Mahindra & Mahindra Debt surged on 31.2% and Net Debt / EBITDA jumped on 2.1x from 8.0x to 10.1x

30-05-2017 • About Mahindra & Mahindra ($M&M) • By InTwits

Mahindra & Mahindra reported FY2017 financial results today. Here are the key drivers of the company's long term financial model:

Mahindra & Mahindra has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.2%. At the same time it's in pair with industry average of 6.8%
CAPEX is quite volatile: ₹29,771m in FY2017, ₹43,216m in FY2016, ₹62,525m in FY2015, ₹69,673m in FY2014, ₹78,323m in FY2013
The company has potentially unprofitable business model: ROIC is 0.8%
It operates with high leverage: Net Debt/EBITDA is 10.1x while industry average is 10.1x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Mahindra & Mahindra's Revenue increased on 9.9%. During the last 5 years Revenue growth bottomed in FY2015 at -5.3% and was accelerating since that time. EBITDA Margin showed almost no change in FY2017. EBITDA Margin followed a declining trend at -0.95 pp per annum in the last 5 years.

Net Income margin showed almost no change in FY2017.

Investments (CAPEX, working capital and M&A)

In FY2017 Mahindra & Mahindra had CAPEX/Revenue of 6.8%. The company showed small growth in CAPEX/Revenue of 1.3 pp from 5.5% in FY2014 to 6.8% in FY2017. Average CAPEX/Revenue for the last three years was 6.8%. The company investments to CAPEX were large: 142% of EBITDA.

Return on investment

The company operates at good ROE (13.2%) while ROIC is low (0.8%). ROIC showed almost no change in FY2017. ROE increased slightly on 1.1 pp from 12.0% to 13.2% in FY2017. ROIC declined at -1.4 pp per annum in FY2013-FY2017. During the last 5 years ROE bottomed in FY2016 at 12.0%.

Leverage (Debt)

Company's Net Debt / EBITDA is 10.1x and Debt / EBITDA is 11.4x. Net Debt / EBITDA jumped on 2.1x from 8.0x to 10.1x in FY2017. Debt jumped on 31.2% while cash increased on 2.6%.

Mahindra & Mahindra has short term refinancing risk: cash is only 45.4% of short term debt.

Financial and operational results

FY ended 31-03-2017

Mahindra & Mahindra ($M&M) key annual financial indicators

mln. INR	2013	2014	2015	2016	2017	2017/2016
P&L
Revenue	626,435	669,310	633,620	673,518	739,998	9.9%
EBITDA	51,440	50,112	29,567	32,865	35,437	7.8%
Net Income	40,992	46,669	31,375	31,484	36,980	17.5%
Balance Sheet
Cash	38,398	46,438	30,046	44,793	45,976	2.6%
Short Term Debt	89,536	99,167	159,486	70,771	101,217	43.0%
Long Term Debt	198,603	254,918	223,270	235,988	301,245	27.7%
Cash flow
Capex	32,914	36,653	47,589	41,720	50,262	20.5%
Ratios
Revenue growth	14.5%	6.8%	-5.3%	6.3%	9.9%
EBITDA growth	13.0%	-2.6%	-41.0%	11.2%	7.8%

EBITDA Margin	8.2%	7.5%	4.7%	4.9%	4.8%	-0.1%
Net Income Margin	6.5%	7.0%	5.0%	4.7%	5.0%	0.3%
CAPEX, % of revenue	5.3%	5.5%	7.5%	6.2%	6.8%	0.6%

ROIC	6.1%	4.7%	1.2%	1.2%	0.8%	-0.4%
ROE	22.4%	21.6%	12.8%	12.0%	13.2%	1.1%
Net Debt/EBITDA	4.9x	6.1x	11.9x	8.0x	10.1x	2.1x

Peers in Cars & Utility Vehicles

Below we provide Mahindra & Mahindra benchmarking against other companies in Cars & Utility Vehicles industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Mahindra & Mahindra stock price chart

Mahindra & Mahindra financials

mln.	FY2010	FY2011	FY2012

Revenue	231,987	334,463	547,059
EBITDA	-24,612.700	40,815	45,539
Net income	24,786	30,797	31,267
CAPEX	27,029	26,526	33,370
Debt	134,859	170,475	231,205
Cash	26,943	18,084	31,648

About Mahindra & Mahindra

Mahindra & Mahindra Limited primarily engages in the automotive and farm equipment businesses in India and internationally. The company offers aerospace components, assemblies, and aircrafts; automotive services and pre-owned cars; and crop care, fresh produce services, seed distribution, and seed potato inputs. It also provides commercial vehicles, such as Alfa, Gio, trucks and buses, Bolero Pick-Up, Genio, Loadking, Maxximo Plus, and Tourister buses; personal vehicles, including Bolero, e2o, Scorpio, Thar, Verito, Xylo, Actyon, Actyon Sports, Chairman W, Korando, Kyron, Rexton, Rodius, XUV 500, and Quanto; contract sourcing and engineering services; and components, such as alloy steel, blankings, castings, composites, ferrites and magnetic products, forgings, gears, ring rolling, and stampings. In addition, the company offers backhoe loaders; engineering consulting, information security consulting, project management, and strategic risk management services; defense vehicles, including Land, Axe, Marksman, Mine Protected Vehicle, and Rakshak; diesel generators, inverters, and off-grid solar energy solutions; on-grid, power-leasing, telecom infrastructure management, and turnkey EPC services; tractors, crop harvesting, and rice and sugarcane farming solutions; and general and life insurance broking, as well as vehicle, asset, and rural housing finance services. Further, it provides bulk handling systems; business process outsourcing, IT consulting, R&D engineering and manufacturing, supply chain consulting, infrastructure management, security, and network technology solutions and services; leisure boats, resorts, homestays, and terra camps; logistics and people transport solutions; business cities and special economic zones, and living spaces; baby and maternity products through its Mom & Me retail chain; and two wheelers, such as Centuro, Pantero, Duro-DZ, Flyte, genZe, Kine, and Rodeo-RZ. The company was founded in 1945 and is headquartered in Mumbai, India.