Motilal Oswal Financial Services

2 June 2020

Update | Sector: Automobile

Mahindra and Mahindra

BSE SENSEX

33,826

S&P CNX

9,979

CMP: INR463

TP: INR576 (+25%)

Buy

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A generational shift underway

Best rural proxy | Valuations at discount to 1SD below 5-yr average P/E



Mahindra & Mahindra’s (MM) senior leadership is in midst of a generational shift, at

a time when all its key businesses are facing cyclical or structural challenges.

While the cycle for tractors should turn positive in the near term and for LCVs too in

the not so distant future, the new CEO would have to address two major issues – (a)

restore its positioning in the fast growing SUV segment, and (b) circumvent the drag

of underperforming subsidiaries in the core/non-core businesses.

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

MM IN

1,209

575 / 7.6

675 / 246

26/4/-14

2288



We believe MM’s valuations reflect the challenges of the Passenger UV business as

well as no major changes on capital allocation policy.

Any positive surprises in the SUV business, positive evolution of the Ford India JV or

correction of capital allocation by the new CEO should act as re-rating triggers.

Financials & Valuations (INR b)

Y/E MARCH

2020 2021E 2022E

Sales

451

416

482

EBITDA

55.4

45.5

61.6

Adj. PAT*

35.1

25.9

37.6

Adj. EPS (INR)

29.5

21.7

31.5

EPS Gr. (%)

-31.5 -26.3

45.1

BV/Sh. (INR)

312

322

342

Ratios

RoE (%)

10.1

6.3

8.8

RoCE (%)

9.5

6.1

8.4

Payout (%)

Valuations

P/E (x)

15.7

21.3

14.7

P/BV (x)

1.5

1.4

Div. Yield (%)

2.2

FCF Yield*

2.7

5.8

6.4

*(incl MVML)

Shareholding pattern (%)

As On

Mar-20 Dec-19 Mar-19

Promoter

18.9

20.4

DII

26.9

23.2

22.5

FII

41.3

41.4

39.2

Others

12.9

16.6

17.9

FII Includes depository receipts

Stock Performance (1-year)

M&M

Sensex - Rebased

760

Management change – A generational shift underway



After a gap of almost 24 years, MM would see a leadership change with both

Executive Chairman (Mr. Anand Mahindra) and MD & CEO (Dr. Pawan Goenka)

retiring in 2021. Dr. Anish Shah would take over as MD & CEO from 2

Apr’21,

in turn becoming the 5

MD of MM over the last 40 years.

Dr. Shah’s priorities seem clearly set out for the next few years, which includes

(a) revisiting capital allocation in subsidiaries (over next 12 months), (b) funding

of other group businesses, and (c) evaluating segregation of auto and FES

business (over next 3-5 years).

We believe there are several low hanging fruits in the form of loss-making

non-core businesses (Aerospace, Global 2Ws, Retail etc.), which could be

divested or closed. The initial signs on capital allocation are positive as is

visible from the MM board’s decision against investing a further USD406m in

Ssangyong in Apr’20; this, despite giving an approval earlier in Feb’20.

MM has one of the highest exposures to rural markets (~65% of volumes),

which are expected to be less impacted by the on-going impact of the COVID-

19 pandemic. According to our estimates, rural markets should contribute

~62% to revenues, 81% to core PAT and ~70% to SOTP in FY22E.

We have slotted MM’s core business into three buckets viz. Tractors, Pick-up

UVs and Passenger UVs. Tractors and Pick-up UVs are on strong footing in

terms of outlook, MM’s competitive positioning as well as industry-level

consolidation. However, MM’s SUVs business is severely challenged and we do

not see any respite for MM in this category in the foreseeable future.

Best rural proxy with 2 of 3 core businesses on strong footing



680

600

520

440

Tractors primed for fastest recovery in Autos |Reforms to potentially drive

next phase of farm mechanization



The Tractor segment is seeing volume recovery since Dec’19, driven by

improvement in farm-level indicators such as output prices, lower input prices,

higher government spends in rural areas and unusually strong water reservoir

Jinesh Gandhi - Research analyst

(Jinesh@MotilalOswal.com); +91 22 6129 1524

Vipul Agrawal - Research analyst

(Vipul.Agrawal@MotilalOswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on

www.motilaloswal.com/Institutional-Equities,

Bloomberg, Thomson Reuters, Factset and S&P Capital.

3 September 2019

Mahindra and Mahindra



levels. Further, good Rabi crop and expected normal monsoons has further

improved the outlook for farm income.

The supply side getting back in shape post lifting of restrictions (expect

normalized production by Aug’20) also augurs well for the Tractor segment’s

volume recovery from Sep’20.

We do not expect any material change in either the competitive landscape or

MM’s positioning in this highly consolidated industry (top-4 player controlling

over 80% of the market). We estimate Tractor industry volumes to be flat in

FY21E (due to supply-side constraints) and grow 12-14% in FY22E, with MM also

growing in line.

Looking beyond the cyclical downturn, we believe fundamentals of the LCV

segment are strong. Also, LCVs should continue to benefit from the increasing

emergence of the ‘hub and spoke’ model. We estimate the LCV industry to

deliver 8-10% CAGR over the next 5 years.

MM enjoys market share of ~42.5% in the overall LCV segment and ~65% in the

2-3.5 ton LCV segment.

