mostly for intra-state movement of goods. In F-08 44,957 LCVs of
this category were sold – a growth of 4.3% over F-07 (Source: Industry and
internal).The company competes in this segment through its subsidiary Mahindra
International Limited (MIL). There are six manufacturers in India in this
specific LCV segment.
India is the largest market in the world for three wheelers.
In F-08 this segment decelerated by 9.7% over F-07, with 364,700 three wheelers
being sold in India. (Source: SIAM).
The Farm Equipment Sector
The Indian Tractor market is the largest in the world, in
terms of sales volume. In the current year all the tractor manufacturers
together sold 302241 tractors in the domestic market. Additionally, 44260
tractors were exported.
The domestic tractor market is segmented by horsepower into
the low horsepower 25 HP segment, the mid segment of 35 HP and the high segment
of above 45 HP. Most of the major players cater to all the three segments.
However, their relative strengths and market positions differ from segment to
segment. The domestic tractor industry is fragmented, with about 14 major
players and some small local players.
Many factors affect tractor sales including monsoons, means
of irrigation, water levels, government declared support prices for crops,
general commodity prices, crop production expenses (including seeds, fuel,
fertilizer, pesticides and other costs) and the credit policy announced by RBI.
The availability of finance is one of the most significant factors influencing
tractor demand, as more than 90% of tractors are sold through bank finance.
Company Farm Equipment Sector (FES), which designs,
develops, manufactures and markets tractors for Indian and overseas markets, is
the largest manufacturer of tractors in India. FES has sustained its market
leadership in the Indian tractor market for over 25 years.
Industry
Developments
The Automotive Sector
The Indian automotive industry had experienced a strong growth wave over the last five years. F-08 however, saw a drop in production (including two wheelers) by 2.3% and a drop in sales (including two wheelers) by 4.7% (Source: SIAM). The only segments that registered growth in sales were passenger vehicles (12.2%) and commercial vehicles (4.1%). The three wheeler and two wheeler segments witnessed a drop in growth of 9.7% and 7.9% respectively.
A combination of factors contributed to this situation, the main ones being a rise in interest rates, continued increase in fuel prices, sharp commodity inflation leading to higher costs and a slight economic slowdown.
The total number of MUVs sold in India increased by 5.1%, Within the MUV sub segments, the hard top sub segment, which is the largest sub segment in MUVs, saw a volume increase of 9% in the as compared to 16% in the previous year. The soft tops sub segment, which has been declining significantly over the last few years, declined a further 6 % in the year under review. The pick-up market declined by 4% this year, after a 20% growth last year.
The mid size car segment where the Logan competes, increased by 16%.
In the LCV segment (2-4 MT of payload) the sales increased by 4.3%. The volumes in the small three-wheeler segment (0.5T load) declined by 18.6% and the large three-wheeler segment witnessed a decline in volumes of 37.3%. (Source: Industry and internal)
The Farm Equipment Sector
The first monsoon (between June and Sept) of FY 07-08 was 105% of
the Long Period Average, resulting in a good Kharif crop. The second monsoon
was lesser than normal in more than half of the areas across India. Hence, Rabi
sowing was lower than F-07 by 3%. However crop production during F-08 (Rabi and
Kharif combined) is estimated to be 3% higher than the last year. The
Government also announced significantly higher Minimum Support Prices for
various crops for both Rabi and Kharif periods. Overall, it is estimated that
the agricultural GDP of India will grow by 2.6% in F-08.
Credit allocation to agriculture had been increased to
Rs.2250000.000 Millions. Yet, due to higher NPAs, they witnessed a slow down in
bank financing and a tightening of lending norms. This, coupled with increased
interest rates, caused a drop of 5.1% in domestic sales in the tractor industry
over F-07. The domestic industry closed at 302241 tractors in F-08, compared to
318328 tractors in F-07. Exports from India totalled 44,260 tractors in F-08, a
growth of 31.5% over the last year.
The industry had to bear the impact of hikes in the price of raw
materials. Over the last four years, the prices of important input materials
like steel, pig iron, and lead have continuously increased. The prices of crude
oil increased significantly in the current year. Simultaneously, exports were
impacted due to a significant appreciation of the rupee against the U.S.
Dollar. Margins therefore continued to be under pressure.
The industry is witnessing consolidation in the domestic market.
In F-06, Tractor and Farm Equipment Limited (TAFE) bought Eicher Tractors
Limited In F-08, M&M FES increased its dominance of the domestic market
with the acquisition of Punjab Tractors Limited (PTL), With this acquisition,
M&M FES now commands nearly 40% of the domestic market.
