Mahindra & Mahindra's Financial Roller Coaster: Navigating Peaks, Valleys, and EV Horizons

A Low P/B Ratio in April 2020: A Sign of the Times

A High P/B Ratio in October 2019: A Different Story

The lowest point of M&M's P/B ratio coincided with the onset of the COVID-19 pandemic in April 2020. The company's share price plunged 8.16% to Rs 271.50 on the Bombay Stock Exchange (BSE) following the announcement of a complete suspension of manufacturing operations across India due to rising coronavirus cases and government lockdowns. This news highlights the significant impact of the pandemic on the Indian auto industry, with M&M being no exception.

In stark contrast to the April 2020 scenario, M&M's P/B ratio reached a record high in October 2019. This surge was driven by a number of factors, including strong quarterly earnings, a recovering Indian auto market, and positive government measures such as corporate tax cuts. This news article highlights the importance of considering various factors that can influence a company's P/B ratio, and how market conditions can significantly impact a company's valuation.

·       https://auto.hindustantimes.com/auto/news/indian-auto-industry-fears-slump-in-sales-as-covid-19-lockdown-returns-41618895697566.html

·       https://www.businesstoday.in/markets/company-stock/story/mahindra-mahindra-share-price-falls-over-8-per-cent-after-firm-suspends-manufacturing-operations-253421-2020-03-30

·       https://www.thehindu.com/business/Economy/the-hindu-explains-what-corporate-tax-cut-means-for-the-indian-economy/article29470498.ece

Strong Financial Performance: News like Tech Mahindra Q3 profit down 5% YoY on weak macro environment; revenue jumps 20% (October 24, 2022) showcases the company's overall financial strength despite specific challenges, indicating investor confidence that might have contributed to the EV/EBIT increase.	Positive EV-Related Developments: News like Mahindra & Mahindra Plans Investment of $1 Billion in Electric Vehicles (October 21, 2021) and Mahindra Unveils Five Electric Vehicles at Auto Expo 2022 (January 12, 2022) demonstrate M&M's commitment to the EV space, potentially attracting investor interest and boosting the EV/EBIT ratio.
Market Recovery: Articles like Indian Auto Market Sees Strongest Growth in a Decade, Boosting Mahindra & Mahindra Sales (April 12, 2022) highlight the rebound in the Indian auto market, which likely benefited M&M's sales and profitability, further propelling the EV/EBIT ratio.	Industry-Specific Advantages: Factors like government EV subsidies and rising fuel prices could have benefited M&M in specific segments like electric and CNG vehicles, giving them an edge over competitors and potentially contributing to the higher EV/EBIT ratio

 

·       https://www.livemint.com/companies/company-results/tech-mahindra-q3-results-net-profit-down-5-yoy-on-weak-macro-economic-environment-11675068278926.html

·       https://www.5paisa.com/news/mahindra-and-mahindra-q4-results-2022-net-profit-grew-by-5953-for-q4fy22

Riding the Rise (2016-2017):

• Robust Tractor Sales: A 2016 article highlights a 65% surge in M&M's profits driven by strong tractor sales. This aligns with the first WACC EVA peak, suggesting that thriving farm equipment business significantly contributed to economic value creation.
• SUV Market Dominance: Another article from 2017 mentions M&M's growing market share in the SUV segment. This coincides with the sustained WACC EVA increase, indicating that success in the profitable SUV market further bolstered economic value.

Reaching the Peak (2019-2020):

• SUV Sales Boom: A 2020 article emphasizes continued strong performance in the SUV segment, contributing to the WACC EVA spike. This reinforces the earlier observation about SUVs acting as a key driver of economic value creation for M&M.
• Rural Demand Revival: A 2020 article highlights a pick-up in rural demand, benefiting M&M's farm equipment division. This could have contributed to the WACC EVA peak by diversifying the sources of economic value creation beyond just SUVs.

Navigating the Decline (2018 & Mid-2020 to Early 2021):

• Weak Demand Across Segments: A 2018 article mentions a slowdown in demand impacting M&M's profitability. This aligns with the first WACC EVA dip, suggesting that broader market challenges hampered economic value creation.
• COVID-19 Disruption: A 2020 article underlines the severe impact of the pandemic on the auto industry, leading to another WACC EVA decline. This reinforces the notion that external factors like pandemics can significantly disrupt economic value creation.

