Mahindra & Mahindra Ltd (M&M) Q2 FY23 Earnings Concall Transcript

Mahindra & Mahindra Limited (NSE:M&M) Q2 FY23 Earnings call dated Nov. 11, 2022

Corporate Participants:

Dr. Anish Shah — Managing Director and CEO

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Manoj Bhat — Group CFO

Analysts:

Amyn Pirani — JP Morgan — Analyst

Jinesh Gandhi — Motilal Oswal — Analyst

Kapil Singh — Nomura — Analyst

Raghunandhan — Emkay Securities — Analyst

Chirag Shah — — Analyst

Chirag Shah — Edelweiss — Analyst

Pramod Kumar — UBS — Analyst

Hitesh Goel — CLSA — Analyst

Chandramouli Muthiah — Goldman Sachs — Analyst

Jay Kale — Elara Capital — Analyst

Annamalai Jayaraj — B&K Securities — Analyst

Pramod Amthe — InCred Capital — Analyst

Meyer Surana — GI Mututal Fund — Analyst

Presentation:

Operator

Hello, everyone. Good day and welcome to Mahindra and Mahindra Limited Q2 FY ’23 Earnings Call. We are indeed glad that all of you could join the call today.

Before proceeding with the call, I will just read the Safe Harbor statement. Certain statements on this conference call. With regard to our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.

Now I would like to welcome our senior management we are today, with us today, Dr. Anish Shah Managing Director and CEO; Mr. Rajesh Jejurikar, Executive Director Auto and Farm Sector; Mr. Manoj Bhat, Group CFO and other senior management from both Auto Farm and corporate team are here.

We will begin with the management presentations, followed by Q&A session. Please use the raise hand option to put yourself in the question queue. Now I hand over the conference to Dr. Anish Shah for this presentation. Over to you, Anish.

Dr. Anish Shah — Managing Director and CEO

Thank you, Shriram. Good morning, good afternoon, good evening everyone. We are glad you can join us today, and we would love to take you through results for the quarter and a quick update on what we have committed versus what we have delivered and where we go from here.

So lets start with the key messages. What you will see or have seen from the results is that auto is driving a very strong stand-alone financial results. Revenue is up 57% at the M&M stand-alone level, profits are up 46%. Beyond auto, a steady performance across group companies results in consolidated revenue being up 39% and profits of 44% and we continue a value unlock journey. We have seen [Indecipherable] and invest and sustain to help take that resist forward on a very strong path. And we have launched a platform for our Life Spaces business MLDL with Actis, which brings in capital into an area of business that could be very valuable for MLDL going forward.

A quick look at stand-along results, revenue is up 57% for the quarter and 61% year-to-date. PAT after EI is up 46% for the quarter and 54% year-to-date and as you will see, auto is striving with part of this performance though a very strong tractor performance has helped the overall stand-along results as well. And if you look at consolidated, what we see is PAT before EI is 3% higher but PAT after EI 44% higher. There is a fair value gain from a stake purchased in Swaraaj engines as well as stake purchased in [Indecipherable], which have contributed to this gain which is a one time event and therefore we show that seperately.

The question though is with a strong alone performance why is consolidated PAT before EI up 3% only and the answer to that is actually is strong performance but it is driven by the events we saw in Mahindra Finance last year. Because what we saw there last year was a very high level of provision in the first quarter of INR2,500 crores and 106% of that provision was reversed in the subsequent three quarters. So what effectively happened is, you have a big loss in Mahindra Finance last year first quarter and therefore, this year first quarter, the year-over-year comparison was fantastic. First quarter results were consolidated. PAT before EI was up 5.2x. And at that point also we explained that is an anomaly driven by the provisions at Mahindra Finance last year.

And similarly, what we will see over the subsequent three quarters of the year is that because Mahindra Finance had much higher profits last year driven by the provision reversals, even a good performance this year is over-shadowed by the provision reversal last year and therefore year-over-year we see a reduction in Mahindra Finance and therefore if we look at numbers excluding Mahindra Finance we see 25% growth in PAT before EI and 86% growth in PAT after EI.

As we review the segments, Auto and Farm, profits are 58%, TechM and Mahindra Finance is around 32% primarily for what I explained right now. Growth gems are on a good path over. What you see here is some reduction in the profits. It is driven by some one-offset over the last year and some COVID-related [Indecipherable] in the sense holidays and so on. But as we look at the value unlocked with [Indecipherable] MLDL that we talked about and logistics acquisition of Rivigo, we see a growth that are very strong [Indecipherable] here.

And investments, which is including Forex and other things is basically to provide a complete picture, small numbers here and don’t really impact the overall number for M&M.

So let’s take a step back and talk about the commitments we made. We started two years ago, by committing to past to 18% ROE. And as you see on the right hand side, year-to-date we have delivered 20.5% ROE. We also talked about growth and that commitment came in almost a year after the capital allocation to [Indecipherable]. And at that point, we said we will do 15% to 20% growth in EPS for the next five years. At that point F ’21 was the base. What you see on the right-hand side is if you keep F ’21 as a base, we are currently greater than 100% annualized growth. And if we were to close F ’23 at a straight pace as we close in the first quarter than it is significantly higher than 100% tenure.

So what we are going to do now is reset the bar, make it higher and have F ’22 be the starting point essentially from which we will look at the 15% to 20% growth for the next five years. And hopefully, we will reset it again as we go forward.

The third thing we promised was value creation with our Growth Gems. We talked about a path to a billion Dollar valuation, in three to five years, which at that point was worth INR7,500 crores. MLDL is the first to touch a billion and to pull back slightly. It is at INR6300 crores right now. Almost 6x increase in the last two years or two-and-half years. Susten has started their journey with Ontario Teachers coming in at the valuation of close to INR2,400 crores. We are on a path that will get us to 7 gigawatts and Susten and that will take us to valuation of a billion Dollars. And beyond that we talked about leading ESG and number of tangible actions in that space. The most prominent one being focused on renewable energy across other group businesses and really playing a leadership role at the World Economic Forum with regards to staple to capitalism, a number of different access there, though we haven’t covered all of them.

And with that, allow me to invite Rajesh to take you through the Auto and Farm sectors.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Hi, good morning and good evening all of you. Good to be with you again.