M&M
Performance
The Automotive Sector
The Automotive Sector (AS) of the Company is engaged in the
Multi Utility Vehicle (MUV) and three wheeler segments directly. It competes in
the Light Commercial Vehicle (LCV) segment through its joint venture subsidiary
MIL, and in the passenger car segment through another joint venture subsidiary
Mahindra Renault Private Limited (MRPL). The Company manufactures LCVs for MIL
and passenger cars for MRPL on contract basis. The Company also markets these
LCVs and cars for the two companies respectively under distribution contract
for a fee.
For the sixth consecutive year, the Company’s vehicle production
and sales touched an all-time high during the year under review, despite the industry
slowdown. A total of 234,688 vehicles (including 34,556 three wheelers, 11,079
LCVs for MIL and 26,653 cars for MRPL) were produced, which is a growth of 31.1
% over the previous year.
On the domestic sales front, the company along with its subsidiaries
MIL and MRPL sold a total of 218,998 vehicles (including 33,927 three wheelers,
10,373 LCVs through MIL and 25,907 cars through MRPL), recording a growth of
28.7% over the previous year.
The Company’s domestic MUV sales volumes grew a very healthy
16.4%, against the industry MUV sales growth of 5.1%. A record number of
148,761 MUVs were sold by M&M in the domestic market in the year under
review as against the sale of 127,856 MUVs in the previous year.
The company strengthened its domination of the domestic MUV sub
segment by increasing its market share to 51.5% over the previous year’s market
share of 46.6% In the hard top MUV sub segment, the success of the refreshed
Scorpio and the Bolero models helped the Company grow its volumes by 19%. The refreshed
version of the Bolero that was launched in March 2007 was a hit with customers
and the Bolero brand sales volume increased by 33% over the previous year. In
the process, Bolero brand sales crossed the milestone of 50,000 vehicles sold
in a year and Bolero continued to be India’s largest selling MUV, for the third
year in a row. November 2007 saw the launch of the VLX variant of the Scorpio.
Powered by the m-Hawk - a new indigenously developed, state of the art, 2.2
liter common rail diesel engine - and bundled together with a host of
electronic features. The Scorpio VLX has found great favour with the customer.
In the soft top sub segment, the Company’s soft-top sale volume
declined by 7 % in line with the industry decline of 6%. The Company pick up
volumes registered a growth of 17% in spite of an industry de-growth of 4% in
this sub segment. As a result, the Company’s market share jumped to 76.9% from
the previous year’s share of 63.2%. The credit goes to the success of the small
pick up model, the Maxi Truck.
In LCVs, M&M, through its subsidiary MIL, has a presence
only in the lower payload (< 4MT) segment of the market. The Company’s sales
in this sub segment improved by 20.3%, as against an industry sub segment
growth of 4.4 % in the year under review. This was due to recent launches in
the passenger segment as well as the repositioning of a load carrying model.
One of the principal reasons for this very healthy growth was the increased
focus on the business through MIL. This led to an increase in the Group’s
market share in the segment from 20.1% in the previous year to 23.1% in the
year under review. The subsidiary company is currently also working on
developing products for the higher end of the LCV segment as well as larger
commercial vehicles.
In November 2007, the company signed a joint venture agreement
with International Trucks (a wholly owned affiliate of Navistar International
Corporation) to produce diesel engines for medium and heavy commercial trucks
and buses in India. The joint venture, named Mahindra Navistar Engines Private
Limited (MNEL), is 51% owned by Mahindra and Mahindra (M&M) and 49% owned
by Warrenville based Navistar, North America’s largest combined commercial
truck, school bus and mid-range diesel engine producer. F-08 also witnessed the
launch of the Logan car by MRPL.
The Logan boasts of best in class fuel efficiency, cabin space
and driving comfort and has won multiple awards. Competing in the very
competitive midsize segment of the domestic car market, the Logan has been
amongst the top selling cars in the segment since launch and has captured an
11.2 % market share of this segment. 25,907 Logan cars were sold in F-08.
In the 0.5 T load segment of the three wheeler market, the
company has now acquired a sizeable market share of
19.3% with the Alfa three wheeler selling 21,564 units. This is
a growth of 10.3% over the previous year, in a scenario where the industry
volumes declined by 18.6%. In February 2008 the company also entered the 3-seat
three wheeler passenger markets with the launch of the Alfa passenger, in
Chandigarh, Rajasthan, Bihar, Assam, West Bengal and Kerala. Customer
acceptance has been positive and this model should contribute to the Company’s
growth in the current year, with the Pan India launch being completed by July
2008.
