GST cut framing peaked Q2-Q3 then faded to 3 mentions by Q4.

On the electric vehicle side - focusing on mix and margins. As we know, when we started, the EV has made a very strong mix. As time is passing by, how do you see that mix changing and will it have an impact on margins? Secondly, on margins from our understanding generally we see that electric vehicles tend to have lower operating leverage than ICE vehicles. Could you do some breakdown into gross margins and variable margins for EVs or fixed cost so that we can build that trajectory about what are the key milestones to track on EVs in terms of margin improvement?

Yeah. Thanks, Binay. So, on the mix to give you an insight, the mix that we have on current deliveries, sorry on current bookings is still very skewed to the top end, which is pack 3 more than 75%. We believe that the mix will start changing when we put out display and test drive vehicles or pack 2 and pack 1. While inquiries are good on Pack 1 and Pack 2, they don't get converted right now into bookings because people do want to see the vehicles before they book. So, we will have to start getting at least 25%-30% of our volumes from Pack 2 and Pack 1. There is a very large segment of people who will want 79 kWh in lower packs. So, we will have to re-variant, and create some new variants which are 79 kWh which with lesser other tech, so that consumers get the 450 km, 500 km, 500 km plus range, which we are promising. On operating leverage, firstly the benefit because they're in the same plant in Chakan, there is an automatic operating leverage benefit that comes out of being in the same plant. The fixed costs sitting in the MEAL organization are very limited, very, very low manpower there. It's mainly the sales teams. All manufacturing fixed costs are sitting in what you saw as the conversion cost.

Just to sort of understand then what should we try to sort of build a margin rising from here on? Will it be localization then or will it be you know pricing or more scale like how to think about that?

So, the biggest variable I think will be the mix of packs and that honestly, we have to see how that plays out. So, on the one hand, we do think that the mix has to move to Pack 2 and Pack 1, otherwise we are not going to get volumes are only Pack 3, but you never know. The sell prices are indexed, so you know any benefit that is happening out of sell prices being moderated downward around the world, which is what is happening does translate back to us. So, we are indexed on that and that's an important factor from a material cost. I don't think the fixed cost is going to be a big variable in this equation for the reason that I told you because it's all within the Chakan plant. So, I would think that two key things to track will be the sell price movement around the world, which will come in with the one quarter lag and the mix. Right now, unless the other Packs pick up, we would be wary about taking a price increase in hurry. We will take some price increases soon, but nothing planned immediately.

Just a follow up on the margins for EVs, are all the cost capitalized, depreciation etc. are fully factored in?

Depreciation on the two products that we've launched are fully captured in now in the quarter. Yeah, starting fourth quarter, yeah, starting fourth quarter.

Okay, and just as the volumes rise right from here, you know, what impact does it do to bring on the cost per unit, is there economy of scale benefits also that we should expect?

I think Kapil maybe, Anish, answered that. I think the biggest benefit you'll see in absorption of depreciation that's the biggest benefit that the volume scale up you will know the impact because full depreciation happening upfront. It's not being, so we are fully depreciating the programs as we are launching them. We are capitalizing it, so the depreciation effect is fully in for the products you launch. So, there are cost reduction programs underway on both the products that we've launched like we do in any ICE products. So, that will have a positive impact as well.

Okay. And just one question is overall, you know on demand side for the industry we hear typically you know industry body as well as some of the other leading OEM's talking about very low growth this year, and we're talking about mid to high teens kind of growth. So, just you know, how are you thinking about that from M&M's perspective, not only for next year, but when I see the capacity expansion plan, I see that capacity is probably growing at somewhere around 15% CAGR as well for next few years. So, if you could give some insights on how do you see or where do you see that demand coming from?