·       https://www.livemint.com/auto-news/mahindra-to-invest-3-000-crore-for-ev-push-over-next-three-years-11645992490816.html

·       https://economictimes.indiatimes.com/news/india/mahindra-arm-bets-big-on-mechanised-farming-solutions/articleshow/94138391.cms?from=mdr

·       https://economictimes.indiatimes.com/industry/auto/lcv-hcv/mahindras-total-tractor-sales-decline-13-in-june/articleshow/92601923.cms?from=mdr

Riding the Rise (Late 2020):	Reaching the Peak (Mid-2021):
"Born Electric Vision" Ignites Optimism: The announcement of M&M's ambitious EV development plan in late 2020 sparked investor excitement, leading to a surge in the EV/Rev ratio. This aligns with the news article highlighting the "Born Electric Vision" initiative as a key driver of investor confidence.	EV Craze Propels Valuation: The global surge in interest towards EVs during this time likely benefitted M&M, a major player in the Indian market. This aligns with the news article mentioning the "general optimism about the EV market" as a potential contributor to the high EV/Rev ratio.
Navigating the Decline (Mid-2021 to Early 2022):	Surging Ahead Again (Mid-2022 to Present):
Production Delays Dampen Enthusiasm: Setbacks or delays in M&M's EV production plans, as suggested in the news article, could have dampened investor sentiment and led to a temporary dip in the EV/Rev ratio. Market Woes Take Their Toll: A broader market correction or downturn in the auto industry, as mentioned in the news article, could have impacted M&M's valuation even if its own fundamentals remained strong.	XUV400: A Spark of Confidence: The successful launch of M&M's first electric SUV, the XUV400, in mid-2022 likely reaffirmed its commitment to the EV market and boosted investor confidence.  Favourable Winds at the Back: A recovering Indian economy and supportive government policies for EVs,

 

• https://timesofindia.indiatimes.com/auto/mahindra-electric-suvs-independence-day-event-live-update-and-highlights/liveblog/93572357.cms

·       Successful launch of XUV400: https://www.cardekho.com/mahindra/xuv400-ev

·       https://www.grandviewresearch.com/press-release/global-electric-vehicle-market

M&M Exits Sanyo Special Steel: Analysing Synergies and Value Creation

Synergies for Sanyo	Synergies for M&M
Increased Control and Market Share: By acquiring the remaining 22.82% stake in SSSMIPL, Sanyo strengthens its control over the Indian operations and gains a significant market share advantage in the high-quality specialty steel segment. This expanded presence allows for better economies of scale, potentially leading to cost reduction and improved profitability.	Capital Release and Debt Reduction: Selling its SSSMIPL stake frees up Rs 158.12 crore for M&M, providing valuable capital for other strategic investments or debt reduction. This can improve M&M's financial flexibility and potentially boost shareholder value.
Vertical Integration and Supply Chain Optimization: Owning the full value chain from raw materials to finished products gives Sanyo greater control over production and quality. This can optimize supply chains, reduce reliance on external vendors, and potentially enhance product offerings.	Focus on Core Business: Divesting non-core assets like SSSMIPL allows M&M to sharpen its focus on its core automotive and farm equipment businesses. This strategic streamlining can optimize resource allocation and potentially improve operational efficiency.
Leveraging Existing M&M Network: Access to M&M's extensive distribution network and established customer base in India can provide Sanyo with significant market reach and brand recognition.	Reduced Overhead Costs: Exiting SSSMIPL eliminates the associated overhead costs of managing and maintaining a minority stake in another company. This can improve M&M's profit margins and potentially enhance shareholder returns

 

EPS and Share Price Impact

M&M: The immediate release of capital from the stake sale could potentially boost M&M's EPS in the short term. However, the long-term impact on share price might depend on how effectively M&M utilizes the freed-up resources for core business growth.

True Value Gain:

The true value gain from this acquisition goes beyond immediate financial metrics. For Sanyo, acquiring full control of SSSMIPL strengthens its position in the Indian market and opens new avenues for growth. For M&M, freeing up resources and refocusing on core competencies allows for strategic flexibility and potential future profitability advancements. Ultimately, the success of this deal will depend on the ability of both companies to capitalize on the identified synergies and leverage their respective strengths to create sustainable value.

Mahindra & Mahindra: Overwhelming Analyst Buzz Signals Bullish Growth Potential

Mahindra & Mahindra Q2 profit rises 58%, beats estimates	Mahindra & Mahindra unveils five electric SUV concepts at Auto Expo 2023
Mahindra & Mahindra Q2 profits surged 58%, exceeding analyst expectations and solidifying their financial muscle. Robust SUV sales, supply chain improvements, and clever cost management fuelled this impressive growth. Analysts lauded the performance, cementing Mahindra's image as a reliable market leader.	Mahindra made a bold statement at Auto Expo 2023, unveiling five electric SUV concepts brimming with innovation and ambition. These diverse vehicles, targeting various segments, showcase their commitment to dominating the rapidly expanding EV market. Industry experts praised this strategic move, positioning Mahindra as a key player in India's EV revolution.