Under BS6, MM’s Pick-up business’ competitive positioning should improve v/s

SCVs/LCVs due to lower price inflation. While near-term volumes would be

impacted due to COVID-19 and BS6 transition, we estimate volume CAGR of

7.5% over FY20-22E.

MM’s positioning in LCVs to further strengthen under BS6



Competitive intensity in fast-growing SUV segment to stay high, MM

remains vulnerable



While MM is trying to catch up with competition on the products side, we see

limited visibility for MM to make a comeback. Over the next 12-18 months, the

company has several upgrades and new launches lined-up viz. (a) e-KUV100

(1HFY21), (b) new Thar (1HFY21), (c) new XUV500 (4QFY21), (d) new Scorpio

(1QFY22), and (e) e-XUV300 (mid-CY21).

We have not built in benefits of any imminent launches or material benefit on

product development from MM’s recent JV with Ford India. We estimate

passenger UV volumes to decline ~1% CAGR over FY20-23E.

Despite MM’s recent outperformance, valuations are still at substantial discount

to its 5-year average (which captures both pain point of deterioration in UV

market share and subsidiaries’ performance).

Implied Core P/E for MM is ~15.4x/10.6x FY21/22E Core EPS and 1x/1x Core

P/BV, which implies ~25% discount to 1SD below 5-year average P/E and ~30%

discount to 1SD below 5-year average P/B.

We are lowering our EPS for FY21/22E by ~22%/4% to factor in the supply- side

issues for Tractors and weaker volumes for Autos in FY21. We are now building

in volume growth of 0%/12% for Tractors, -20%/22% for LCVs and -17%/10% for

SUVs for FY21/22E.

Our Jun’22E-based SOTP TP is ~INR576/share – an upside of ~25%. At our TP,

implied Core P/E is ~13.6x (v/s 5-year average core P/E of ~15.9x and 10-year

average of ~14.3x). Maintain

Buy.

Valuation and view



2 June 2020

Mahindra and Mahindra

Management change – A generational shift underway

Who’s Dr. Anish Shah?

Prior to joining MM, Dr.

Shah was President and

CEO of GE Capital India,

where he played a key role

in many avenues, especially

in the turnaround of the

company’s SBI Card JV. In

his 14-year stint with GE

Capital, Dr. Shah held

leadership positions in the

US and other global

business units. Dr. Shah

holds a PhD in Corporate

Governance from Carnegie

Mellon’s Tepper School of

Business. He also has a

Master’s Degree from

Carnegie Mellon and an

MBA degree from IIM-

Ahmedabad.



After a gap of almost 24 years, MM would see a leadership change with both

Executive Chairman (Mr. Anand Mahindra) and MD and CEO (Dr. Pawan

Goenka) due for retirement in 2021. Dr. Anish Shah would take over as MD and

CEO from 2

Apr’21, in turn becoming the 5

MD of MM in the last 40 years.

Dr. Shah joined MM in Aug’14 as President, Group Special Projects; thereafter,

he took over as the company’s Group Strategy Head in Apr’15. In Apr’20, he

was appointed as Deputy MD and Group CFO. This makes Dr. Shah probably

the first ‘quasi-laterally’ hired MD in MM’s history, as his predecessors have

spent multiple decades in the group before taking over as MD.

The timing of this leadership transition could not have been more challenging;

MM is in midst of the perfect storm – highly challenging macros, record-low

market share in SUVs, technological changes/disruptions, deteriorating

performance of non-core subsidiaries (PAT of MM+MVML > Consol. PAT), etc.

Since taking over as Deputy MD and Group CFO, Dr. Shah has clearly set out his

priority for the next few years, which includes (a) revisiting capital allocation in

subsidiaries (over the next 12 months), (b) funding of other group businesses,

and (c) evaluating segregation of auto/FES business (over the next 3-5 years).

We believe there are several low-hanging fruits in the form of loss-making non-

core subsidiaries (Aerospace, Global 2Ws, Retails, etc.) that could be divested

or closed, which would immensely help reduce the drag on consol. profits.

Besides low-hanging fruits in non-core businesses, hard decisions are required

on under-performing and/or loss-making businesses in core areas like

Ssangyong, overseas subsidiaries in Autos and tractors, etc. Also, there is a

need to look at non-core businesses, which are not significant or do not have

the right to win in MM’s area of operations.

The initial signs on capital allocation are positive as is visible from the MM

board’s decision against investing a further USD406m in Ssangyong in Apr’20;

this, despite giving an approval earlier in Feb’20.

Exhibit 1: Dr. Anish Shah would take over as MD and CEO from Apr’21 – Dr. Shah is the 5 MD of MM in last 40 years

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 2: Dr. Anish Shah’s (new MD from Apr’21) clear set of priorities

Source: MOFSL

Exhibit 3: On aggregate basis, subsidiaries have been a drag on consol. PAT (INR b) and RoEs (%)

Adj. MM+MVML PAT

Adj. Cons. PAT

8.6

-2.3

-0.9

-1.2

-3.4

Profit contbn from subs

MM+MVML

Consol

-19.3

FY15

FY16

FY17

FY18

FY19

9MFY20

FY15

FY16

FY17

FY18

FY19

9MFY20

Source: Company, MOFSL

Exhibit 4: Classification of all relevant businesses in 5 buckets show scope for rationalization

Core

(profitable)

•Tractors

•Autos

•Pick-ups/LCV

•SUVs

•NBFC

Core

(loss making)

•Tractor exports

•Agri Implements

•Agri

•Auto Exports

•Ssangyong

Adjacencies

•Power back-up

•Used cars

•Auto Engg.