Yeah. So, Kapil, I wouldn't read capacity expansion one-on-one with growth, and the reason I'm saying that is there are some products out of the new products that are going to come which will replace some of the existing products. So, you know it's not that all new capacity will be incremental by way of new volume addition. That being said, you know we do see that India is at a very early stage of inflection point on vehicle penetration. You know, vehicle penetration in India still in the region of 10%-12% way below what any international market is. So, for an economy of our size and scale and especially with road infrastructure building, our view is that vehicle penetration in India will move up significantly from here and we should be well poised to leverage that growth story. So, I think we are very optimistic about the way the market is growing, but I wouldn't necessarily add what you see as the capacity number and equate that to a volume number.

Sure, and for the current year, what are your thoughts like you know, are you expecting the ICE portfolio also to keep growing and is it that SUV's are growing much faster and that's why you are expecting much higher growth than the industry also? Sorry, just one more addition, like if you can give some color, are you seeing cannibalization between EVs and ICE as well?

+You know, surprisingly not. We were actually expecting more cannibalization than what we are seeing at the moment. It's much lesser than what we would have expected. So, it's a very low level of cannibalization at this point of time. We have, at least in the first way, many customers were buying the electric were non-Mahindra owners. The reason we are optimistic on growth is for the full year is 2 things. Thar Roxx was not there for six months of last year. We will have a 12-month volume this year. 3XO was not there for first two months, so you have for 12 months of 3XO whereas your 10 months or 3XO last year and neither of these were replacement products. So, when we did not have 3XO, so we did not sell 300 in that period of time either because we have phased it out. So, these are two factors that you have to keep in when you are thinking about how we think about growth, and because the EV's are getting in a completely different target group, we believe that a lot of the EV volume will be additional incremental without cannibalization.

On the Farm, you have delivered a strong farm margin in a seasonally weak quarter for the tractors. Is there any one-off margin benefit or does this set stage for a new base of margin potential in the farm business? The second question for Auto is that for the ICE SUV launch for 26, is this going to be a 5-seater or a 7-seater?

Okay. On the first question, I said we should ask Hemant quickly before he changes his role in an hour or so from now. But jokes aside, there's no one time. We are delighted by the 20.8% margin, but there's no one time in that. It's all real correction. The critical thing is the level of competitive intensity that we would expect starting this season from competition, and if that level of intensity is very high, then we may need to respond to make sure that we don't lose market share. We will not do anything irrational, and we are very mindful of managing margins, but we did not have as much competitive intensity in quarter 4 relative to what we've seen in some quarters in the past. So, if the same environment continues, then yes, but we would expect a higher level of competitive intensity. On the second question on is there a 5-seater or not on first-hand account what we are launching. No. No 5-seater I think, yeah. No, there's no 5-seater.

On the EV side, if you can just help us understand with the initial deliveries, the -niggles, what's been the big learning and how quickly can we incorporate those learning into the products what we're executing on the variants, what we're executing? I'm just trying to understand, will there be sustained efforts to kind of keep improving the product fix this or we kind of reach the stage we are quite comfortable about the software niggles?

Yeah. As I had mentioned last time, Pramod, we've learned a lot on customer usage even as we went through the test drives. We kind of felt that customers tend to the cars really fast and powerful, and for those of you who have driven it, I think many of you drove it on the track, but we found people just getting into race mode even in a city or as soon as they get and you know the lot of in crazy driving on this car, so we decided to introduce two things even before we were launching. One was what we called a default mode. So, the default mode is what you get your car with that simulates the driving cycle of a XUV 700. We also added a voice message to say that this is a very powerful vehicle drive it responsibly, something to that effect. There were a lot of learnings on doing, you know, things of this kind. There are no glitches, is not the word you know using software updates smartly to enhance customer experience is really what we would want to do, and we would do that on an ongoing basis. For example, we did not have car, Apple Car play in place that's now ready. We will be going in for updates on Apple Car play on all the vehicles whether they're Android or Apple customers. So, that's one intervention that will happen now. So, we are continuously working on feedback and we'll try to keep updating the product, but fundamentally we have a set of very happy customers.

My first question is on BEVs. You know, if you see globally some of the OEM's have got a sustainable lead on BEVs, have certain USP's going for them. Some of it is of course vertical backward integration for some OEMs, some of it is software and superior software experience. As we see, Mahindra's portfolio in the next three years, what do you think would be your differentiation versus the other OEM's coming in India that will give you a sustainable lead?