In the declining large three wheeler segment, the Company sold
9,799 large three wheelers against 14,146 in the previous year. This is a
decline of 30.7% in sales volumes compared to a 37.3% decline for industry as a
whole. In the last MDA it was reported that two Greenfield manufacturing sites,
one at Chakan, near Pune and one at Oragadam near Chennai, were being planned.
During the year under review, based on a re-alignment of its manufacturing
strategy, the company has deferred its investment at the joint manufacturing
site at Chennai in partnership with Renault s.a.s and Nissan Motor Company
Limited. The company will utilise the capacity available at their new plant in
Chakan and other existing plants to meet its medium term requirements, for both
domestic and overseas production.
Work on the greenfield plant at Chakan, near Pune has been
initiated. Land acquisition is complete and construction work is in full swing.
This plant near Pune will have the capabilities to manufacture the company’s
range of new generation MUVs as well as commercial application vehicles. It
will also manufacture CVs for MIL. Additionally, MNEL will manufacture engines
at this facility. The Company has intensified its efforts to identify niche
markets for its automotive products throughout the world, especially in
geographical areas that have similar sales, distribution and marketing
conditions as India. Over the last three years the Company introduced its
vehicles into many new countries including Europe, Middle East, South America
and South-East Asia by adapting unique business models for each country.
In F-08, vehicles were launched in Australia, Chile and Sudan.
The year also witnessed the launch of the sector’s first CKD operations abroad
with the opening of CKD assembly plants in Egypt and Brazil.
These initiatives resulted in continuing strong growth in export
volumes, with a 54% export growth from 8,021 vehicles [including 254 vehicles
sourced from MIL] in the previous year to 12,359 vehicles [including 363
vehicles sourced from MIL] in the year under review. The entry into all these
new markets was under the “MAHINDRA” brand name, in keeping with the objective
of promoting and establishing the Mahindra brand across the globe.
In Operations, the Company focused on increasing capacity at
existing plants, on rigorous cost reduction, and on a ramp up of its new
Uttaranchal plant. Energy conservation was an area of particular focus. The
impact of their efforts was recognised when, the Zaheerabad and Nasik Plants
were awarded the National Energy Conservation Award (1st
rank and 2nd rank respectively), and the Nashik and Kandivli plants won the
state level prizes for energy conservation. The Automotive Sector’s Nashik plant
also won the National Award for excellence in water conservation.
The Company has also been making significant efforts to take
customer satisfaction to even higher levels in its pursuit of becoming one of the
most customer caring automotive companies. The Company significantly improved
its standing to 3rd rank on
sales satisfaction in syndicated studies conducted by independent third party
agencies like J.D. Power. Two of the company’s products – Scorpio and Logan
were ranked No. 1 in the TNS Total Customer Satisfaction scores in their
respective categories. In the TNS study on Dealer Satisfaction released in
2007, the Company ranked first. The Company was also rated second in a TNS
study on the Most Trusted Indian car companies.
The
Farm Equipment Sector
FES achieved a major milestone in F-08 when the cumulative sales
of its tractors till date crossed the 1.300 Millions mark. It sustained its
leadership position for the 25th consecutive year with a market share of 30% in the domestic
tractor market, 90,509 tractors were sold in F-08 as against 95,006 tractors in
F-07. Additionally, 8,533 tractors were exported in F-08 against 7,525 tractors
in F-07.
The year F-08 was marked by the introduction of new and upgraded
products and technologies. The 295 DI Super Turbo and the upgraded Sarpanch
595DI Super Turbo were launched in the month of October 2007. The former is a
39HP Turbo charged tractor with a new technology. It is the first Turbo tractor
in the mid segment and is one of the most powerful tractors in this category.
The latter is an upgraded product, with significant improvement in the product
performance and in the value offered to the customer. The Arjun Ultra-1 has now
been transformed into a versatile product capable of being used in the fields,
as well as for construction and mining applications.
The Mahindra ‘Shaan’, launched in F-07, won the “Outstanding
Innovation Award” from ASABE (American Society for Agricultural &
Biological Engineers). This is recognition of FES’ ability to conceive and
develop innovative products that meet the customers’ latent needs. In its
endeavor to offer unparalleled customer quality, durable and high performance
products, FES tests its products in the most demanding environments. M&M -
FES was awarded the ‘Indian Innovation Award 2006’ for ‘reducing time to market
in New Product Development by bringing field to lab’. This is an
acknowledgement of FES’ technological advances and its ability to test its
products with the same rigor within the confines of a test lab.