•Steel Processing

•Defence

Non-Core

(Self sustaining)

•IT

•Hospitality

•Real Estate

•Logistics

•Clean Power

Non-Core

(Loss making)

•2W - Jawa

(India)

•2W - Peugeot

(Global)

•Aerospace

•Retail

•AMC

•Boats

Source: MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 5: Analysis of key subsidiaries suggests several low-hanging fruits to reduce losses

INR Mn

Name of Subsidiary/JV/Associate

Aerospace

Retail

Clean Power

2Ws - Overseas

2Ws - Domestic

Defence

Hospitality

Logistics

Real Estate

Steel Processing

Agri

BFSI

MMFSL

Mahindra Rural Housing Finance Limited

Mahindra Insurance Brokers Limited

Mahindra Asset Management Company

Mahindra–BT Investment Company

(Mauritius)

Key to Color Coding

FY19

Gross Sales

1,641

29,001

333

3,382

22,389

39,132

14,400

19,985

11,422

PAT

-227

729

-181

169

773

812

1,518

909

-944

1,357 -3,880

FY18

Gross Sales

1,365

4,387

234

PAT

-395

-12

-633

-381

1,060 -3,700

10,888 -6,250

1,284 -3,071

105,481 18,415

88,098 15,571

13,840

3,234

281

2,505

715

-395

Core or Supplement to core

Non-Core but self sustaining

Non-Core & value destructive currently

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 6: Core Auto and FES business subsidiaries (excl. MVML) also have several hot spots that need addressing

INR Mn

Name of Subsidiary/JV/Associate

A] Autos Subsidiaries (Ex MVML)

Mahindra Heavy Engines Limited

Mahindra Trucks and Buses Limited

Mahindra North American Technical Center

Mahindra Electric Mobility Limited

Mahindra First Choice Wheels Ltd

Mahindra First Choice Services Limited

Ssangyong Motor Company

M&M South Africa (Proprietary)

Mahindra Vehicle Sales and Service Inc.

Zoomcar Inc

Mahindra Automotive North America Inc.

Automobili Pininfarina GmbH

Total Autos

B] Farm Equipment Subsidiaries

Swaraj Engines

Gromax Agri Equipment Limited

Erkunt Sanayi A.S.

Erkunt Traktor Sanayii A.S. #

Hisarlar Makina Sanayi ve Ticaret Anonim

Mitsubishi Mahindra Agricultural Machinery

Sampo Rosenlew Oy

Trringo.com Limited

Mahindra USA Inc.

Mahindra do Brasil Industrial Ltda

Mahindra Mexico S. de. R. L

Total FES

Key to Colour Codes

Core business

FY19

Gross Sales

10,792

2,003

3,494

2,513

2,280

1,136

226,000

6,236

3,370

838

258,663

1,477

5,787

3,434

2,517

23,181

532

342

37,289

PAT

526

-80

-530

-146

-355

-3,797

-218

-1,269

-263

-302

-1,009

-7,416

275

485

-468

-782

-363

-574

-77

-5,493

-259

-219

-7,463

FY18

Gross Sales

454

1,294

1,426

926

213,202

6,364

223,738

6,459

1,483

PAT

-907

-1,290

Business

Autos

Autos - Engineering

Autos (EV)

-319 Autos - Used car dealers

-404 Autos - Used car dealers

-5,484

-17

-258

-8,678

-732

-1,616

FES - Tractors

FES - Implements

Autos - Overseas

Autos - Car rentals

Autos - Overseas

37,376

474

288

46,079

224

-128

-41

-2,294

FES - Others

FES - Tractors USA

FES - Tractors

Strategic but loss making

Adjacent but loss making

Source: Company, MOFSL

Best proxy on rural – 2 of 3 core businesses on strong footing



In the Indian auto sector, MM has one of the highest exposures to rural

markets (~65% of volumes), which are expected to be less impacted by the on-

going impact of the COVID-19 pandemic. Also, MM is relatively better

positioned for faster recovery in rural markets due to (a) limited impact on

Tractor demand, and (b) its passenger UVs (Bolero, Scorpio, etc.) being highly

popular in rural areas.

According to our estimates, rural markets should contribute ~62% to revenues,

81% to core PAT and ~70% to SOTP in FY22E.

While MM’s strength in the Tractor business is highly appreciated by investors,

concerns around its Auto business (due to weakening position in SUVs) exist.

MM’s SUV segment challenges are garnering disproportionate mindshare of

investors, despite it contributing <30% to the top line and <10% to core PAT.

2 June 2020

Mahindra and Mahindra



We have slotted MM’s core business into three buckets viz. Tractors, Pick-up

UVs and Passenger UVs. Tractors and Pick-up UVs are on strong footing in

terms of outlook, MM’s competitive positioning as well as industry-level

consolidation. However, MM is severely challenged in the SUV segment and

we do not see any respite for MM in this category in the foreseeable future.