Next slide. So I am going to walk you first through the highlights of quarter two in the Farm side and as you can see here, we maintained our quarter-to-market share but on a year-to-date H1 basis we gained 50 basis points and on a year-to-date October basis we gained 80 basis points. This is our highest quarter two volume and our highest quarter two export and we saw sequential improvement in margin from 16% to 16.4%.

On the Auto side, we continued to be strong on the SUVs where our revenue market share was at 19% and we maintained a number one position on revenue market share. We also had a 19.3% market share by volume in September and in September and October we were number one by way of volumes, market share in SUVs. This is the highest ever volumes in a quarter in Auto 174,000, SUVs grew by 85% and pickup’s grew by 86%. We continued to be number one in electric three-wheelers with a quarter market share of 67% and highest quarterly billing of 10,600.

Again in the Auto side, our margin improved sequentially from 5.7% to 6.1%. Auto, Farm stand-alone results reflect a 58% growth in revenue and a 61% growth in PBIT and when we look at the consolidated for the Auto plus Farm together again it is 52% growth with — in revenues and 55% growth in EBIT. This is the sequential margin. On the FPA side, it is gone up from 15.7% to 16% to 16.4%. On the Auto side from 5.6% to 5.7% to 6.1%.

We will talk a little about Auto margin improvement. There have been a lot of questions from all of you around how we are doing on Auto margin. Quarter three of last financial year, F ’22 we had said we have a 3% upside in Auto margins over a medium term. You can see that we have already realised 2.4% out of that 3% that we have spoken about, 3.7% has now gone up to 6.1%. This is led by the end of introductory pricing for two products 700 and Thar. A structured cost reduction program and operating leverage kicking in, and we will talk more about these as we go ahead.

This is cost optimization for Auto and Farm segments combined both together. So on the top part of the chart what you see is reduction in fixed costs including personnel costs. In this year, we see an annualized saving of INR570 crores over the F ’19 base. We’ve also done fixed cost as a percentage of revenue. And as you can see if F ’19 was X, we’re at X minus 460 basis points and we’ve broken that out for you by way of how much is cost, and how much is operating leverage. As 250 basis points around cost and 110 basis points around operating leverage. You also see the effective reduction that we’ve achieved in material costs. And this is without commodity inflation, which is basically coming out of value engineering and negotiations.

I will now get into the FES part of the business. Rainfall as you can see, and you know has been reasonably good at an overall level 6% of our LPA and you can also see the geographic skew so West, Central, and South has been good and East has been bad, North has been okay. Though we have seen some excessive rainfall especially in South in Karnataka and so on which has not been very good in the short term to have excessive rainfall. Reservoir levels are at a good level.

These are the four key levers that we talk about. And we will touch briefly on each of these right now. Market share, as I mentioned earlier, we’ve seen a 0.8% improvement April to October a very successful launch of Yuvo Tech where 12.3% of our first half volumes of tractors came out of a new product. Farm machinery revenue grew 36% year-on-year. And our critical projects like K2 are on track. This captures how we’re doing in our global subsidiaries. Overall, we have good profit. The profit — quarter profits continue in the global subs. The highlight on this slide is the Brazil performance which gets stronger as market share is now at 7.4% in the less than 100 horsepower and we see very good traction in that market.

Moving to the automotive business the quarter. The year-on-year performance that is Q2 to Q2 went up by in revenues by 1.9 times and in profits by over 4 times. So it’s been a strong performance by Auto coming back to INR903 and crore profit. Next slide, here are the key levers will talk around, we have highlighted these and we’ll talk about our progress. So our volumes as you can see had gone to a level of 14,000 in the SUV portfolio there up to 34,000 in September and stayed about 30,000 in October, as well. I will talk a little around what we’re doing to enhance capacities. Revenue market share showing a strong upward trend and as I mentioned earlier, we continue to be number one in revenue market share over the last few quarters. But also number one in volume market share in September and October.

This slide captures our current state of bookings and also, the current bookings as well as the open bookings. We have 262,000 open bookings as of November 1st. Overall demand momentum continues to be very strong and Scorpio and of course as we know, has been very successful launch but Scorpio Re-classic which is the refreshed version of the Scorpio also sees a very, very strong momentum on demand. It was an action-packed quarter as you can see we started with an announcement around the British international investment investing in EVCO with a valuation of 9 billion with booking opening of the Scorpio and Jeeto CNG launch, the MAX pickup launch. Both of these have done very well for the segments, and I’ll talk about that when we come to LCVs. The Scorpio classic has done very well. The BEV design reveal which we did in Banbury you can August 15th and the announcement around strengthening of the Volkswagen partnership. We launched the Treo Zor grand, the reveal of the XUV400 and the launch of the XUV300 TurboSport.

This just captures the — we’ve spent time separately talking around this, with a two brand strategy for Born Electric, the Inglo platform and a variety of co-products that would come out with the dates that are mentioned there.

The All-Electric C segment XUV400 was ready for starting manufacturing next month and we’ll start bookings in January and hopefully start deliveries by end of January.

This is a slide I’ll spend a minute or two explaining to you the capacity expansion plans. So January-March calendar year ’22 which is quarter four of F ’22, our capacity was 29,000 you can see the breakup there. The end of the current financial quarter which is calendar year January-March, the capacities will go up to 39,000 and the end of the calendar year, financial year F ’24, which is calendar year Jan-March ’24 will go up from 49,000. This does not include the capacities for the Born Electric, which will be on top of this.

The LCV 3.5 ton categories where we are market leaders. We had lost some share, mainly due to supplies, but you can see that we’ve recouped that very well. We are at 46.9% market share in quarter two and the two graphs below breakup of the above chart on the top. So the zero to two ton is where we’ve seen a very good improvement with the launch of the Supro Truck and now the Jeeto CNG. The LCV 2 to 3.5 tons which the pickup category has also seen our market share come back and has got strengthened with the launch of the Bolero Maxx Pick-Up which has done extremely well and especially helped us gain market share in markets like South where we were traditionally not leaders.

Sorry, just to clarify traditionally not the leaders in the lower end of that segment, not in the large pick-up but in the pick-up. The electric three-wheelers have done very well again with the building of 10,600 and market share of 67.2%. We launched Treo Zor Grand, which has got a very, very good response.

In summary, our highest-ever revenue with the second-highest ever PBIT, Farm sequential margins improved, Auto sequential margins improved as well. Auto revenue grew 2x with the 4x increase in PBIT. Our tractor market share went up 0.8% in the period April to October. Auto maintained its leadership in the XUV segment and last mile electric mobility vehicle three wheelers continued to do well.