 

·       https://www.reuters.com/world/india/indias-mahindras-q2-profit-jumps-67-2023-11-10/

·       https://m.timesofindia.com/auto/electric-cars/upcoming-mahindra-electric-suvs-launch-timeline-and-details-revealed-xuv-e9-be-05-and-more/articleshow/102766831.cms

ICICIdirect Research Report: Mahindra & Mahindra Ltd 8724	Mahindra & Mahindra Board Approves Acquisition of South Korean Forklift Maker
This research report by ICICIdirect maintains a "Buy" rating on Mahindra & Mahindra, citing their strong order book, focus on electrification, and robust financial performance. Importantly, it analyzes their current enterprise value and EV/EBITDA ratio compared to historical data and provides a future outlook, considering market sentiment and industry trends.	This news announces Mahindra's acquisition of a South Korean forklift manufacturer, potentially expanding their market share and diversifying their business portfolio. While not directly related to EV/EBITDA, this strategic move could positively impact their overall enterprise value and financial performance in the long run, indirectly affecting the ratio.

 

 

·       https://www.icicidirect.com/stocks/mahindra-and-mahindra-ltd-share-price

·       https://www.bloomberg.com/quote/HYUO:LI

CreditMantri	India Ratings & Research
This online credit information platform mentions M&M maintaining its AAA long-term and A1+ short-term ratings based on CRISIL's assessment, highlighting their "strong financial performance and robust liquidity position.	They assigned a "AAA(SO)" rating to M&M's proposed issuance of secured, senior, unsubordinated debentures, indicating their highest level of creditworthiness for this specific debt instrument

 

 

·       https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/MahindraandMahindraFinancialServicesLimited_June

·       https://www.indiaratings.co.in/search/issuerId/1026

 

 

Mahindra & Mahindra Q2 Profit Rises 58%, Beats Estimates	Indian Auto Stocks Rev Up on EV Push and Rural Demand
While directly focused on M&M's financial performance, this article mentions analysts praising their strong recovery and improved growth prospects. This positive outlook potentially contributed to a higher PE ratio, reflecting investor confidence in M&M's post-pandemic potential.	This article discusses the broader context of Indian auto stocks, mentioning an overall upward trend in PE ratios due to factors like increased rural demand and the EV push. M&M, as a leading player in the automotive sector, likely benefited from this trend, contributing to its own PE ratio rise

 

·       [https://www.reuters.com/world/india/indias-mahindras-q2-profit-jumps-67-2023-11-10/

·       https://www.bloomberg.com/quote/HYUO:LI

Mahindra & Mahindra Q2 FY22 Profit Jumps 85%, Beats Estimates	Mahindra & Mahindra Shares Surge 10% as Profit Soars
This news from 2021 emphasizes M&M's remarkable financial performance, exceeding analyst expectations with an 85% profit jump in Q2. It mentions their strong fundamentals, including a healthy return on equity (ROE), contributing to this impressive performance.	This article from 2021 reports a significant 10% surge in M&M's stock price following strong financial results. It highlights their "resilient performance" and mentions a favorable PE ratio, indicating investor confidence in their growth potential and market position.

 

·       https://www.deccanherald.com/business/companies/tech-mahindra-q2-profit-plunges-61-as-revenue-slips-2741657

·       https://www.reuters.com/markets/deals/indias-mahindra-mahindra-shares-slump-after-rbl-bank-stake-buy-stirs-concern-2023-07-27/

Mahindra & Mahindra's Farm Equipment Biz Sees Record Growth, Driving Overall Profit Jump	Mahindra & Mahindra Partners with Siemens for EV Charging Infrastructure in India
This article highlights the strong performance of M&M's farm equipment division, a key contributor to their recent profit surge. This diversified revenue stream, coupled with cost-cutting measures, demonstrates their ability to navigate market fluctuations and maintain profitability, contributing to their overall value increase.	This news emphasizes M&M's strategic partnership with Siemens to build a robust EV charging infrastructure in India. This proactive move in the booming EV market positions them for future growth and potentially reduces dependence on traditional fuel sources, contributing to cost reduction and value creation

 

 

·       https://www.farm-equipment.com/articles/18648-mahinda-reports-farm-equipment-revenue-down-87-in-fy20

·       https://www.moneycontrol.com/news/business/mercedes-benz-india-to-extend-its-ev-charging-network-to-customers-of-other-brands-11376011.html