Exhibit 8: …with over 80% of core PAT attributable to rural

markets

Rural contribution (%, FY22E)

Exhibit 7: MM – one of the best rural proxies in large caps

(% of volumes)…

MSIL

HMCL

ESC

MSIL

HMCL

ESC

Revenue

PBIT

Core PAT

Source: Company, MOFSL

Source: Industry, MOFSL

Exhibit 9: Of the 3 core businesses, Tractors and LCVs (<3.5 tons) are on firm footing and contribute ~84% to core PAT

Dom. Mkt Sh (%)

Tractors

LCVs (<3.5T)

Revenue

Contribution (%)

PBIT Contribution PAT Contribution (%)

(%)

Source: Company, MOFSL

SUVs

Others

Tractors

LCVs (<3.5T)

SUVs

Tractors primed for fastest recovery in Autos |Reforms to

potentially drive next phase of farm mechanization



The Tractor segment is seeing volume recovery since Dec’19, driven by

improvement in farm-level indicators such as output prices, lower input prices,

higher government spends in rural areas and unusually strong water reservoir

levels. However, the COVID-19 related lockdown has put brakes on the

recovery due to supply-side disruption.

Further, good Rabi crop and expected normal monsoons has further improved

the outlook for farm income. Also, factors that impacted demand last year viz.

low/no subsidy for tractors in certain states and weakness in infra (10-15% of

tractor usage), are also showing initial signs of normalization. Thus, supply side

getting back in shape post lifting of restrictions (expect normalized production

by Aug’20) also augurs well for the Tractor segment’s volume recovery from

Sep’20.

2 June 2020

Mahindra and Mahindra



“Amendments to

the Essential Commodities

Act and reforms in

agricultural marketing and

risk mitigation through

predictable prices would

empower farmers,

strengthen agri-food

processing linkages, and

enable demand-driven

value-added agriculture.

The reforms would

encourage investment in

food processing, and

together with infrastructure

outlays, would contribute in

shaping a competitive agri-

value chain, reduce

wastage, and raise farmer

incomes,” said Mr.

Sanjiv

Puri, Chairman, ITC.



We do not expect any material change in either the competitive landscape or

MM’s positioning in this highly consolidated industry (top-4 player controlling

over 80% of the market). We estimate Tractor industry volumes to remain flat

in FY21E (due to supply-side constraints) and grow 12-14% in FY22E, with MM

also growing in line.

The recent next-round of reforms for the agricultural segment viz. (a)

deregulation of agri-commodities from the Essential Commodities Act, (b) ‘One

Nation, One Market’, and (c) allowing private participation, have the potential to

transform the Indian agriculture landscape.

While it’s too early to judge these initiatives, if implemented in the right spirit, it

could significantly incentivize farmers to invest in farms. Not only does it augur

well for reducing volatility in tractor volumes, but also it is a catalyst to drive

higher penetration of implements in India.

Globally, the implement business is estimated at ~66% of the overall farm

equipment industry, whereas in India it is ~15% of the farm equipment industry.

As non-tractor farm machinery usage evolves in India – from basic implements

to more advanced ones – we believe that MM would be its biggest beneficiary

due to (a) several global alliances in this segment, and (b) MM’s stronghold over

the Indian agriculture ecosystem. Over the next 3-5 years, the agri-implement

segment has scope to support growth of MM’s FES business.

Exhibit 10: Tractors volumes – outlook improving, but near-term to be impacted by

lockdown

MM Tractor Volumes ('000 units)

22.3

10.2

-4.9

-12.6 -8.7

23.1

21.5

12.0

3.4

-8.6

0.0

Gr (%)

19.5

214

FY11

235

FY12

224

FY13

268

FY14

234

FY15

214

FY16

263

FY17

320

FY18

330

FY19

302

FY20

302

338

FY21E FY22E

Source: Company, MOFSL

Exhibit 11: MM’s market share stable at 40-42% over a

decade…

MM's Dom. Mkt Sh (%)

41.4 42.0 41.4 40.2 40.6 40.0 41.3 41.7 42.1 40.2 41.2

Exhibit 12: …in a highly consolidated market with top-4

players controlling over 80% share

Others

CNH

5.2

3.8

9.6

Escorts

11.6

Sonalika

11.7

M&M

41.2

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Source: Industry, MOFSL

TAFE

16.9

Source: Industry, MOFSL

2 June 2020

Mahindra and Mahindra

The Farm Machinery (ex-tractors) segment is at a nascent stage in India considering the

fragmented farms and affordability issue. However, if the recently announced farm

reforms of ‘One Nation, One Market’ are executed in the right spirit, it has the potential to

unlock farm prosperity, and in turn, provide incentives to farmers to invest in their farms.

This should augur well for modernization of the non-tractor farm mechanization space,

thus, opening up huge opportunity for players like MM. Due to several global tie-ups in the

Farm Machinery space as well as robust presence in farm ecosystem, we believe that MM

should be a big beneficiary.

Exhibit 13: Indian farms are tractorized but not mechanized

so far…

Tractor

Farm Machinery

Tractors

Harvesting

Planting &

Fertilizer

Exhibit 14: …globally, implements play a big part in farm

mechanization

Global

India

M&M India

Source: Industry, MOFSL

Haying

Others Parts& Tillage

10 Attachment 6

Source: Industry, MOFSL

Exhibit 15: MM’s India farm machinery revenues have seen

strong growth on low base…

Farm Machinery (INR m)

3980

2790

2190

Exhibit 16: …considering low share of MM in farm

machinery segment

M&M Mkt Sh (%)

41.2

4.0

FY17

FY18

FY19

Source: Company, MOFSL

Tractor

Farm Machinery

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 17: MM has one of the strongest presence across farm value chains in India

Source: Company, MOFSL

MM’s positioning in LCVs to further strengthen under BS6



The LCV industry saw the first year of downcycle in FY20, after delivering ~19%

CAGR over FY16-19. The downcycle was led by weak macros, impact of

liquidity and increasing risk averseness of financiers and transition to BS6. This

situation would further worsen due to the impact of Coronavirus.