Yeah, I'll probably break that up into 2-3 points. So, one point is - a couple of points are reinforcing what we've said. Pre-launch, we've said that we want to create an aspirational value at accessible prices for a segment that was to be driven by the design that we have in you know, right now as vehicles get getting on the road, the design story is actually really beginning to play out because the product really has an amazing presence on road. The second is, some of the features that we have are not even available in top end luxury cars and you know the kind of music, the auto park assist are some really, really great features that our products have which are available in very high-end luxury cars. The third is, you know, just the EV driving experience, the quietness of the vehicle, the refinement, all of that makes for a very good experience. The advantage that we have of leveraging current assets. One is the fact that, we are not setting up a separate factory entirely to do this. So, we have the benefit of leveraging existing manufacturing assets. The second is we have the benefit of leveraging existing dealer network. It's not going to be easy for any global player to come and create a network of 300 outlets overnight at the kind of price points that they come in with.

Also, you know this journey of software in your vehicle and software defined vehicle is relatively new and we've seen globally there are a lot of legacy OEM's have, you know, not really been successful in that and they've actually invested in many of the startups to get their expertise, are you all open to such opportunities, and are you actively looking to kind of strengthen this part of your business?

Yeah. So, we work with multiple, firstly, we've set up, you know, team of our own about 200-300 people who work exclusively on this, but we've leveraged multiple partnerships, partner different ways to leverage partnerships. The partnership can be a supplier relationship or partnership can be an investment in a startup and there are multiple other people like in Israel, who have the right technologies, who already done that before, then our role becomes integration. But a lot of the software that has gone in is actually the IP's are owned by us. The battery management system all of that we've done internally but using outsource software capability. We believe that we have a unique advantage of not being so well entrenched as auto player like some of the big players in the Western world are. So, we were you know, learning organization without so much of legacy, capability, and system that we can't adapt and neither are we so new that we don't understand automotive.

Just lastly on the tractors growth outlook for FY26, I think you did mention on a very high single digit if I'm not wrong for FY26?

For the industry. But I must be very clear. I have said this before and you will hear me say this again, we do not go after market share. Our focus is execution. If execution results in higher market share, we will get it. If someone wants to act irrationally, let them act irrationally. We do not go after market share.

Can you throw light on performance of the emerging growth gems, Aero, Accelo, and CLPL and how we are going to unlock value there? And just one more question, is there any other acquisition or merger opportunity that is expected in the near future?

So, the Growth Gems first, we started today with the scalable growth gems because we see a much clearer paths based on execution that they have achieved already. Accelo is one of the strongest operating businesses we have. The plants that they have in place, the Say-do ratio is very high in terms of them delivering what they have said, and it is one of the larger growth gems. Once that is done, you will see it on the scalable growth gem path much sooner. Aerostructures, I have talked about earlier, the business has done exceedingly well in delivering a very high quality. As we hear from some of our OEM customers who are obviously the largest makers of aircraft in the world, they've often positioned us in the same breath as companies that are literally 1000 times our size in terms of delivery of quality. Now, this is a business that takes time to grow because every new order we get often will take a year or two before revenue starts coming in. CLPL has some very promising products. It has won product awards in the last few months. In inorganic, as we've said, we have a very high bar for it. We continue to look at things. The reason SML happened was because the business is very well positioned. It meets the four criteria that we've laid out as well for acquisitions, which is it must deliver scale, it must deliver market beating returns, it must have a very strong customer value proposition as well that we can deliver, and a strong ability to execute.

My question again is on EV business. Now, that we have a few months of learning curve and you know customer feedback, if you can talk a little bit about the booking momentum, inquiries that you're seeing, what is the customer profile? Is there still a reach sort of an issue that we're still available in larger cities not yet available in smaller cities? So, how should I think about the volume progression for the business and if there is any update to the emission regulation, you know in discussions with the government, how do we think about the EV mix in that context?

