‘Driving financial control will be our top priority’

Nandana James / Thomas K Thomas Mumbai | Updated on April 04, 2021

In a wide-ranging interview with BusinessLine, Anish Shah talks about what is in store for M&M with him at the helm

Six years after joining Mahindra & Mahindra as the Group President-Strategy, Anish Shah has now become the successor to Anand Mahindra. In November, when Mahindra Group’s Chairman Anand Mahindra transitions to the role of Non-Executive Chairman, Shah will become the first professional MD and CEO in the history of the Mahindra Group to have complete oversight of and responsibility for the Mahindra Group businesses. In a wide-ranging interview with BusinessLine, Shah talks about what is in store for M&M with him at the helm. Excerpts:

How would your leadership style be different when it comes to building up the organisation, its culture, and people?

In all honesty, if I can even model a small percent of how Anand leads, I will be very successful. It is not going to change a lot from that, because that’s embedded in our culture -- the empowerment, the importance of collaboration, the importance of being transparent and authentic in what we do. The importance of being a custodian for the Mahindra brand; all of those things will continue as they are. Where I see some change is in fact, going back to where we were in the past on financial control and discipline. I think we deviated from that in the last few years.

So are you telling group companies now that fresh investments will only be aimed at entities driving growth?

Yes, our companies will get capital only if there is a strong value proposition, a strong right to win, the ability to execute, and therefore, the ability to meet certain financial milestones that provide the right set of returns for our investors. So it’s a combination of growth and ROE.

What’s your strategy going forward?

There are really three parts to the agenda. The first part is innovation with regard to auto, farm, Mahindra Finance, and Tech Mahindra. In auto, electric vehicles are going to be a big part of it. In the farm businesses, it’s also about farm machinery. On Mahindra Finance, it’s about creating a strong digital business. And Tech Mahindra has already embarked on a transformation journey started a couple of years ago, and it’s fairly well positioned today. So those are the four core businesses.

The second part of the growth story is around the 10 growth gems that we have identified, plus our mid-sized listed entities, which are Holidays, Lifespaces, and Logistics. The 10 growth gems have a combined revenue of Rs 10,000 crore, many of them are profitable and generating cash today, and are well-positioned to scale.

The third part is establishing new-age platforms. And what I mean by that is platforms that can really disrupt industries. We saw the example of that with FirstCry, which is now valued at $2 billion. We have a smaller stake there now, but it’s a value creation story for our shareholders.

Will you bring all your new-age digital offerings under a single platform?

Our approach is to play in ecosystems and create platforms for those ecosystems. We’re not sure whether a platform across the board is going to work or not. We would look at a multitude of things. We are going to leverage technology to create a quantum jump in terms of how we serve our customers. However, at this point, we are not looking at too many new areas.

Healthcare is one area we have been exploring for some time and so is insurance. Beyond these two, we feel that our ability to scale up the existing businesses today is far higher. We have a good set of businesses across industries. The primary focus is on scaling these up rather than new areas for growth.

Which ones would be the first to be listed and what’s the timeframe that you’re looking at?

I would say that the first set of companies will be in the 2-5 year timeframe. Rural housing is clearly a candidate for that. And others will become a candidate ... based on how they grow and how they scale up over the next two years. Because we need to get to a certain size before we get to IPO. So our focus right now is on the scaling of the businesses.

Do you plan to stay invested in areas like real estate and Mahindra Marine?

We’ve done a lot of exits this year. And I would say that our exits are behind us. Where we are today, we feel very comfortable that we have the ability to scale up our businesses. Mahindra Marine is not just into luxury boats, but also boats for the defence sector. It’s a company that I would say is much smaller today, but with a certain inflection point -- which would have to be an external stimulus -- it would have the potential to grow significantly. It is not draining cash.

The approach that we have is if a company does not require cash, is reasonably profitable and has reasonable returns, it’s fine as an entrepreneur to be a smaller company today and get an inflection point and grow much bigger. This is the approach we’re taking: We will have large pillars, we will have mid-sized businesses that we can scale up, and then we may have some smaller businesses that have the potential to grow. But they have to be profitable. The capital allocation discipline has to be there.

If they start burning cash, then we need to start looking at it a lot more closely and ask does it really make sense.

What is your vision for Mahindra in the automobile sector?

We have seen over time that all our launches, which are part of what we call our core, which is really a true to SUV (focus), have done very well. Anything that is outside our core has not done as well.

If we see the Marazzo, which is the MPV, or the KUV which is a small SUV, they have not done well. And we have got validation of this, again, with the launch of the Thar. We have two more launches coming up in our core and we are looking forward to those as well.

Where do you see Mahindra playing in the fintech services space?

We have set up a separate vertical or business unit that is focused on digital-only. And we have got one of our top leaders going in to run that. He had actually come in to run partnerships and alliances; he came in from Goldman Sachs. And we are building a very strong team in that space. So that will look at positioning Mahindra Finance much better in the fintech space.

Would you continue to focus on international markets?

We will have to be global because of two reasons. One is technology. In many of our industries, there is value in getting technology from other markets.

If we take our farm business as an example, the acquisitions we made in Japan, Finland and Turkey, have helped us tremendously in terms of technology. If you look at farm machinery, it has a huge play in India.

We have the technology now for implements, and we are customising that for India.So, we will continue to be global-- the only difference is that the fiscal discipline will be far higher than what it was.

How do you see growth opportunities in the defense sector?

So we have a small defence business today; it is profitable. And we don’t need to deploy cash from auto and farm into defence. And so we are positioned well from that standpoint. Our focus in defence is really more around security. So we will grow as orders come in - not put in a lot more cash, put in a lot of investment and then wait for the orders.

What are your targets for the first 100 days?

First, focus on growth. Second, managing the change in terms of the culture and our focus on our purpose, which is really what the strength of the organisation is. Third, on communication. Because typically we see that in a change, that anxiety drives a different set of things often and different messages are sent out. So, there will be very strong communication through that. And essentially building the team in terms of building strong working relations with the team.

Published on April 04, 2021

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