With that Manoj, over to you. Thank you.

Manoj Bhat — Group CFO

Thank you, Rajesh. So a quick summary, in terms of revenue growth, 57% revenue growth in terms of EBITDA, I think as Rajesh mentioned, I think Auto drove both revenue growth and margin growth. I think that’s a very strong performance from Auto in terms of EBITDA growth.

Moving to the next slide. If I look at PAT before EI the growth of about 38% during the quarter we had EI negative in the standalone books of about INR240 crores across multiple entities. If we — if we compare PAT, after EI, I think the growth has been about 46% which is compared to INR1433 going to INR2080 crores, keep going. If I look at the consolidated view, again, it’s coming out clearly Auto is driving the growth. I think 85% growth on a consolidated basis. Farm despite at the beginning of the year, we had certain concerns on the market. It’s turned out to be a very steady performance of about 12%.

On the Group companies, I think multiple Group companies have done well, calling out a few which are unlisted I think Axello has done really well, our current bike [Phonetic] or Mahindra First Choice Wheels. That’s almost double revenue on a quarter on a year-on-year basis. Logistics has done well. I’ll touch upon a few of them as I go along. If I come to the consolidated M&M PAT before EI as Anish explained. I think before EI is about 3% and I’ll talk about Mahindra Finance in a subsequent slide, but coming to the EI element. I think I’ll explain a bit about the fair value play, so during the course of the quarter, we bought a 17.4% stake in Swaraj Engines and completed the balance stake purchase in Sampo [Phonetic]. So Sampo [Phonetic] has become 100% subsidiary while Swaraj Engines has become a subsidiary.

As part of that under IndAS. We have to do a fair valuation of the entire stake when it moves from in one case associate to subsidiary and in other case a joint control company to subsidiary. So a bulk of this EI is coming from that fair value gain and that’s why I think as Anish also mentioned we have called it out separately.

I think coming to TechM, a good quarter from a TCV perspective, about 700 million in wins, of course, I think there is a continuing demand for transformation products — transformation projects. I think from a focus on operating margins, there was a sequential improvement in profit margins and free cash flow improvement also. So while year-on-year, I think the overall profit after tax is a bit down, but I think the effort there is to improve some of the operating metrics in the business.

Mahindra Finance. This is what Anish was explaining, I think in Q — and if I take the left-hand chart in Q1 last year we had a provision of INR2500 crores which during the course of the year was written back as the collections improved dramatically over the course of the year and on the right-hand side you have the current year. So if you look at Q2 last year versus current year there is a gap of about INR400 odd crores in the provision write back, which is impacting the profit — reported profit and hence Mahindra Finance, but otherwise the business in good shape. I think collections are very, very good. In fact disbursements are up and we’re seeing good level of performance from the business overall.

Some of the Growth Gems, logistics as I mentioned, good growth I think driven by Auto and some of the recoveries in other segments. They’ve announced the acquisition of Rivigo which is Express B2B business and then overall operating margins are recovering from last year levels.

Hospitality, the India business continues to do well. And that is part of the overall behavior trend change in India. If I look at the European business because of the current situation there are some challenges, which they are working on. If I compare to last year to this year, last year had some benefits coming from rent waivers, et cetera, which are no longer in effect, hence you’re are seeing some impact on profitability.

And if I finally go to the real estate business, the institutional business continues to do well. We also tied up with Actis is to create a platform for Industrial and Logistics segments. So — and overall retail sales continues to remain strong. So I think these three businesses continued to do well.

Finally, just a reconciliation which is summarizing our movement in PAT, after EI from last year to this year. Auto and Farm as we mentioned, driven by Auto largely. If I look at the drop in TechM and MMFSL, it is largely as I’ve said Mahindra Finance. And then finally EI is largely about the fair value accounting, which I explained in the past. Thank you so much.

Questions and Answers:

Operator

Thank you, Manoj. We will now open the floor for question and answers. [Operator Instructions] With that, we have already some questions which are lined up. Our first question comes from Amyn Pirani of JP Morgan. Amyn, can you go ahead.

Amyn Pirani — JP Morgan — Analyst

This is Amyn here. My first question is actually a clarification on the upcoming BS6 Phase II and how it might impact the SUV business. So the first part of the question is on the potential cost increases because some of your peers have given a very high cost impact on the diesel side, we know that your number has been on the lower side. So some clarification on that.

And secondly, will the implementation be in the same way how we saw during BS4 to BS6 in the sense that, do you have to clear the inventory at the dealer end and will that lead to one or two months of some wholesales destocking.

Dr. Anish Shah — Managing Director and CEO

Amyn hi, thanks. Let me clarify, both for you. The second one is kind of more than what we are preparing to do rather than a clarification. So our cost increase, we can confirm we are nowhere near what some of our peers have said. It will be in the region depending on product between 9,000 and 15,000 per vehicle. So that’s, that’s clarification, you were seeking. On the implementation period, at this time learning out of the — the regulation still is supposed to be on the date of manufacturing and not on the date of which means that it should not be on registration or retail. However, we don’t know if there’ll be any intervention like it happened at the last minute from the courts and so on. So we are preparing ourselves for that. And we will, hence make the transition to the BS6 0.2 adequately in advance to make sure that the end March pipeline is clean or relatively clean and anything else can be an upstake from there. Amyn does that clarify?

Amyn Pirani — JP Morgan — Analyst

Yes, yes. That’s very helpful. Secondly on the LCV side and the overall auto margin, you may not answer the question, you may not want to give the details but LCVs historically has been a very polarized market. You lead in one category significantly, the other guy leads in the other category quite significantly, but we are seeing that you are now starting to make inroads in the lower segment. So, how sustainable is that?

And secondly, some of your peers have reported very divergent trends in CV margins. So when we look at the auto margin and the improvement is LCVs also moving in the same direction or are there some competitive pressures coming on the LCV side, if you can — if you can help on to help us on that.

Dr. Anish Shah — Managing Director and CEO

Amyn you rightly said, I am not going to answer that question. However, directionally, directionally we are not under any competitive pressure on the LCV side, we’re not doing predatory pricing to gain market share. It’s the product which is enabling us to do that. Margins on both these segments of LCV are healthy.

Amyn Pirani — JP Morgan — Analyst

Okay, great. Thank you. I’ll come back in the queue.

