How M&M turned its fortunes around after being a ‘bruised blue chip’ – CNBC TV18
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When Shah took over in April 2020, the company was facing challenges and was what Motilal Oswal’s 29th Wealth Creation Study defines as a “bruised blue chip”—a fundamentally strong company that had lost over 50% of its market value.
Shah inherited a company grappling with ₹5,332 crore in losses across various businesses, including a ₹2,400 crore hit from its Ssangyong operations.
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He categorised M&M’s operations into three groups: entities with turnaround potential, strategically important businesses, and non-core units to be exited.
Within 18 months, the company divested 15 non-core businesses. “We moved quickly and didn’t wait to address issues sequentially,” Shah said.
To fuel growth, Shah identified “growth gems”—businesses with the potential to become billion-dollar entities. Starting with a collective valuation of $900 million in 2020, these businesses surged to $3.4 billion within three years.
Shah then raised the target, challenging these units to grow five times to $17 billion over the next five to seven years with actionable strategies in place.
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Motilal Oswal’s study also highlights M&M’s transformation, driven by its capital efficiency, divestment of loss-making subsidiaries, and a revamped product portfolio, including successful launches like the Thar (2020), XUV700 (2021), and refreshed Scorpio.
The SUV segment share rose from 15% in 2020-21 (FY21) to 18% in 2023-24 (FY24).
M&M delivered a 22% compounded annual growth rate (CAGR) in revenue and a 31% CAGR in profit after tax (PAT) between 2019-20 (FY20) and FY24, while its return on equity (RoE) improved from 10% to 22%.
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Shah credited M&M’s foundational strength and entrepreneurial DNA for enabling the turnaround. “I give a lot of credit to our predecessors who really helped set us up for success and we had to just go forward and implement a few things that that we felt were important.,” he said