Yeah. Thanks, Gunjan. So, the geographic, we've opened up all critical markets as we have said, Tier 1, Tier 2, even Tier 3. So, I don't think there's a geographic set of towns that will open up. One of the things we haven't yet done, which we'll do in the next few days is, we haven't yet got into sharing committed delivery dates with customers who are in the waiting, but at this point of time, we would expect the average waiting period to be about four months based on what we have. The booking momentum continues to be very steady and very strong. The new booking momentum. There is a cancellation rate on day one bookings as it has happened with previous launches, especially because of waiting time and here there is an uncertainty of waiting time. So, the few learnings to your question 1 is, this is a business which we don't want to be rash and ramping up for two reasons. One is, there is a lot of product complexity. We are learning new technologies as we ramp up and so are our suppliers. So, we have to be very cautious in the way we ramp up production. But over the last 40 days, we've also learned that we need to be as cautious on the delivery process with customers and it is way, way, way more complex than what we thought or what we are used to in the ICE world. It takes minimum 2 hours to do a delivery to a customer, minimum, and even often that's not enough. So, we've actually decided to slow down the pace of deliveries through April and May to make sure that we are not compromising on the experience to the customer. CAFE norms. I think it's status quo. So, our guess is if it does happen in 2027, about 25% of our portfolio will need to be there to meet the CAFE norm that are under discussion roughly, that's the number.

Just very quickly, when I look at the production capacity, there is 7,500 EV capacity, 3,000 is what we are roughly producing right now. Is it all flexible you know basis the customer choice we are seeing now you know, not just the battery packs, but there are a lot of spec changes that we're seeing. So, is the production capacity that flexible at the supplier end as well that you can ramp up the pack you want, or the variant you want?

Yeah, that's a great question, Gunjan. So, firstly, we've operationalized 5000 a month as we said and not operationalized the 7,500 because that was the first phase of, if you recall what we said the last time we met that we will go at the rate of 5,000 per month in the initial phase of ramp up. Pre the launch, we had skewed capacity much more to BE6 than 9E because our assumption was that that will get more of a demand, but as we started the test drives, we could see that you know we are tending more to 9E than BE6 and that roughly that number right now is I think 60:40; 60 in favor of 9E. So, we triggered starting in November or December the increase in specific 9E parts to reach that level. So, by I think June or July, we would be ready with the right mix of 9E based on the fact that we triggered that 5-6 months back. The battery pack is identical between the two products and you know whether 79 kWh or 59 kWh is fungible, because it's just modules that go into the same pack.

Going back to EV's, how confident are you on the supply chain, especially because it seems generally a lot of supply chain is linked to China, there are already restrictions around rare earth metals etc. So, how do you think that dependence is for you and how can that be mitigated?

I'll just maybe clarify on the rare metal thing because you know it's maybe not, the interpretation of that is not as clear. So, the intention of restricting rare metal is directly linked to end use. I'm talking about India. So, for India, they're basically wanting to restrict end use to not allowing it to go into guns and weaponry. That's the categorization. So, basically there are two sets of interpretations. One is any part that has a rare metal in it made in China, there is no restriction on today, any part that is the pure rare metal which then needs a certification of end use. Now, what is not clear at the moment is the process that has to be followed to get this end use certification. So, the intention is not to stop rare metal usage in automotive industry or any other related industry, it's related to an end use. Right now, we are well covered by way of inventory on each of these components and hopefully by that time, this issue of how to get end use certification in the few parts which are not will get clarified.

Just one more on the tractor side. So, for a very long time, we didn't see market shares changing too much and what are you executing right over the last few years to gain this market share and how much more can this right execution continue?

I would just say that there is not one thing that we have done because if it was one thing we would have done many years back. So, there are several small things that we have done right from some product gaps that we had right from some channel interventions, certain improvements in our manufacturing and processes quality, and getting better understanding of our customers. So, I would say 5-6 things that we have done together, which is kind of helping us do much better. It's not one thing, it's not easily copyable by our competition, so I think we have built something which will sustain.