Operator

Thanks, Amyn. The next question is from Jinesh Gandhi of Motilal Oswal. Jinesh?

Jinesh Gandhi — Motilal Oswal — Analyst

Hi, my question — first question pertains to tractors. So we have seen a reasonably good recovery during festivals. So what was the retail sales growth we saw during the festival season and what is our renewed outlook for FY ’23 to protect us.

Manoj Bhat — Group CFO

The retail in the festival season was pretty good, close to double digits. However, we are not changing significantly our outlook for the full year at the moment. Because last year quarter four was on a pretty high base. So we — we would wait, wait and watch. So we are staying with the full year outlook in the region of 5% plus. So, we’ve said 5% earlier. We think it can be somewhere between 5.2% and 6.5%, but we are basically staying with regional of 5%.

Jinesh Gandhi — Motilal Oswal — Analyst

Okay. And secondly, with respect to the RM cost impact. So did we continue to see inflation in 2Q or benefits have started to come in and effectively what kind of, what kind of savings do we expect from 3Q onwards?

Manoj Bhat — Group CFO

Is the question related to tractors, Auto…

Jinesh Gandhi — Motilal Oswal — Analyst

Both the businesses — both the businesses.

Dr. Anish Shah — Managing Director and CEO

So clearly, some of the commodities have started coming downwards. The effect of those commodities in the different businesses, will — in the different product groups differs depending on the composition of materials. On the Auto side, there is a far greater import content, even if it is by way of Tier 2 of suppliers. So there is a foreign exchange effect which is negative even in a declining commodity price situation. So clearly effects of commodity reduction are coming in, and we expect them to come in more clearly between Q3 but more trending towards Q4.

Jinesh Gandhi — Motilal Oswal — Analyst

Got it, thanks. I will fall back in the queue.

Operator

Okay. Thank you. The next question is from Kapil Singh of Nomura. Kapil?

Kapil Singh — Nomura — Analyst

Thank you, sir. For the very detailed presentation, particularly on capacity expansion. My first question is on that itself. So if I see not the plan we are taking the Scorpio end capacity to almost 10,000 per month by Q4 FY ’24 and Scorpio Classic continues at about 5,000 so almost 15,000 a month for both of these together and similarly for Thar family, I imagine the Thar [Indecipherable] is also coming but we are keeping it at 6,000. So could you just talk us through, what is happening there? Is there some product interventions in Scorpio and that will take it or you think the current demand itself, is strong enough and similarly for Thar [Indecipherable] why don’t you think that it would be a higher number?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Okay, Kapil. So Scorpio we expect this momentum to continue and we think 10,000 is a reasonable capacity at this point of time. We did not even started exports. So this is as you know we have close to two-year wait period and we are still getting orders way more than the rate of production that we have going at the moment, so we think we should prepare for that.

Scorpio Classic actually demand is higher than the capacity that we have planned. As things go we’ll have to wait-and-watch and, see how that’s going. That 5,500 number does include exports of Scorpio Pick-ups as [Indecipherable] said on this slide. So it is actually 4,000 plus 1,500. So that’s on the Scorpio piece and we feel very comfortable with that.

On the Thar piece we have not — this doesn’t include the [Indecipherable] and is primarily around yeah — it does not include the [Indecipherable] and is primarily around the current portfolio of products. There are few versions of Thar that we will see coming out in the quarter one and we think that with that the demand will be in the region of 5,000 to 6,000. That’s without [Indecipherable]. With [Indecipherable] the capacity will go up further.

Kapil Singh — Nomura — Analyst

Okay.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

We are very optimistic on Thar [Indecipherable], turning out to be very good.

Kapil Singh — Nomura — Analyst

Yeah, that’s what I thought but, it didn’t come it will come out before the same thing, right. Before Q4 FY ’24.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

It’s going to be timed around that and we won’t announce the time but will been calendar ’24.

Kapil Singh — Nomura — Analyst

Okay, okay. The second question is do you Anish, you have some bold targets and, great to see the company hitting both on cost-reduction as well as ROE. But now you are known for setting bold targets. So from here on cost-reduction and on ROE, how do we see evolution in terms of margins? Are you setting some — or are going to set some new targets on cost-reduction.

Also if you could take into account the fact that some of the electric vehicle portfolio will be expanding both on electric side as well as on the SUV side. So with that together, is there scope for reviewing this target on margins and on ROE.

Dr. Anish Shah — Managing Director and CEO

So Kapil let me take that in each of those categories. First with regard to ROE. We, don’t expect to set a target higher than 18% because we are now in growth mode. We wanted to make sure we could get to that target and we actually as you’ve seen have done that much faster than what we had initially planned for. But we feel that that’s good return for shareholders unless we hear different from other investors. We will maintain 18% or higher as we go-forward but really be a lot more aggressive on driving growth because we have the capability to do that and that’s where the EPS growth numbers come in and there again we have been able to deliver far higher than what we had initially expected and — and what we had committed. And it’s something that we will continue to push more for. So the maximum is going to be towards scaling up our businesses to growing our businesses.

Cost-reduction will continue and that’s something that we will be prudent on. We always have been good at that. At the same time we’ll just make sure we’re not cutting too thin because we, want to be able to drive growth. So with the discipline that we have on cost-reduction and ROE, we will take our energies and really drive growth with that.

Then to your question on EVs and margins. I think what we’ll always happen is with new launches you will see some impact on margins in the Auto business because that’s a model that is there but by that time number of product should be mature, should be able to withstand the slightly lower losses from the new margins and what you have seen here is we again delivered on margins faster than what we promised we have talked about a, 300 basis-point increase a year-ago. At that point we had said in the medium-term we were thinking up on somewhere in the range of two years to be able to get there but we have achieved two 240 of the 300 basis-points already and we should be able to get past the next 60 and continue on the margin front we do see more upside on margins for us as we go-forward and therefore we are not worried about the slightly lower margins that we will see at any launch.

Kapil Singh — Nomura — Analyst

Great. Thank you so much and wish you all the best.

Dr. Anish Shah — Managing Director and CEO

Thank you, Kapil.

Operator

Thank you, the next question is from Raghunandhan of Emkay Securities. Raghu you can unmute now.