Looking beyond the cyclical downturn, we believe fundamentals of the LCV

segment are strong. Also, LCVs should continue benefiting from increasing

emergence of the ‘hub and spoke’ model. We estimate the LCV industry to

deliver 8-10% CAGR over the next 5 years.

MM enjoys market share of ~42.5% in the overall LCV segment and ~65% in the

2-3.5 ton LCV segment. Pick-up trucks offer versatility for the owner/operator as

it can operate with ease in varying conditions (hilly terrain, higher payload, etc.).

Under BS6, MM’s Pick-up business’ competitive positioning should improve v/s

SCVs/LCVs due to lower price inflation. Price increase in Pick-up Trucks would be

~10% whereas in SCVs (<2 tons and contributing 40% to LCV industry) it is

expected at 15-20%. While near-term volumes would be impacted due to

COVID-19 and BS6 transition, we estimate volume CAGR of 7.5% over FY20-22E.

2 June 2020

Mahindra and Mahindra

Exhibit 18: LCV segment is witnessing cyclical slowdown; should recover in FY22E

Total LCVs (Goods, '000 units)

29.5

20.8

7.9

-0.9

-13.3

-20.7

334

FY16

361

FY17

467

FY18

564

FY19

448

FY20

-20.0

358

FY21E

430

FY22E

20.0

Change (%)

337

FY15

Source: SIAM, MOFSL

Exhibit 19: 2-3.5 ton LCV segment has been gaining share, except for last 2 years of

downcycle, due to their versatility

<2 tons

2-3.5 tons

3.5-6 tons

6-7.5 tons

FY15

FY16

FY17

FY18

FY14

FY19

FY20

Source: SIAM, MOFSL

Exhibit 20: MM is market leader in LCVs (goods), particularly in 2-3.5 ton segment…

2-3.5 tons

73.3

63.9

39.7

43.6

69.1

47.0

65.8

47.0

Total LCVs (Goods)

61.9

43.5

62.9

41.4

65.3

42.6

FY14

FY15

FY16

FY17

FY18

FY19

FY20

Source: SIAM, MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 21: …LCV segment is highly consolidated with top-3

players enjoying 90% share

MSIL

4.9 Others

3.5

9.8

42.6

Exhibit 22: MM’s competitive positioning to further improve

in BS6

On-Road Price

(INR '000)

Tata Ace Gold

Tata Intra V10

AL Dost+

M&M Bolero

Maxi 1.2T

M&M Bolero

Pick up 1.7T

Payload

(Kgs)

750

1,000

1,475

1,200

1700

Diesel

BS4

495

600

680

675

800

BS6

570

670

770

743

880

Diff (%)

TTMT

39.3

Source: Industry, MOFSL

Source: SIAM, MOFSL

Competitive intensity in fast-growing SUV segment to stay high,

MM remains vulnerable



Over the last 5-7 years, MM has been playing catch-up in the fast growing SUV

segment, as the market has shifted from MM’s area of strength (large SUVs) to

the new segment of compact SUVs. More importantly, none of its launches in

the new segment have met with big success.

Hence, the passenger UV business of MM has seen continuous dilution in

market share (~19% market share of domestic UVs in FY20 v/s ~43% 5 years

back) due to substantial increase in competition as well as it lagging

competition in its product pipeline.

While MM is trying to catch up with competition on the products side, we see

limited visibility for MM to make a comeback. Over the next 12-18 months, the

company has several upgrades and new launches lined-up viz. (a) e-KUV100

(1HFY21), (b) new Thar (1HFY21), (c) new XUV500 (4QFY21), (d) new Scorpio

(1QFY22), and (e) e-XUV300 (mid-CY21).

We have not built in benefits of any imminent launches or any material benefit

on product development from MM’s recent JV with Ford India. We estimate

passenger UV volumes to decline ~1% CAGR over FY20-23E.

Exhibit 24: …however, MM’s UV volumes impacted by

increasing competitive intensity…

UV - M&M

7.5

20.0

0.1

MMs UVs ('000 units)

5.1

Growth (%)

10.0

0.6

Exhibit 23: UV segment volumes for industry in structural

uptrend…

UV - Industry

29.9

Dom. UVs ('000 units)

Growth (%)

21.0

5.0

6.3

2.1

-5.7

0.5

-10.0

-23.8

1,022

207

FY15

222

FY16

223

FY17

234

FY18

235

FY19

179

144

158

-20.0

552

FY15

587

FY16

762

FY17

922

FY18

941

FY19

946

851

FY20 FY21E FY22E

Source: Industry, MOFSL

FY20 FY21E FY22E

Source: Industry, MOFSL

2 June 2020

Mahindra and Mahindra

Exhibit 25: None of MM’s UV launches in last 5 years met with big success…

Product

TUV300

KUV100

Thar *

TUV300 Plus

Marazzo

XUV300

Month & Year of

launch

Sep-15

Jan-16

Jun-18

Aug-18

Jan-19

Segment

Compact SUV

Mini SUV

Compact SUV

Mid-size SUV

Mid-size MPV

Compact SUV

Avg. Monthly

Segment

Vols in FY20

Mkt Sh (%)

873

2.7

150

300 (1HFY20)

1,058

9.9

3,131

9.9

Source: Company, MOFSL

Exhibit 26: …resulting in sharp decline in UV market share to ~16% by 2HFY20

MM UV Mkt Sh (%)