This year, FES further increased its focus on Customer
Centricity by leveraging technology to provide innovative new services. A 24x7
toll free number has been extended pan India to give customers a unique ownership
experience.
To meet the growing demand for automobiles running on alternate
fuels, Bio-Diesel technology readiness for up to 5% bio-fuel has been achieved.
FES has sold tractors with this capability. Bio-fuel hubs have been created in
some areas to facilitate availability of this green fuel. FES is at the
forefront of efforts in the development of green technologies, which will
contribute to environmental sustainability. FES also sells engines and gensets
under the ‘Mahindra Powerol’ brand. ‘Mahindra Powerol’ retained its market
leadership in the telecom segment for gensets. In F-08, it increased its
customer base, with engine and genset sales put together increasing by 32% in
volume terms, and by an even more substantial 72% in value terms. Mahindra
Powerol also expanded its genset product range upto 62.5 KVA. This was
accompanied by the introduction of super silent gensets (less than 62 db) for
usage in silent zones in accordance with the Central Pollution Control Board
norms. Innovative brand promotion like FM radio campaigns & advertisements
in public transport were undertaken – a first in this segment. Branded show
rooms were set-up in 25 Indian cities to boost its presence in the retail
segment. Mahindra Powerol won with the Frost & Sullivan ‘Voice of the
Customer’ Award” for being the ‘Most preferred Genset
Brand in the Telecom Segment’, which truly reflects the impact
that Mahindra Powerol has created in the telecom space. This is another
reflection of the FES spirit of customer centricity.
On the global front FES’ strategic joint venture in China - the
Mahindra (China) Tractor Company Ltd. (MCTCL) increased its presence in the
Chinese market by spreading its distribution to new regions in North West and
Central China. This enabled a sales growth despite a sluggish domestic
industry. On the exports front, MCTCL launched its 25HP - 4wd product in the
USA market. This product has been well received by dealers in US. MCTCL has
also made inroads in South Asia by penetrating markets like Bangladesh and Sri
Lanka. MCTCL embarked on a product range expansion program by introducing
products up to 55 HP. The enhanced market presence in domestic and exports
markets and the product range expansion program will enable MCTCL to gain a
significant presence in the China tractor industry.
In the USA, the 0-70 HP tractor industry declined by 13% between
April 2007 and March 2008. The major reasons were fuel price increases,
softening of the credit market due to sub prime crisis and higher energy costs.
Mahindra USA (MUSA) sales increased by 1%.
Mahindra USA has been recognized as an important player in the
American market, and has been invited to join the Board of the Association of
Equipment Manufacturers (AEM), which is a leading international trade
association focused on meeting the global business needs of equipment
manufacturers and service providers.
The overall growth in exports for Rest of the World (ROW)
tractor markets (excluding USA and China) in F-08 was 18%. Australia and Africa
were major contributors to this growth. Satellite assembly plants were set up
in the African states of Tchad and Mali in F-08. FES also entered new markets,
including Iran in the Middle East, {where it had partnered with Iran Tractor
Manufacturing Co. (ITMCo) and Brazil in South America.
FES won the All India Award for Export Excellence instituted by
Engineering Export Promotion Council (EEPC), which recognized its outstanding
contribution to Engineering Exports in the field of agricultural machinery. In
addition, at the 74th International
Fair of Agriculture, at Novi Sad, Serbia, M&M bagged the ‘Best Tractor
Introduction’ award. The Union of Japanese Scientists and Engineers (JUSE),
Tokyo, Japan awarded the ‘Japan Quality Medal’ to FES for 2007. The JQM is an
internationally acclaimed Quality accolade, awarded to a company with
outstanding Quality Management. FES is now the only tractor company in the
world to attain this award, and with this win, it joins the league of global
companies. FES also won the Deming Application Prize in 2003 for its Customer
Focus, commitment to TQM practices and demonstration of results in improving
product and process quality. For FES, after winning the Deming Prize, the JQM
win signifies the culmination of a dream, the confirmation of our self-belief,
and the embodiment of the ‘We can’ spirit.