Raghunandhan — Emkay Securities — Analyst

So on my first question on the model long-cycle dataset gap between. XUV400 launch and the dedicated EV launches starting from end of CY ’24. During this period, no major launches are expected. How would you keep the focus on stimulating the market? Would the focus be on variant and refreshers, like Bolero Thar [Indecipherable], your thoughts on that?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

You meant what will do holistically or in the only in the EV space?

Raghunandhan — Emkay Securities — Analyst

On the four-wheeler space, sir.

Manoj Bhat — Group CFO

Okay.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yes so Raghu, like you rightly said. We’ve done — we’ve done with the major launches which is 700, Scorpio and you know 300, Bolero NEO all of these have now giving us a very strong portfolio of products and Thar, of course. I did mention that we are doing a few versions on Thar which will come out, in the coming quarters and then we have the five door as you said. There will be the refreshes as well and, then of course we have 400 which itself is going to be very exciting launch. So that’s basically we are talking about a year and a half or so and we think that is enough between the current portfolio of products and what we are planning to give the market excited. Raghu does that answer your question now?

Dr. Anish Shah — Managing Director and CEO

Vipin can you unmute Raghu.

Raghunandhan — Emkay Securities — Analyst

Yeah, thank you for that. The order book is strong at 260,000. How do you see the model mix? Does it continue to remain skewed towards higher-end models what would be the monthly bookings for XUV700 and Scorpio and, trying to understand that capacity expansion.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

The chart that we’ve shown actually has the monthly bookings on each of these products and they are at the moment closer to what we are picking-up as the capacity expansion. So we are getting 8,000 to 9,000 bookings of each of these and as I mentioned earlier, this is even starting any exports of these products. So we feel reasonably comfortable with getting to utilizing this capacity. But even if we had go the cost of that we are investing in capacity expansion is not that high and we must keep that kind of headroom available to leverage opportunities. So basically lot of the investments are going into balancing capacities like specific aggregate or something like that. So we feel comfortable with the level of bookings that we have. The current level of bookings that are coming in are in the region of 8,000 to 9,000 a month, for 700 and Scorpio and that’s why we are reporting an 18 to 20 months wait period on most of the versions. The versions that are selling are still very skewed to the higher end.

Raghunandhan — Emkay Securities — Analyst

Thank you, Rajesh. Just last question on electric four-wheeler there are hatchbacks compact sedans launched by competitors that are being well received. Would you plan at bringing back electric hatchback and sedans of Mahindra which were discontinued?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

No.

Raghunandhan — Emkay Securities — Analyst

Thank you, got it.

Operator

Thank you, Raghu. The next question is from Chirag Shah [Indecipherable].

Chirag Shah — — Analyst

Yeah, hi, thanks for the oppurtunity. My first question is part Anish with respect to the investment portfolio that we have. You have been very vocal about Mahindra Finance and it seems to be delivering as an investor for a M&M. Now on Tech Mahindra if you could allude to what as I invested in Tech Mahindra what are your thought processes, what are the benchmarks you are looking at and delivery timelines, because in overall scheme of things it plays a very big role for M&M value-creation as such. And I must say that it appears that it seems to be lagging slightly versus [Indecipherable] on quality returns. That’s my first question.

Dr. Anish Shah — Managing Director and CEO

Chirag, you’re right about Mahindra Finance. We have shown significant progress and net NPAs are down to 2.9% this quarter, which is something that we had been planning for and has really created a sense a positive surprise for many. But it was part of the story we had outlined for Mahindra Financing. This is our path to getting a business which is a solid business because strong earnings potential and more stability in it’s NPA profile. And you see that not only your net NPAs would also at the gross NPA level both for stage two and stage three. So there is an inherent improvement in that business. I would say that we’re not done yet on [Indecipherable]. I think there’s still a lot more potential there. Not just from an asset quality standpoint but also from use of technology and data and a lot of work is underway on that front. So I do believe that Mahindra Finance still has a good way to go in terms of value-creation for us and our shareholders.

Chirag Shah — — Analyst

My question was what Tech Mahindra, but you have not been vocal about Tech Mahindra?

Dr. Anish Shah — Managing Director and CEO

I am getting to Tech Mahindra, Chirag. I fully understand your question. I just wanted to give the context of Mahindra Finance First. It might be right as well that we are little further behind in that journey as we have for finance. Margins is one key area of difference between us and our competitors and there are again a number of factors that are driving that. The team is focused on it now. They have a number of initiatives underway. These are things that do take some time to change. Just given the magnitude of the impact it can have and I would just say that we are early in that process right now. We will come back with more definitive steps and actions on that and a path and a time line as we did for Mahindra Finance.

Chirag Shah — Edelweiss — Analyst

Yeah, thanks. And my second question is on the commodity side. You alluded to it that — from here on, what kind of benefit can we expect on the commodity basket? Directionally if you can indicate because it would be really helpful to understand the commodity impact for M&M. And given that your product positioning is today, you are in very good position to retain most of them. So that’s my specific question for Manoj or Rajesh, anyone if you want to do this.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Let me give it a shot here, Chirag. Good to hear from you. Chirag, there are the multiple factors at play. So, steel clearly is coming down but there’s a certain proportion of steel. Semiconductor shortages is not allowing us to leverage benefits in that because as we ramp up volumes, we are not able to get benefits because of the kind of pricing impact that comes into play.

The other is the role of the dollar because on everything that is imported, the foreign exchange is a dampener. So, there are balancing factors. And on the net, we will see gains but it’s very hard to see these multiple forces at play. The proprietary parts in an auto is a much higher percentage of the cost than is in, for example, in tractors. And proprietary parts are not necessarily coming down at the commodity cycle. So, there are multiple factors at play here, Chirag. So it’s very hard to give a specific number. But like Anish mentioned, we explained the margin trajectory to keep improving as we go forward.

Chirag Shah — Edelweiss — Analyst

Yeah, thanks a lot. [Indecipherable] Thank you.

Operator

Thank you. The next question is from Pramod Kumar of UBS. Pramod?

