Mahindra War Room
Future of Mobility
TEAM SMCG
STRATEGIC MANAGEMENT CONSULTING GROUP

DEVESH MENDIRATTA |NITISH MAHAJAN |R...
Motive
High infrastructure growth markets
Metro, high speed rail and freight
Cater to millennial demands
Commercial and so...
Executive Summary
Strategy to Create a new Rolling Stock Vertical

Rationale

The Business

The Growth

Mission: To become...
Agenda
Mahindra Rise
Future of Mobility
Market Identification
Proposed Business Model
Feasibility Study
Implementation Str...
Mahindra Rise
The Alphabet of the language the Group Speaks

Accepting No Limits
• We accept no limits, and ask the same o...
Mahindra Rise

It is this DNA that
motivates us to propose
what we are going to

Tweet by Mr Anand Mahindra 8.29 PM Oct 22
The Journey
…that has been

…that is ahead
Future of Mobility
How do we foresee the future

Better
infrastructure

Greater
Urbanisation

More
comfortable

Faster tra...
5 Cs of Mobility
5 Cs of Mobility
4

3

1

11

2

1

•Environment Friendly
•Renewable resources
•Regenerative

Clean

Clever

•Uses technol...
Mission

To become the leading Indian manufacturer and exporter of Metro trains in
India and world over
Metro Growth
Delhi
•193 km network operating 2002. Trains from Bombardier and Hyundai.
Mumbai

Proposals of cities with
po...
Competition Analysis
Bombardier Transportation
•Canada headquartered Germany based
•Largest subway rolling stock manufactu...
Competition Analysis
The world advanced rolling stock market is dominated by Bombardier, Alstom, Siemens and
Kawasaki. The...
Dedicated Freight Corridor
DFCIL

•Dedicated Freight Corporation of India Ltd incorporated in 2006. SPV
under control of I...
High Speed Railway
HSRC

Shatabdi

•High Speed Rail Corporation of India set up in August 2012
•Building first HSRC betwee...
Markets: Exports
Middle East
•
Riyadh Metro
developed recently
•
Other oil rich
nations invited
initial bids for
turnkey p...
Mahindra Core Competencies
Leadership

Financial and
Management

• A passionate
leadership
keen to
explore new
businesses
...
Mahindra Group : Support Capabilities
Automotive
Mahindra Vehicles
Manufacturing
Limited

Components
Mahindra Forgings
Lim...
Related Diversification
High

Fit of the New Business

Performance

Rolling Stock +
Mahindra Automotive

Undiversified
exp...
Missing Link ?
Design and Manufacture
Technology

A proven and known technological leader
A partner with Engineering as Co...
Evaluation of Partner
International
Operations
Experienced with
India
Current JVs/
Partnership

Technical Expertise

• Pla...
The Potential Partners

•Japan-based
manufacturer since
1936
•Consolidated
subsidiary of Japan
Railway
•Notable projects i...
The Comparison
AnsaldoBreda /
Bombardier Kawasaki Siemens
Talgo

Factor (weight)

Nippon Sharyo

Alstom

International
Exp...
The Perfect Marriage
Why Kawasaki

Why Mahindra

• Has prior experience of Indian
markets in Automobile
• The Japanese con...
The Outcome
Enter Mahindra Kawasaki Rolling Stock Limited

• Vision: To become the preferred global Rolling Stock supplier...
Metro Market Scenario Planning
Scenario 1

Scenario 2

Scenario 3

•7-8 player Oligopoly Market: Few
major players decide ...
Demand Forecasting

Delhi Metro
Current Track Length: 189Km
Current Trains running: 40(4 bogie), 97 (6 bogie), 25(8 bogie)...
The Plant

The plant has to be set
up in Chakan to utilise
the capabilities of the
existing Mahindra
companies in the vici...
Financial Model : Assumptions
Investment Cost:

Capacity of Plant

Operating Margin (10 %)

• ₹ 150 crore in Phase 1
• ₹ 1...
Breakeven Analysis
CAGR – 37.28%
Excluding Time value
of Money we can
break even in 4 years

Capacity VS Production
60
50
...
Implementation Plan
Friday, December 27, Tuesday, July 15, Saturday, January 31, 2015
2013
2014
Wednesday, August 19, 2015...
Tying the ends together


Case:
India has seen various industries booming at point of time and few players rode the
wave ...
Late entrant in the market