FES continued its journey towards excellence in business process
improvements in several ways. Its Lean Manufacturing initiative continued with strong
momentum at all its plants. The Total Productivity Management (TPM) initiative
that was launched at the Mumbai plant in November 2006 has been extended to
Nagpur plant. Involving suppliers in the process strengthened the ongoing focus
on continuous improvement. The ISO: 9000:2000, TS 16949 & ISO: 14001
re-certification & surveillance audits have continued at the various FES
plants and all the stringent requirements have been met successfully.
The Mumbai and Rudrapur plants were certified in F-07 for
‘Occupational Health & Safety Assessment Series’ (OHSAS- 18001), making all
the four FES plants OHSAS certified. This year, re-certification and
surveillance audits for OHSAS were conducted. In recognition of its excellent
health & safety practices, FES was awarded the ‘Golden Peacock Occupational
Health & Safety Award’ for the year 2007. Similarly, for the efforts in the
area of Quality, FES was awarded the ‘Golden Peacock National Quality Award
-2007’.FES continues to improve its supply chain efficiency by reducing dealer
stocks and outstanding.
Opportunities
The Indian economy has been growing at an annual average growth
rate of well above 8% for the last four years making it one of the fastest
growing large economies in the world. This kind of secular long term growth
combined with the Company’s diligent expansion of its technological and product
development capabilities, and its active search for overseas partners and
markets, augurs well for the coming years for both sectors. The sectors also
share synergies of resources, especially for sourcing, giving major
opportunities for savings.
India’s automotive sector is one of the fastest growing in the
world. With the Indian economy on a high growth path on a secular long-term
basis and with the consequently increased disposable incomes of the population
at large, the Indian automotive industry is expected to have significant growth
opportunities. The Indian Government’s Automotive Mission Plan 2016 will enable
such growth and targets a doubling of automotive industry’s contribution to the
Indian economy over 2006-2016. With the Company’s enhanced presence in the
Indian automotive industry thorough its joint ventures for CVs and cars as well
with its entry into the smaller three wheeler category, the Company is well
poised to garner an increasing share of this relatively high long term growth
segment of the Indian economy. However the current year may witness sluggish
growth due to global and local economic pressures as listed under the next
section.
In the Automotive Sector, the Company believes that its core MUV
market is likely to increase its share in the light vehicles category due to
the inherent versatility of MUVs for a fast growing developing country. The
proportion of MUVs in India is relatively low compared to corresponding figures
in Asian countries that share a similar or more developed profile. In the long
term, they believe that the light vehicle market will expand at a fast clip in
India and that MUVs will take an increasing share of this market.
The AMP 2016 also states that fiscal benefits should be provided
to MUVs, which could lead to further MUV growth. The Company’s entry into the
car market and the CV market through joint ventures and its strong presence in
the MUV segment will enable the leveraging of the full range of opportunities.
The WTO and Free Trade Area negotiations with Thailand, SEAN,
SAARC countries and the Mercosur countries are likely to lead to lowered
tariffs across many target export markets. This could provide a significant
opportunity to generate larger volumes from export sales and further the auto
sector’s strategic emphasis on the development of exports.
Given the current state of road infrastructure in the interiors,
as well as the extremely high cost required for improvement, MUVs will continue
to be the most appropriate and economical vehicles for transporting people in
the interiors. Rural public transportation is not as extensively developed as
in the urban areas, providing further opportunities for MUVs and LCVs.
MUVs and CVs are preferred vehicles for projects and
construction sites like the Golden Quadrilateral road project and the North,
South, East and West Corridor project. A higher level of industrial development
generally leads to a greater demand for MUVs and CVs. Hence if the planned rate
of GDP growth is achieved over the next decade, the demand for MUVs and CVs
should increase commensurately.
The increased infrastructural investments required maintaining
the high growth of the Indian economy - like the North South East West corridor
which has a budget of tens of Millions - and the increased goods movement from
a fast growing economy, would maintain a high demand for commercial vehicles.
To capture a share of the growing medium and heavy commercial vehicles segment,
the Company’s subsidiary, MIL, will launch a new range of medium and heavy
commercial vehicles over the next few years and thus ensure the Company’s
participation in this important segment of the Indian automotive industry.
The direct tax changes announced in the Government of India’s
budget for F-09 would lead to an additional increase in the disposable incomes
of taxpayers. In addition the release of higher salaries to government
employees as a result of the sixth Pay Commission would also increase
disposable incomes to a large group of people. Both these factors are likely to
have a positive influence on vehicle demand, especially for personal use
vehicles in the current year.