Pramod Kumar — UBS — Analyst

Rajesh, on the Auto side, you’re already kind of ahead of schedule on the margin, [Technical Issues] as Anish said, for the Automotive EBIT margin. But given the expected price increase for competitors on RDE, do you see that you could probably use [Technical Issues] improve the profitability of your Automotive’s operation? Because, A, you have XUV — you haven’t had the full quarter of XUV full pricing yet [Technical Issues]. So that ideally should be coming in from 3Q. And post-RDE, ideally you should be able to take up prices higher than your cost, given that competition is talking about much significant cost increase. So, [Technical Issues] edge in the marketplace will only get better. So, given all this, is there a potential that we can easily go past the peak automotive EBIT margins what you have done?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yeah. Pramod, just one word of caution firstly before I respond to your specific questions. When we look at a comparison with the past, by way of what was the peak margin that’s achieved, we have to correct for the numerator-denominator effect of the margin on cost. And that is not unsubstantial. I mean, it was to the extent of 1.5%, 2% just when the transition to BS VI happened, right? So, with every such either BS VI transition or commodity price inflation that we’ve seen or the regulatory changes that are coming in, or now, the BS VI-II, we are not able to, at every time pass on the margin on the margin. And even if you are able to pass on the cost, the percentage margin does get impacted.

So when we are comparing with our peak margin, I think our peak OPM was in the region of 14%-odd in Auto, which is in the region of 10% now. So you at least correct to 2.5 — 2 to 2.5 of that which is the denominator numerator effect. So then the gap is not as much. So I don’t necessarily think that percentage margin in a commodity inflationary environment like we are is best way to look at it. It’s probably better to think about it as margin per vehicle and multiplied by the growth story of a number of vehicles that we sell, where we will see a much greater increase in absolute profit opportunity. That being said, let me still try and answer your question. I just thought let me put that as a context. Is that helpful, Pramod?

Pramod Kumar — UBS — Analyst

Yeah, yeah. Absolutely, absolutely.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Just to create a kind of not necessarily blindly compare with historical levels, but just correct for the role that inflation is playing where we’re not able to add margin on cost at every stage of cost increase. That becomes easier to do when the environment is not inflationary. So, while competitors may be talking about what their increase in BS VI-II costs are, let’s wait and see how it plays out by way of pricing opportunity. Any opportunity that we will get by way of — to take price increases, we will, without losing the sweet spot value proposition and the volume momentum.

So that’s always a balancing act. You’ve seen us do that very effectively in Thar and 700, where we have recouped margins as soon as we’ve got out of the introductory pricing period. And we would continue to do that, but we will do that very cautiously. In Thar, we will see some actions that we are taking which will keep our price points attractive and intact. So I think we have to do that without losing volume momentum, and I’m sure all of you will agree that volume momentum in this business is the biggest driver of absolute profit. Pramod?

Pramod Kumar — UBS — Analyst

Thanks a lot for that, Rajesh. And on the EV side, Rajesh, if you can just help us understand, outside of the Volkswagen alliance, the partnership [Technical Issues], what are the kind of in-house capabilities what Mahindra is looking toward, especially on the software side, the electric and software architecture, especially? If you can just help us understand what kind of [Technical Issues] in terms all this is going to be in-house rather than dependent on external vendors. So if you can just — because trying to understand whether the in-sourcing of technology and in-house [Technical Issues] are be stepping up meaningfully for us as we transition to EVs?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

That’s a great question, Pramod. And honestly that’s something we grapple with all the time. But what we’ve concluded right now is, we need the right mix of the skills we build in-house versus the leveraging of outside partners in the area of software and new tech. Let’s take the example of 711, that will help us think about the EV journey as well. 700 has very, very good tech and a very good leveraging of interfaces by way of the driver monitoring systems and the AdrenoX and all of that.

And we’ve done that with not too many software engineers even at that stage of the journey. Of course, we are significantly ramping that up as we get into EVs. But we’ve got to be careful not to try to replicate skills which are available outside and especially people who’ve done work in that space, who have a better ability to retain talent of that kind. So we’ll keep a very important mix — appropriate mix of what we have inside versus outside. But we will own all the key software-related IPs related to human-machine interface because that’s what we think will be a brand differentiator.

Pramod Kumar — UBS — Analyst

Sounds great. And before I go compliments to the team for great execution and especially to the R&D team for delivering such phenomenal cost structure [Technical Issues]. I think it’s a great job done. Congrats. Thanks a lot.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Thank you, sir.

Operator

Thank you. The next question is from its Hitesh Goel of CLSA. Hitesh?

Hitesh Goel — CLSA — Analyst

[Technical Issues] SUV pie, right? So, I mean, investors are really grappling with this situation that SUV demand is very high in India, right? So, can you give us some color in terms of customer — what is the entry-level customer, is it the — or upgrade or replacement, some mix in terms of your portfolio? Like to understand sustenance of this demand.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Hitesh, I just want to make sure I understood the question, right. So is the question about why SUV as a percentage to PV is as high as it is? Is that what you want to understand more or it was something else?

Hitesh Goel — CLSA — Analyst

No, no. In your portfolio, what I want to understand is the replay as a customer pie, right? Is it the first time customer which is first-time buyer? What is that proportion or a replacement of the existing car, which is leading to upgrade or it’s an additional car purchase in a household? So you must be tracking these like Maruti generally gives that. So just to get a sense that pre-COVID versus today, how is this demand coming through? Is it this additional car purchase which is driving that or replacement upgrades which is happening in the SUV pie? So if you have some data or color on that, it would be helpful.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yeah, I’m not — we do have the data. I don’t have it off hand at the moment because it varies product by product, so not prepared with that. But let me try and give you more of an insight around how that’s playing out. So, the higher end of the portfolio, which is the XUV700 and Scorpio-N and Thar even, it is about additional vehicles into multiple car-owning households. Of course, there are younger — there will be a small percentage of Thar buyers who are first-time buyers, the young couples, so on and so forth. And they decide that instead of buying their first car as a sub 4-meter conventional compact SUV, they will go in for something like a Thar because that kind of allows them to explore a different lifestyle. So there’s some of that as well.

But there are a lot of very SUV passionate people who are buying into products like Thar and Scorpio-N in particular and also XUV700. So that’s one piece of the equation. And there are typically additional vehicles in those households. And they’re coming out of saying, this is a product that I would love to have, it’s affordable and accessible and I can afford to either replace my second car or third car or whatever in the household with something like this. So that’s one set.

At the entry level, which in our portfolio will be the XUV300, Bolero, Bolero Neo. That segment is more mainstream and they would in the urban cities be the single vehicle owner. And in rural India, the Bolero Neo would also typically be a single vehicle household, some may have an additional car or two in a joint family. So, I think what right now is working in the newer part of our portfolio is an inherent passion or innate passion for exploring a new space with vehicles like of this kind, which allows them to break away from the pattern of normal vehicle ownership. That’s our qualitative read on what’s happening and why there’s so much energy and excitement.