CASE:
 Plethora of rolling stock manufacturers for rapid transport exist.
 Players have mo...
 The

essence of strategy is to know what to do and
at what time…
 Anonymous

This Market Opportunity needs to be
addres...
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Future of Mobility

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  • Mahindra Group has an existing eco system of complementary automotive capabilities. The company can leverage its synergies and incorporate them with a proven foreign technology to achieve a competitive advantage and gain a sustainable market share
  • Rise Vision of MahindraFuture of Mobility What they see What we want them to see Why we believe what we believe
  • MAHINDRA BUILDS THREE THINGS: PRODUCTS, SERVICES, AND POSSIBILITIES
  • It is this DNA that motivates us to propose what we are going to
  • Rating Electric Cars and Electric trains on same metrics
  • Comparing the players based on certain metrics. The metrics were assign weights and by our judgements points were given. Score is calculated using ∑weight x score
  • Future of Mobility

    1. 1. Mahindra War Room Future of Mobility TEAM SMCG STRATEGIC MANAGEMENT CONSULTING GROUP DEVESH MENDIRATTA |NITISH MAHAJAN |RAJAT JAIN |SYED HASAN AIJAZ
    2. 2. Motive High infrastructure growth markets Metro, high speed rail and freight Cater to millennial demands Commercial and socioeconomic sustainability What we want to be- a Nation Builder Challenge conventional thinking Think disruptively Drive positive change Mahindra Rise Service Markets and Grow Future Of Mobility Reinvent Mobility Environmental concerns Oil economics Changing consumer needs Advanced technologies Newer, Superior, Evo lving Explore all modes of Mobility - Rail Leverage group’s synergies Create future markets Invest in the long term Utilise Strategic Growth Opportunity Create a new Business Vertical Mahindra Rolling Stock Limited JV with a technological partner High technology with frugal economics Deliver stakeholder value
    3. 3. Executive Summary Strategy to Create a new Rolling Stock Vertical Rationale The Business The Growth Mission: To become the leading Indian manufacturer and exporter of Metro trains in India and world over Strategic Partnership with Kawasaki Heavy Industries Rolling Stock Company as the technological and manufacturing partner Target rapidly growing Indian Metrotrain market Rolling Stock: The logical ‘fit’ in the 5Cs of Mobility Establish plant at Chakan and commence operations within 2 years Manufacturing hub to service the natural export market Company : A new vertical to build high quality and high performance trains In Phase 1, establish capacity for Metro train systems. Establish competency to fulfil High Speed Rail and Dedicated Freight Corridor ecosystem Related Diversification: Address the only missing link of the Automotive Ecosystem In Phase 2, establish capacity for High Speed Rail system Create a ₹ 2,500 Crore+ company (by turnover) within 4 years Mahindra Group has an existing eco system of complementary automotive capabilities. The company can leverage its synergies and incorporate them with a proven foreign technology to achieve a competitive advantage and gain a sustainable market share
    4. 4. Agenda Mahindra Rise Future of Mobility Market Identification Proposed Business Model Feasibility Study Implementation Strategy Tying the ends together
    5. 5. Mahindra Rise The Alphabet of the language the Group Speaks Accepting No Limits • We accept no limits, and ask the same of everyone else. In return, we work relentlessly to provide the tools, information, and inspiration for us to push past limitations and comfort zones Alternative Thinking • Alternative thinking means solving problems in ways no one thought of before, by using fewer resources and entering markets thought to be unreachable Driving Positive Change • We want you to rise. And not just you. Your family. Your neighbourhood. Your whole community. This is why we come to work every day MAHINDRA BUILDS THREE THINGS: PRODUCTS, SERVICES, AND POSSIBILITIES
    6. 6. Mahindra Rise It is this DNA that motivates us to propose what we are going to Tweet by Mr Anand Mahindra 8.29 PM Oct 22
    7. 7. The Journey …that has been …that is ahead
    8. 8. Future of Mobility How do we foresee the future Better infrastructure Greater Urbanisation More comfortable Faster transport Bigger and denser cities Electricity over fossil fuels Seamless communication Zero Downtime Forerunners in the race for Mobility Electric Cars For Cleaner, greener and technologically advanced Low to zero operating and maintenance costs Zero dependence on oil economics Against Higher one time costs to individuals Batteries to be replaced every 3 years- Not green Unavailability of battery charging infrastructure Feasible only for advanced countries- erratic electricity supply Public Transport For Faster mobility- savings in travel time for passengers Freedom from individual capex Affordable and a far more convenient alternative to driving Forms natural focal points for communities Relieves congestion- also reduces number of road accidents Zero dependence on oil economics Changes in land use pattern Increased employent Against High investment of the governments Policy interventions required Land bank
