Mahindra to list 10 group cos, sell loss-making units

Mahindra and Mahindra Ltd (M&M) is crafting plans to take 10 of its most promising units public in the next 5-7 years as the automobiles-to-software conglomerate aims to unlock value in these so-called “gems” by bringing in new investors.

M&M has identified the 10 companies, across sectors such as mobility, clean energy, rural, financial services, infrastructure and technology, to drive the future growth of the group, Anish Shah, group chief financial officer and deputy managing director at M&M, said in an interview.

Shah will succeed the current managing director and chief executive officer Pawan Goenka in April.

The 10 units identified by M&M include cleantech firm Mahindra Susten, diesel generator maker Mahindra Powerol, electrical steel processor Mahindra Accelo and supply-chain consultant Bristlecone.

Classic Legends Pvt. Ltd, the maker of Jawa Motorcycles; Mahindra Electric Mobility, the maker of the electric vehicles; and used-car seller First Choice Wheels are also among the 10 companies that will sell shares to the public for the first time.

“We would expect 2-3 businesses to IPO in the next 2-3 years; some will go public in 3-5 years and others in 5-7 years,” Shah said.

These 10 gems were identified as part of M&M’s strategic plan to ensure 18% return on equity (RoE) across all business units in the mid-term, he said. To achieve the target, the company is to sell loss-making units including SsangYong Motor Co., the US-based electric bike startup GenZe and Australia-based small aircraft maker GippsAero Pty Ltd.

“While their (10 gems) contribution to M&M’s overall revenues is low, currently, their cumulative revenues are more than ₹10,000 crore, which is not a small amount. So, these are all entities that have a reasonable size as of today. This is in addition to the fact that they are doing well in their respective industries,” Shah said. “They are positioned well; they have shown a strong ability to execute and deliver profits, and many of them are profitable and are generating cash. Many of them will not require more cash from the parent to grow.”

Shah said that the company is scouting for investors in its used-car business to capitalize on the demand momentum for pre-owned cars.

“In the aftermarket business, which is used cars, we have to look at potentially getting an investor for that business and look at adding a much greater front end to it,” Shah said, adding that a stronger consumer connect would allow the used car business to grow faster.

Similarly, M&M sees promise in steel processor Mahindra Accelo as the central government is likely to introduce the much-awaited vehicle scrappage policy soon.

“Accelo will have its inflection point from the auto recycling or the vehicle scrappage policy when the government comes out with it. Whenever that comes out, we are ready to put 25 plants across the country. That will help the company grow rapidly,” Shah said.

Shah is also upbeat about M&M’s supply chain business.

“We feel that Bristlecone is poised to grow very significantly. We have a number of Fortune 500 companies as customers. and we are effectively looking at a 10X growth in the next four-to-five years,” he said.

Besides reducing cash burn and ensuring proper capital allocation across group companies, putting the 10 identified business units on a growth path is a top priority for Shah.