Stellar show by Mahindra arms
The $20.7 billion Mahindra group, which until a few years ago appeared to be spreading itself thin by getting into newer businesses, is focusing on consolidation, scaling up and turning around underperforming businesses, which is evident from the improvement in performance of Mahindra & Mahindra (M&M) subsidiaries.
Revenue of M&M's 134 subsidiaries grew at a 30 per cent compounded annual growth rate over the past two year, with profit at the net level in both years from a loss in 201516. Had it not been for Korean subsidiary SsangYong Motor's loss of ~5.48 billion if FY18, the cumulative bottom line would have been much higher. The Seoul-based company had made a profit of ~2.31 billion in FY17. "There has been a phenomenal improvement in the performance," said G Chokkalingam, CEO, Equinomics Research & Advisory.
Anish Shah, president, strategy, Mahindra Group, told Business Standard, pointed out that investor concerns regarding the group "spreading itself thin" have disappeared in the past few years. "The reason is that few of the businesses that were bleeding have been taken care of," he said citing instances of exits in two-wheelers and retail. Mahindra sold Babyoye to baby product seller Firstcry for ~3.62 billion in October 2017. Unable to gain a toehold in the competitive two-wheeler market, the Mumbai-headquartered firm quit the mass market in September 2017 after merging Mahindra Two Wheelers with the parent company in 2016. It had entered the segment in 2008 with the acquisition of now defunct, Kinetic Motors.
Driven by strong performance of M&M, that houses the automotive and farm equipment businesses, the combined market capitalisation of listed Mahindra firms such as M&M, EPC Industries, M&M Financial Services, Mahindra Holiday, Mahindra Lifespaces, and Mahindra Logistics, has risen to ~1.3 trillion at the end of 2018 fiscal year, up from ~944 billion at the end of 2016 fiscal year.
According to analysts, while concerns of excessive diversification may ebb, the group needs to do more.