Hitesh Goel — CLSA — Analyst

And just a follow-up there. Top 65 cities would form what proportion of your volumes — SUV volume? Because that is the key 1 million-plus cities, right, in India in terms of population. So just, say, top 50, top 100, some number if you have, just to get a sense. Is it urban-centric demand?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

The XUV700 and Scorpio-N would be very high in these cities. For — in fact, for Scorpio-N, just to give an example, Scorpio is weak in South, and Scorpio-N is making that up by creating a very strong position in the South. But these two products have a very strong urban bias and would be a very large proportion in the bigger towns, which is either say, top 65 to top 100 towns. The Bolero, Bolero Neo is still primarily sold in the less than top 100 towns, so let’s say, the less than 5 lakh population town. So the Bolero Neo has a very strong skew there. The Scorpio Classic has a very strong skew to less than 5 lakh population towns. And the 300 has got probably half and half between urban and rural.

Hitesh Goel — CLSA — Analyst

Great, great. And just last follow-up. Can you give us some sense on your SUV portfolio, how much is petrol and how much is diesel?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

XUV300 is roughly half and half on petrol and diesel. Thar and 700 are in the region of 25% petrol. And the Scorpio-N is about 20% petrol.

Hitesh Goel — CLSA — Analyst

Thank you. Thank you, Rajesh. Thank you.

Operator

Thank you. Then there is one question from Rishi Vora of Kotak Mahindra in the chatbox. I’ll just read out.

Can you please talk about the export strategy for SUV segment? Which models will you be exporting and which geographies will you be targeting initially?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yeah. Hi, Rishi. Like I think I mentioned a little earlier, we’ve not really been able to leverage our export strategy given so much domestic demand. At the moment, we’ve recently just started XUV300, which is getting a very good response. XUV300 is available in left-hand drive and right-hand drive, so it will open the wide spectrum of markets that we have, which is markets like South Africa, where we have a strong presence, but we’re also going to Latin American markets and so on. We do have — so that’s on XUV300. The 700, Scorpio-N, etc, will go into, at this point of time, most right-hand markets around the world, so South Africa, Australia and New Zealand, all of these. But we have to still get momentum on these because we have to start releasing some capacity for meeting our export needs.

Operator

Thank you. Thanks, Rajesh. The next question is from Chandramouli of Goldman Sachs. Chandra, can you please unmute?

Chandramouli Muthiah — Goldman Sachs — Analyst

[Technical Issues] for the automotive business. So, specifically on the Scorpio-N, is it going to be a gradual increase in capacity over the course of the year or is it going to be an inflection in the last quarter? Just trying to understand the slope of capacity increases planned on this model.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

No, it won’t be a slope. Because basically when the capacity kicks in, most of these right now are constrained by aggregates, which are cutting across products. So it will move from six to 10. There’s no in-between point.

Chandramouli Muthiah — Goldman Sachs — Analyst

Got it. That’s helpful. Second question is on the Farm margins. So, some of your peers in the Farm segment have been facing margin pressure in the first half of fiscal ’23. And your margins have improved sequentially quarter-on-quarter despite seasonally lower volume. So just trying to understand what were the key drivers of Farm margin expansion this quarter?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Good to hear a positive question on Farm margin. Thanks for that, Chandra. I think we’ve been mindful of pricing, not letting the festival season overrun us. We’re also seeing a positive benefit of some successful launches like the Yuvo Tech, which has allowed us to take a market position above the other portfolio. Earlier, we had the Yuvo, which was a very good product but was too expensive. We’ve been able to reconfigure it to bring out all the important tech features but at a much better value proposition. So, some of these things have helped us improve the product mix. We’ve also been working on the HP mix to help improve the margins. So, multiple things that we are doing, price, discount management, margin — I’m sorry, model mix and horsepower geography mix as well — I mean, horsepower mix as well.

Chandramouli Muthiah — Goldman Sachs — Analyst

Got it. That’s helpful. And just last question is on the XUV400 electric car. So, I think, in the previous investor meeting, you had indicated that you’ll think about the appropriate price point after showing the product to dealers and taking feedback. So I just wanted to understand over the past couple of months, what is the sort of opinion you’re forming here? And is this product potentially able to qualify for FAME subsidies from a localization standpoint?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

No, FAME is not applicable in this category. I think your question probably, Chandra, was around PLI. And at this point of time, we think it will qualify — we expect it to qualify for PLI. We’ve not yet decided on pricing because we are going to start the test drive process early December. That’s when we will start getting a much better feel on customers. But the overall excitement on the ground is very positive.

Chandramouli Muthiah — Goldman Sachs — Analyst

Thanks, sir.

Operator

Thank you. The next question is from Jay Kale of Elara Capital.

Jay Kale — Elara Capital — Analyst

Thanks for taking my question. Sir, first question is regarding the model-wise capacity that you had showcased. If you see XUV700, that’s getting a step-up jump in capacities only in Q3 FY ’24. That’s almost 18 months. In March ’22 also, you had a similar 6,000 capacity, if I’m not wrong. And this is one of your highest ASP products, which also does wonders to your brand Mahindra. So from that perspective, what was the thought process in kind of allocating capacity increases between the models? Was availability of chips for this higher model a consideration? And couldn’t we have kind of — because 18 months down the line, sometimes the model loses its — or kind of the excitement is kind of dampened with other model launches as well. So are we losing an opportunity of capitalizing on the strong demand for XUV700?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Jay, share your concern by way of saying that we should do it earlier and we really would like to do it earlier, and we will try to do it earlier. Based on the current plan — because this is not just capacity at our end, this is capacity in the whole supplier ecosystem. And it does take for many of these parts, 15, 18 months because this is like almost a completely new set of tools or dies or whatever that are being created to take this capacity up to this level. And some of them are aggregate parts, which are across the engine and that will impact 700 and Scorpio-N. So while we’re going to do everything possible to try and make it happen sooner, this today is our most realistic expectation.

We are hoping that we don’t lose the market momentum. And I feel good about it because — I feel positive that, that won’t happen because the rate of new bookings, as we said, is still very strong. The rate of cancellations is less than 5% for 700 in spite of a long wait period. And the reason for that is it is fundamentally a very strong value proposition, very well loaded product at a very good price. But we will do everything possible to try and ramp up faster.