The burgeoning Indian middle class population, with fast growing
disposable incomes, with an increasing propensity to spend, along with the huge
increase in the working age population expected over the next 10 years, will
drive high growth for passenger vehicles like Bolero and Scorpio. Given that
over half the Indian market is accounted for by passenger cars, the Company’s
partnership with Renault to introduce Renault models through its subsidiary
MRPL will continue to provide the Company growth from participating in the
other fast growing segment of the Indian auto industry.
Thus, through these strategic initiatives, the Auto Sector of
Company has put in place plans to increase its size of the addressable market
of the Indian automotive industry from 17% in F-05 to 75% by F-10, providing a
huge opportunity for growth.
There are
opportunities for the Farm Equipment Sector as well. The Govt. of India has
increased its focus on agriculture in the budget for F-09. There are also
certain states in India where penetration of tractors is low and these provide opportunities
for growth. FES will leverage these opportunities by strong marketing
initiatives like brand building, creating stronger franchisees, restructuring
dealer sand the introduction of new products.
The USA and China are amongst the top three tractor markets in
the world apart from India. To tap the potential in these markets, FES plans to
continue its focus on these markets to become a global leader. Company is well
positioned to grow sales in the Chinese market. Company is also exploring various
global tractor markets in Africa, East Europe and the Middle East.
Facilities at Nagpur and Rudrapur Plant will ensure low cost
manufacturing for FES. China will also serve as a low cost sourcing base for
FES products. These can be leveraged suitably.
Threats:
A slowdown of the Indian economy is quite possible for the short
term given current global developments. Due to the strong linkage of the
automotive industry to the economy, such an event would adversely impact growth
in the short term for the Company.
Trade Reference:
- Acey
Engineering Private Limited 55
- Aditya
Engineering Company 56
- Advance
Cooling Systems Private Limited 57
- Aerocom
Automotives Private Limited 58
- Agrofab
Machineries India Private Limited
- Anandji
Haridas and Company Private Limited
- Behzad
Engineering Private Limited
- Bentex
Engineering Private Limited
- Caspro Metal
Industries Private Limited
- Chisty
Engineers Private Limited
- Choice
Precitech India Private Limited
- Circlips India
Private Limited
- Drill jig Bushing
Company (Madras) Private Limited
- Esoofali
Esmailji Karachiwalla and Company
- Gear Master
Engineering Company
- Genuine
Manufacturing Company
- A J Auto Private Limited
- Aarvee Waxpol Tools India Private Limited
- Acey Engineering Private Limited
- Agrofab Machineries India Private Limited
- Akal Spring Limited
- Anilux Coated Products Private Limited
- Ashish Autoparts Private Limited
- Asia Automotive Limited
- Atai Filters Private Limited
- Atop Products Private Limited
- Avesta Enterprise Private Limited
- Avi Autoriders Private Limited
- Behzad Engineering Private Limited
- Bell Agroma China Limited
- Bemco India Private Limited
- Benara Udhyog Private Limited
- Bentex Engineering Private Limited
- Bhagyashri Home Appliances Private Limited
- Bhpl Auto Engineers Private Limited
- Bil Metal Industries Limited
- Brahans Rubber Private Limited
- Caspro Metal Industries Private Limited
- Cast Metal Industries Private Limited
- Chishty Engineering Private Limited
- Circlips India Private Limited
- Classic Stripes Private Limited
- Deshpande Automech Private Limited
- Devki Auto Industries Private Limited
- Dham Fastners
- Disha Engineering
- Ehara Engineering Private Limited
- Emdet Engineers Private Limited
- Enginetech Systems India Private Limited
- Eros Metal Work Private Limited
- Fibre Foam (Bombay) Private Limited
- Goldseal Engineering Products Limited
- Gole Precision Tools Private Limited
- Hind Auto Cranks Private Limited
- Hindustan Fasteners Private Limited
- Hodek Engineering Works Private Limited
- Isha Steel Treatment Private Limited
- Jayashree Iron & Steel Alloys Private Limited
- K P Tools Private Limited
- Kamala Engineering (Diamonds) Private Limited
- Kaykay Fluid Seals Limited
- Lele Auto Private Limited
- Lumax Industries Limited
- Mac Steel Private Limited
- Magnum Engineers
- Menon Engines Limited
- Metal Processing Industries Private Limited