41.7

37.5

37.9

29.2

25.4

25.0

22.2

16.1

FY14

FY15

FY16

FY17

FY18

FY19

1HFY20

2HFY20

MM's Rank in Uvs (#)

Source: Company, MOFSL

Exhibit 27: Upcoming launches in SUVs – unrelenting competitive intensity

OEM

Skoda

Nissan

Toyota

Tata Motors

M&M

Kia

M&M

Skoda

M&M

Model

Karoq Style

Magnite

Urban Curiser

Gravitas

e-KUV100

New Thar

Sonet

T-Roc

Hector Plus

New XUV500

I.D. Crozz

Taigun

e-XUV300

Vision IN

New Scorpio

Timeline

1HFY21

2HCY20

4QFY21

CY21

1QFY22

Segment

Mid-size SUV

Compact SUV

Mid-size SUV

e-SUV Compact

Compact SUV

Mid-size SUV

e-SUV

Compact SUV

e-SUV Compact

Compact SUV

Mid-size SUV

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Valuations: Risks adequately priced in; Change in approach to

capital allocation to be big re-rating catalyst



MM’s senior management is in midst of a generational shift, at a time when all

its key businesses are facing cyclical or structural challenges. While the cycle for

tractors should turn positive in the near term and for LCVs too in the not so

distant future, the new CEO would have to address two major issues – (a) arrest

and restore MM’s positioning in the fast growing SUV segment, and (b)

circumvent the drag of underperforming subsidiaries in the core/non-core

businesses.

MM’s stock has underperformed the NSE Auto Index over the last one year by

~9.6% due to (a) deteriorating market share in UVs, (b) weak outlook for

tractors, and (c) deteriorating performance of subsidiaries.

However, its recent outperformance to the NSE Auto Index (+5.6% in CY20

YTD) is partly led by improving outlook for tractors (in absolute and relative

basis to other Auto segments) and partly in the hope of a relook at its capital

allocation strategy.

However, despite the recent outperformance, MM’s valuations are still at

substantial discount to 5-year average (which captures both pain point of

deterioration in UV market share and subsidiaries performance). On Core P/E

basis (adjusting for value in subs post holding company discount), implied P/E

for MM is ~15.4x/10.6x FY21/22E Core EPS and 1x/1x Core P/BV. This

compares with 5-year average Core P/E of ~15.9x and Core P/B of ~1.9x, and

implies ~25% discount to 1SD below 5-year average P/E and ~30% discount to

1SD below 5-year average PB.

We believe that these valuations reflect the challenges in the Passenger UV

business as well as no major changes in capital allocation policy. Any positive

surprises in the Pick-up UV business, positive evolution of Ford India JV or

correction of capital allocation by the new CEO would act as re-rating triggers.

We are lowering our EPS for FY21/FY22E by ~22%/4% to factor in the supply-

side issues for Tractors and weaker volumes for Autos in FY21. We are now

building in volume growth of 0%/15% for tractors, -20%/22% for LCVs and -

17%/10% for SUVs for FY21/FY22E.

We value MM on SOTP basis valuing Tractors at ~15x Mar’22E EPS (at ~25%

premium to target multiple for ESC), Auto business at ~12.5x EPS (at ~50%

discount to target multiple for MSIL) and other businesses at ~10x EPS. Also,

we value listed subsidiaries at 40% HoldCo discount at CMP. Our Jun’22E based

SOTP TP is ~INR576/share – an upside of ~25%. At our TP, implied core P/E is

~13.6x (v/s 5-year average Core P/E of ~15.9x and 10-year average of ~14.3x).

Maintain

Buy.

2 June 2020

Mahindra and Mahindra

Exhibit 28: Revised estimates

INR b

Volumes ('000 units)

Net Sales

EBITDA (%, incl MVML)

Net Profit

EPS (INR)

EPS (INR, incl MVML)

Rev

683

416

12.4

21.7

FY21E

Old

745

454

13.5

27.8

Chg (%)

-8.4

-110bp

-22.0

-21.8

Rev

776

482

14.3

31.5

FY22E

Old

817

502

14.6

32.8

Chg (%)

-5.0

-4.1

-30bp

-3.9

Source: MOFSL

Exhibit 29: MM: Sum-of-the-parts (INR/share)

INR/sh

Tractors

Autos

Others

Value of Core Business

Value of subs post hold-co

- Tech Mahindra

- MMFSL

- Mah. Lifespaces

- Mah. Holidays

- SYMC

- Mah. Logistics

- Others

Fair Value (INR/sh)

Target P/E (x)

FY20E

271

109

430

127

557

FY21E

265

-8

304

127

432

FY22E

313

430

127

557

Source: MOFSL

Exhibit 30: MM’s Tractor business contributes ~56% to the SOTP value

Mkt value of subs

23%

Others

10%

Autos

11%

Tractors

56%

Source: MOFSL

Exhibit 31: M&M: Core P/E trend

Core P/E (x)

+1SD

Average

-1SD

Exhibit 32: M&M: Core P/B trend

Core P/B (x)

3.0

2.4

1.8

+1SD

Average

-1SD

1.2

0.6

Source: Bloomberg, MOFSL

2 June 2020

Mahindra and Mahindra

Operating metrics

Exhibit 33: Snapshot of Revenue model

000 units

Tractors

Growth (%)