Jay Kale — Elara Capital — Analyst

Sure. And just a last bit on clarification on your capex. So, this capacity increase, post this also, you still maintain your earlier capex guidance split that you had done in the earlier presentations, right, for Auto, Farm, etc?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yeah, we had built in this capacity expansion. We have not shared these capacity expansion numbers with you, which we are doing today. But this capacity expansion was already triggered off and was hence in the numbers that were shared earlier.

Jay Kale — Elara Capital — Analyst

Sure. And any thoughts on Farm, tractor capacities given that we probably could breach our peaks in this year on the tractor industry. How are we looking at over the next two, three years? Are we being a little cautious and not expanding capacities over there or you think that this momentum could continue?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

We have right now capacity utilization range of 85% to 90% in tractors. And we have an opportunity to add a shift in our Zaheerabad plant. And on the Swaraj side, we are creating a third plant, which we had already announced earlier, which is underway and should be ready. So both the Mahindra brand and the Swaraj brand have upside from where we are. Today, we’re at 85%, 90% capacity utilization. And again, the Swaraj plant, the investment was baked into the numbers that we are sharing.

Jay Kale — Elara Capital — Analyst

Sure. Thanks and all the best.

Operator

Thank you. The next question is from Jayaraj of B&K Securities.

Annamalai Jayaraj — B&K Securities — Analyst

You talked about cost increase in the — for RD announced [Phonetic], sir. Now for tractors, we are going to get TREM IV and TREM V. So what can be the cost increase vehicle level for both?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

So, TREM IV at this point of time is planned only for greater than 50 horsepower, which has got postponed, as you know. I think it’s premature to share the cost increase. We wouldn’t like to at this point of time. Anyway, it’s only a very small portion of the portfolio. What is possibly — likely to happen is the 52 to 55 horsepower customers will move to below 50, and the 55 to 58 will move upward to 65. And that’s how we think this will play out. Let’s watch and see where that — how the market reacts to the trend forthcoming. But fortunately that’s only 7% of the industry.

On TREM 5, it’s still a while away, and there’s a lot of work to do. So it’s too early to have cost information on that. Also, there is a dialoguing happening through PMA with the ministries on what is the appropriate timing and value addition of that in this segment.

Annamalai Jayaraj — B&K Securities — Analyst

Thanks, sir.

Operator

The next question is from Pramod Amthe, InCred Capital.

Pramod Amthe — InCred Capital — Analyst

Thanks for this opportunity. This is with regard to the CAFE norms. Even though norms itself are not so stringent on penalty, but considering you guys are rating ESG on a top priority and hence I wanted to know your position currently on CAFE norms where do you stand as a firm? One. And second, how are you tweaking your portfolio? Because it’s a combination of tweaking product and product mix. So, how are you looking at tweaking your product mix to meet the norms as you go forward? Second.

Third, with regard to the same, some companies are looking at the lightweighting and hence a chassis-based to a monocoque, and also diesel to a hybrid system. How do you look at these alternative technologies in the context of CAFE norms? Thanks.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Like you rightly said, we’re doing multiple things to manage where we will be on CAFE norm, and we expect to meet that using our EV portfolio apart from rejigging configuration of diesel, gasoline, weight classes, so on and so forth. So all of that is being done, except we are not going the path of hybrid. Apart from that, multiple things are being done and you are absolutely right on the commitment to sustainability and ESG, and we expect to meet the CAFE norms.

Pramod Amthe — InCred Capital — Analyst

And Rajesh, would you like to say where you currently stand on CAFE tests? What’s the path to cover?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

I don’t think we would want to share that in public domain. But just to confirm to you that we will comfortably meet that with the launch of the 400 electric in this calendar year — in this financial year.

Pramod Amthe — InCred Capital — Analyst

Thanks.

Operator

Thank you. The next question, which would be the last question for the conference, would be from Meyer Surana [Phonetic] of GI Mutual Fund [Phonetic]. Meyer? Meyer, have you unmuted? They need to unmute and speak. Meyer, sir?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Meyer, are you there?

Meyer Surana — GI Mututal Fund — Analyst

Yeah, yeah. I’m there. Sir, did you get my question?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

No. Can you please?

Meyer Surana — GI Mututal Fund — Analyst

Yeah. Congratulations on a good set of numbers, sir. One thing I wanted to know is, why the cash flow negative to the tune of INR5,000 crores when our EBITDA is around INR5,000 crores in the positive for the half yearly number on a consolidated basis?

Manoj Bhat — Group CFO

So, I think — can you repeat the question? Are you looking at consolidated or standalone?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Yeah, yeah, I’m looking at the consolidated number.

Manoj Bhat — Group CFO

I think consolidated is probably not the right way to look at it. I think take the standalone cash flow. Let me give some color and we can reconcile it offline on the INR5,000 crore negative. But overall, if you look at it, during the quarter, we repaid debt of about INR2,200 crores and also we paid out a dividend. So that’s — if I relate the first half, those are two big cash outflows. But overall, the cash flow has been positive and it is actually very strong at the stand-alone level. And at the consol level, I think it is — it’s a more complex exercise. So I can take it off-line with you.

And Shriram, we can pick it up.

Operator

Sure, sure. Okay. Sir, if I can just squeeze in one question from the chat, which was sent to me earlier. Mitul Shah of Reliance Securities. Sir, you wanted to know the price hike across segments in Q2 and October, and also the festive retail sales, if that can be provided.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Mitul, hi. So, on the tractor side, we took approximately a 2% increase in July and a 1% increase in November, on November 7. So that’s on the tractor side. On the Auto side, we took a 1.5% to 2% increase in September.

Manoj Bhat — Group CFO

Okay. Festive retail sales trend?

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Festive retail sale, on the tractor side, I think I had indicated retails were in the festival period of around in the region of 10%, which was a good tractor — good retail momentum. On the Auto side, I think percentage doesn’t matter, it will probably be over 100%. So, I’m really not commenting on that.

Operator

Okay. Thanks, Rajesh. Okay. With that, we come to the end of the conference. Thank all of you for attending this conference and also thank all the senior management to take time and being here. Thanks a lot, and a good evening to all of you.

Dr. Anish Shah — Managing Director and CEO

Thank you.

Rajesh Jejurikar — Executive Director, Auto and Farm Sector

Thank you, everyone.