- Modern Cable Company
- Nimai Export Private Limited
- Nippon Audiotronix Limited
- Om Sai Auto Precision (India) Private Limited
- Padmini Engineering Private Limited
- Panorama Automotive Industries Private Limited
- Paras Mechanical Works Private Limited
- Perfect Electric Concern Limited
- Perfect Mechanical Works Private Limited
- Phiroze Sethna Private Limited
- Polar Auto and Engineering Industries Private Limited
- Pravin Auto Engineering Private Limited
- Pravin Wipers and Ancillaries Private Limited
- Precision Autowares Limited
- Precision Gears Indore Private Limited
- Radheya Machining Limited
- Rain Aagri Company Private Limited
- Ramkrishna Iron Works Private Limited
- Reliable Techno Craft Private Limited
- Ritvij Plastics Private Limited
- Sang Fasteners Private Limited
- Sarna Auto Tex Private Limited
- Satpuda Engineering Private Limited
- Seven Seas Forgings Private Limited
- Shivam Paints Private Limited
- Shivani Locks Limited
- Shroff Textiles Limited
- Sunax Automotive Plastics Private Limited
- Susira Engineering Industries Private Limited
- Suyog Rubber (India) Private Limited
- Sylea Automotive India Limited
- Tide Wateroil Company (India) Limited
- Tigon Pipe Benders Limited
- Tooledge Industries
- Toshira Auto Industries Private Limited
- Toyo Metal Lurgical Limited
- Trikaya Coatings Private Limited
- Unitech Engineers Private Limited
- Windals Precision Private Limited
- Trusa Engineering Private Limited
- Unitech Engineers Private Limited
- Varun Aluminium Industries Limited
- Veltech Forging Private Limited
- Vidharbha Agro Industries Private Limited
- Vidharbha Gas Vessels Private Limited
- Vikas Automatic Fasteners Private Limited
- Vrc Plastmould India Private Limited
- Windals Auto Private Limited
- Zoroastrian Automobiles Private Limited
Fixed Assets:
- Land Freehold
- Land Leasehold
- Cycles
- Technical Knowhow
- Development Expenditure
- Software Expenditure
- Land
- Building
- Plant and Machinery
- Furniture and Fitting
- Vehicles
Contingent Liability:
(a)
Guarantee Given by the company 31.03.2008
|
|
Guarantee |
Outstanding the
Guarantee |
|
For Employees |
10.500 |
* |
|
For other companies |
381.000 |
343.700 |
*Denotes amounts less than Rs.0.050 Millions
News:
Senior appointments at Mahindra’s
Automotive Sector
Mumbai, August 5, 2008: Mahindra & Mahindra Limited
(M&M), one of India’s leading auto companies, today announced the
appointment of Mr. Rajesh Jejurikar as Chief of Operations, Automotive Sector
and Mr. Rajan Wadhera as Chief of Engineering and Development, Automotive
Sector. Mr. Louis Pereira has been appointed CEO of Mahindra Automotive Limited
(MAL).
All appointments are effective
from August 1, 2008.
As Chief
of Operations, Mr. Rajesh Jejurikar will head End to End Operations. In
addition to his current Sales & Marketing function, he will also oversee
the manufacturing function.
As Chief
of Engineering and Development, Mr. Rajan Wadhera will head Product Engineering
and Development. In addition to his current Product Development role, he will
also oversee the Materials Management function.
As CEO
of Mahindra Automotive Limited (MAL), Mr. Louis Pereira will oversee the
development of the Chakan Plant into a world-class manufacturing facility. He
will also be responsible for the smooth functioning of the Plant which will
manufacture new products from Mahindra & Mahindra Limited and Mahindra
Navistar Automotives Limited.
Mahindra's
Automotive Sector is the market leader in Utility Vehicles in India and makes a
wide range of vehicles including MUVs, LCVs, passenger vehicles and three
wheelers. M&M offers customers over 20 models including new generation
utility vehicles like the Scorpio and the Bolero. Over the years, Mahindra has
been steadily growing in stature as an international automotive major with a
footprint in several countries across the world.
About The Mahindra Group
The US
$6.7 billion Mahindra Group is among the top 10 industrial houses in India. Mahindra
is the market leader in multi-utility vehicles in India It made a milestone
entry into the passenger car segment with the Logan. Mahindra & Mahindra is
the only Indian company among the top tractor brands in the world.
The
Group has a leading presence in key sectors of the Indian economy, including
the financial services, trade, retail and logistics, automotive components,
after-market, information technology and infrastructure development. Mahindra
is now poised to make an entry in the two-wheeler segment.