% of total volumes

Autos

Pick-up/LCVs (<3.5t)

Growth (%)

SUVs

Growth (%)

3-Ws

Growth (%)

LCVs (>3.5t)

Growth (%)

M&HCVs (MTBL)

Growth (%)

Others & Exports

Growth (%)

Total Autos

Growth (%)

% of total volumes

Total volumes ('000 units)

Growth (%)

ASP (INR '000/Unit)

Growth (%)

Net Sales (INR b)

Growth (%)

FY16

214

-8.7

30.3

156

6.7

233

-41.4

-3.2

20.6

63.1

0.1

492

6.1

69.7

705

1.3

571

5.2

404

6.6

FY17

263

23.1

34.3

168

7.7

223

-4.4

-4.9

18.7

17.7

0.0

504

2.5

65.7

767

8.8

572

0.3

441

9.1

FY18

320

21.5

36.8

200

19.1

235

5.7

4.4

1.6

41.2

0.0

549

8.9

63.2

869

12.9

560

-2.1

487

10.5

FY19

330

3.4

35.2

229

14.9

237

0.9

22.1

8.6

14.3

0.0

609

10.8

64.8

939

8.1

571

1.9

536

10.1

FY20

302

-8.6

38.8

188

-18.1

179

-24.4

-6.8

-26.5

-53.0

0.0

476

-21.8

61.2

778

-17.2

580

1.5

451

-15.9

FY21E

302

0.0

44.2

150

-20.0

150

-16.6

-17.0

-35.0

0.0

381

-20.0

55.8

683

-12.2

608

5.0

416

-7.8

FY22E

338

12.0

43.6

183

22.0

165

10.1

8.0

20.0

0.0

438

15.0

56.4

776

13.7

621

2.0

482

15.9

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Story in charts

Exhibit 34: Trend in tractor volumes

Tractor volumes (units)

Growth (%)

Exhibit 35: New product launches to drive UV sales

UVs (incl pick-ups)

6.7

(8.9)

(7.2)

(20.0)

(23.0)

3.1

9.1

Growth (%)

16.0

9.5

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E FY22E

Source: Company, MOFSL

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E FY22E

Source: Company, MOFSL

Exhibit 36: Realization trend

Net realizations (INR/unit)

Exhibit 37: Trend in EBITDA margins

EBITDA (incl. MVML) (%)

14.8

14.2

13.5

12.5

14.3

13.7

13.1

12.4

13.5

Source: Company, MOFSL

Exhibit 38: Trend in return profile

RoE (%)

RoIC (%)

Exhibit 39: FCF to improve despite high capex plans (INR b)

CFO

44.2

34.1

(10.1)

54.2

56.5

43.9

34.9

46.0

23.1

26.6

5.0

(20.0)

(20.2) (21.6) (20.7)

(26.7) (30.3)

(35.0)

FY16

FY17

FY18

FY19 FY20E FY21E FY22E

Source: Company, MOFSL

22.8

25.5

72.7

Capex

56.9

40.0

42.8

FCF

60.5

33.9

FY14E FY15

Source: Company, MOFSL

2 June 2020

Mahindra and Mahindra

Financials and Valuations

Income Statement

Y/E March

Net Op. Income

Change (%)

Total Expenditure

EBITDA

Margins (%)

Margins (%, incl MVML)

Depreciation

EBIT

Deferred Revenue Exp.

Int. & Finance Charges

Other Income

Non-recurring Income

Profit before Tax

Tax

Eff. Tax Rate (%)

Adj. Profit after Tax

Change (%)

Adj. PAT (incl MVML)

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Deferred tax

Loans

Capital Employed

Application of Funds

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr.Assets, L & Adv.

Inventory

Sundry Debtors

Cash & Bank Bal.

Loans & Advances

Others

Current Liab. & Prov.

Sundry Creditors

Other Liabilities

Provisions

Net Current Assets

Application of Funds

E: MOFSL Estimates

2016

4,08,751

6.3

3,62,551

46,199

11.3

13.5

10,681

35,518

1,861

8,499

687

42,845

10,799

25.2

31,532

(1.2)

33,394

2017

4,40,535

7.8

3,95,388

45,147

10.2

13.1

15,264

29,883

1,596

13,455

5,485

47,226

10,792

22.9

32,203

2.1

35,133

2018

4,86,856

10.5

4,24,615

62,240

12.8

14.8

14,794

47,446

1,122

10,364

4,336

61,024

17,464

28.6

40,465

25.7

43,202

2019

5,36,140

10.1

4,69,744

66,396

12.4

14.2

18,604

47,792

1,134

16,890

-297

63,250

15,290

24.2

48,186

19.1

51,288

2020

450,837

-15.9

395,472

55,366

12.3

13.7

22,047

33,319

1,116

15,733

7,665

55,601

13,900

25.0

35,952

(25.4)

35,138

2021E

415,552

-7.8

370,028

45,524

11.0

12.4

24,904

20,620

1,116

12,388

31,891

7,973

25.0

23,918

(33.5)

25,900

(INR M)

2022E

481,805

15.9

420,174

61,631

12.8

14.3

27,434

34,197

1,071

13,511

46,637

11,659

25.0

34,978

46.2

37,590

(INR M)

2022E

5,958

400,983

406,941

6,341

22,803

436,086

322,320

196,689

125,631

15,000

252,321

176,772

34,502

31,680

41,177

9,900

59,513

133,637

79,201

41,236

13,200

43,135

436,086

2016

2,963

2,21,269

2,24,232

-54

18,436

2,42,614

1,39,386

63,426

75,960

15,622

1,35,474

1,23,286

26,879

25,116

22,870

17,103

31,317

1,07,728

66,780

30,300

10,648

15,558

2,42,614

2017

2,968

2,64,888

2,67,856

2,548

27,729

2,98,134

1,54,778

77,068

77,710

20,404

1,79,084

1,25,034

27,580

29,388

16,875

5,406

45,784

1,04,098

68,811

21,388

13,899

20,935

2,98,134

2018

5,950

2,96,991

3,02,941

2,772

28,644

3,34,357

1,82,295

1,03,700

78,594

31,287

2,05,830

1,58,457

27,017

31,730

28,937

10,182

60,591

1,39,811

86,034

38,485

15,292

18,646

3,34,357

-0

2019

5,958

3,36,135

3,42,093

6,341

24,803

3,73,237

2,23,122

1,22,304

1,00,818

24,198

2,20,160

1,81,795

38,393

39,463

37,317

7,110

59,513

1,53,734

96,782

41,236

15,716

28,061

3,73,237

-0

2020

5,958

365,919

371,877

6,341

24,803

403,022

272,320

144,352

127,968

10,000

230,321

163,295

32,284

33,184

32,335

5,978

59,513

128,562

74,110

41,236

13,216

34,733

403,022

2021E

5,958

377,922

383,880

6,341

24,803

415,024

287,320

169,256

118,064

15,000

240,321

162,570

29,757

27,324

37,437

8,539

59,513

120,931

68,310

41,236

11,385

41,639

415,024

2 June 2020

Mahindra and Mahindra

Financials and Valuations

Ratios

Y/E March

Basic (INR)

Fully diluted EPS

FD EPS (incl MVML)

Cash EPS

Book Value per Share

DPS

Payout (Incl. Div. Tax) %

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price to Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

ROIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors (Days)

Working Capital (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Int./Dividends Received

Depreciation & Amort.

Direct Taxes Paid

(Inc)/Dec in Wkg. Capital

Other Items

CF from Oper.Activity

Extra-ordinary Items

Other Items

CF after EO Items

(Inc)/Dec in FA+CWIP

Free Cash Flow

(Pur)/Sale of Invest.

CF from Inv. Activity

Change in Net Worth

Inc/(Dec) in Debt

Interest Paid

Dividends Paid

CF from Fin. Activity

Inc/(Dec) in Cash

Add: Beginning Balance

Closing Balance

E: MOFSL Estimates

2016

26.6

28.2

35.6

189.2

6.0

26.3

16.4

13.0

5.3

0.6

2.4

1.3

15.1

13.4

37.0

1.7

0.1

2017

27.1

29.6

40.0

225.6

6.5

12.3

15.6

11.6

5.5

0.6

2.0

1.4

13.1

12.4

30.7

1.5

0.1

2018

34.0

36.3

46.4

254.6

7.5

23.8

12.7

10.0

8.2

1.0

1.8

1.6

14.2

13.0

45.1

1.5

0.1

2019

40.4

43.0

56.1

287.1

8.5

24.5

10.7

8.3

7.7

0.9

1.6

1.8

14.9

13.9

45.3

1.4

0.1

2020

30.2

29.5

48.7

312.1

10.0

33.2

15.7

9.5

9.4

1.2

1.5

2.2

10.1

9.5

22.5

1.1

0.1

2021E

20.1

21.7

41.0

322.2

10.0

57.9

21.3

11.3

1.2

1.4

2.2

6.3

6.1

12.2

1.0

0.1

2022E

29.4

31.5

52.4

341.5

10.0

39.6

14.7

8.8

8.2

1.1

1.4

2.2

8.8

8.4

20.5

1.1

0.1

(INR M)

2022E

34,197

13,511

27,434

-11,659

2,244

65,727

-35,000

30,727

-12,000

-47,000

1,930

-2,000

-1,071

-12,084

-13,225

5,502

37,437

43,107

2016

41,612

-3,027

11,086

-9,279

14,393

54,785

687

55,473

-21,597

33,189

-13,865

-35,461

-9,500

-2,110

-8,461

-20,071

-747

20,648

20,069

2017

41,742

-9,800

15,264

-9,929

-508

332

37,100

5,485

42,585

-20,743

16,358

-7,076

-27,818

-1,742

-1,482

-8,391

-11,615

-2,333

22,870

20,705

2018

56,688

-8,084

14,794

-12,887

17,803

1,957

70,271

-26,688

43,583

-24,416

-51,104

592

-1,695

-9,230

-10,333

8,834

16,875

25,876

2019

63,547

-13,184

18,604

-14,341

-5,060

-327

49,239

-30,316

18,923

4,829

-25,487

-3,725

-1,710

-10,117

-15,552

8,199

28,937

37,137

2020

33,319

15,733

22,047

-13,900

-11,653

45,546

7,665

53,211

-35,000

10,546

-10,160

-45,160

1,930

-1,116

-12,084

-11,270

-10,884

37,317

26,600

2021E

20,620

12,388

24,904

-7,973

-1,804

48,134

-20,000

28,134

-10,000

-30,000

1,930

-1,116

-12,084

-11,270

6,864

32,335

39,367

2 June 2020

Mahindra and Mahindra

NOTES

2 June 2020

Mahindra and Mahindra

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

2 June 2020

Mahindra and Mahindra

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

2 June 2020