Mahindra's
Farm Equipment Sector has recently won the Japan Quality Medal, the only
tractor company worldwide to be bestowed this honour. It also holds the
distinction of being the only tractor company worldwide to win the Deming
Prize. The US based Reputation Institute recently ranked Mahindra among the top
10 Indian companies in its Global 200: The World's Best Corporate Reputation
list.
CMT REPORT
(Corruption, Money Laundering & Terrorism]
The Public Notice information has been collected from various sources
including but not limited to: The Courts, India Prisons Service,
Interpol, etc.
1] INFORMATION ON
DESIGNATED PARTY
No exist designating subject or any of its beneficial owners, controlling
shareholders or senior officers as terrorist or terrorist organization or whom
notice had been received that all financial transactions involving their assets
have been blocked or convicted, found guilty or against whom a judgement or
order had been entered in a proceedings for violating money-laundering,
anti-corruption or bribery or international economic or anti-terrorism sanction
laws or whose assets were seized, blocked, frozen or ordered forfeited for
violation of money laundering or international anti-terrorism laws.
2] Court Declaration :
No records exist to suggest that subject is
or was the subject of any formal or informal allegations, prosecutions or other
official proceeding for making any prohibited payments or other improper
payments to government officials for engaging in prohibited transactions or
with designated parties.
3] Asset Declaration :
No records exist to suggest that the property or assets of the subject
are derived from criminal conduct or a prohibited transaction.
4] Record on Financial
Crime :
Charges or conviction
registered against subject: None
5] Records on Violation of
Anti-Corruption Laws :
Charges or
investigation registered against subject: None
6] Records on Int’l
Anti-Money Laundering Laws/Standards :
Charges or
investigation registered against subject: None
7] Criminal Records
No
available information exist that suggest that subject or any of its principals
have been formally charged or convicted by a competent governmental authority
for any financial crime or under any formal investigation by a competent
government authority for any violation of anti-corruption laws or international
anti-money laundering laws or standard.
8] Affiliation with
Government :
No record
exists to suggest that any director or indirect owners, controlling
shareholders, director, officer or employee of the company is a government
official or a family member or close business associate of a Government
official.
9] Compensation Package :
Our market
survey revealed that the amount of compensation sought by the subject is fair
and reasonable and comparable to compensation paid to others for similar
services.
10] Press Report :
No press reports / filings exists on
the subject.
CORPORATE
GOVERNANCE
MIRA INFORM as part of its Due Diligence do provide comments on
Corporate Governance to identify management and governance. These factors often
have been predictive and in some cases have created vulnerabilities to credit
deterioration.
Our Governance Assessment focuses principally on the interactions
between a company’s management, its Board of Directors, Shareholders and other
financial stakeholders.
CONTRAVENTION
Subject is not known to have contravened any existing local laws,
regulations or policies that prohibit, restrict or otherwise affect the terms
and conditions that could be included in the agreement with the subject.
FOREIGN EXCHANGE
RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.42.40 |
|
UK Pound |
1 |
Rs.80.54 |
|
Euro |
1 |
Rs.62.96 |
SCORE & RATING
EXPLANATIONS
|
SCORE FACTORS |
RANGE |
POINTS |
|
HISTORY |
1~10 |
9 |
|
PAID-UP CAPITAL |
1~10 |
9 |
|
OPERATING SCALE |
1~10 |
9 |
|
FINANCIAL CONDITION |
|
|
|
--BUSINESS SCALE |
1~10 |
9 |
|
--PROFITABILIRY |
1~10 |
9 |
|
--LIQUIDITY |
1~10 |
9 |
|
--LEVERAGE |
1~10 |
9 |
|
--RESERVES |
1~10 |
9 |
|
--CREDIT LINES |
1~10 |
9 |
|
--MARGINS |
-5~5 |
- |
|
DEMERIT POINTS |
|
|
|
--BANK CHARGES |
YES/NO |
YES |
|
--LITIGATION |
YES/NO |
NO |
|
--OTHER ADVERSE INFORMATION |
YES/NO |
NO |
|
MERIT POINTS |
|
|
|
--SOLE DISTRIBUTORSHIP |
YES/NO |
NO |
|
--EXPORT ACTIVITIES |
YES/NO |
YES |
|
--AFFILIATION |
YES/NO |
YES |
|
--LISTED |
YES/NO |
YES |
|
--OTHER MERIT FACTORS |
YES/NO |
YES |
|
TOTAL |
|
81 |
This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
RATING
EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit transaction.
It has above average (strong) capability for payment of interest and
principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit consideration.
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
|