    9. 9. 5 Cs of Mobility
    10. 10. 5 Cs of Mobility 4 3 1 11 2 1 •Environment Friendly •Renewable resources •Regenerative Clean Clever •Uses technology to be efficient •Optimises as per terrain and conditions Connected Convenient Cost Effective •Connected to the users •Connected to each other •Seamless connectivity •Easy to park and ride •No use of fuelling and refuelling •Zero Fuel charges •Utilising solar power •Zero oil changes 3 3 4 3 4 17 The marks awarded are as per our judgment
    11. 11. Mission To become the leading Indian manufacturer and exporter of Metro trains in India and world over
    12. 12. Metro Growth Delhi •193 km network operating 2002. Trains from Bombardier and Hyundai. Mumbai Proposals of cities with population greater than 2 million under review by Urban Development Ministry •Planned 147 km network. Expected 2014. Chinese CSR-CNR trains ordered Chennai •45.1 km network under construction. 42 train sets ordered from Alstom Bangalore •7.5 km operational. 114 km network planned. BEML and Hyundai ordered for 150 trains Gurgaon •5.1 km network under construction. Turnkey contract awarded to Siemens Jaipur •32.5 km network under construction. 10 trains ordered from BEML Hyderabad •71 km network under construction by L&T. 57 train order to Hyundai Rotem Others •Pune, Lucknow, Kochi, Ludhiana, Indore, Ahemdabad-Gandhinagar, Chandigarh, Kanpur, Nagpur and Patna are under advance stage of planning 19 cities have been shortlisted by the Ministry for review for Government funding under PPP model. Source: Metrobits.org;IndianExpress.org:HMR:JaipurMetro
    13. 13. Competition Analysis Bombardier Transportation •Canada headquartered Germany based •Largest subway rolling stock manufacturer globally •Wholly owned plant at Savli, Gujarat •Propulsions manufacturing at Maneja •Investment valued at 33 million euros •800 people employed producing 32 metro cars per month •Supplied over 600 MOVIA cars to DMRC. •Has exported 95 train shells to Australia from this plant. •IRIS certified plant for technology standards Hyundai Rotem •Major supplier to DMRC and Hyderabad Metro •Wholly owned plant at Hosur. •Suffered image loss in Ukraine when trains failed to perform •Limited global experience primarily in East Asia •Tie up with BEML for Indian business. •Part of Hyundai Group, India’s largest exporter of cars. Source: AmTrak: The Hindu: Times Of India: Jeffries Research Alstom Siemens India •One of the largest supplier of subway rolling stock globally •168 coach order from Chennai Metro worth 243 million euro. •Euro 30 million invested in manufacturing facility in Chennai •Engineering hub at Bangalore •Has bid for over a billion euro contracts in India so far •200 people employed so far •Interested to build electric locomotives •Just built the new Riyadh metro, a 4.38B euro project. •Part of Siemens AG, a global technology major present in India for over 20 years. •₹. 2,000 crore of investments in India. 1 •Greenfield manufacturing at Aurangabad •₹.200 crore investment employing around 1000 people. •800 bogies per year capacity, designed as per European norms. •Won Turnkey contract for Gurgaon metro. •Outsourced bogie manufacturing to CNR-CSR •First factory outside US-Europe to address railway growth in India. BEML-BHEL CSR •Mini Ratna PSU has converted rail shed factory into metro coach factory •Jaipur Metro contract worth 380 crore to begin with •Invested in developing technical expertise to compete with global players •747 crore order from Delhi Metro recently •BEML–Rotem-Mitsubishi consortium to supply the trains •Major suppliers to Indian Railway •CSR Nanjing is largest rolling stock manufacturer in China •Experience of over 50 years •Has bagged a few orders from Delhi Metro •Very limited global exposure •Confirmed orders from reliance operated Mumbai Metro •Security concerns of Indian Home Ministry over Chinese equipment in strategic sectors
    14. 14. Competition Analysis The world advanced rolling stock market is dominated by Bombardier, Alstom, Siemens and Kawasaki. The former three have invested in building plants in India Kawasaki the only global player not yet present in India The other players in the Indian market are minor players and have not invested in capability building in India, preferring to manufacture through a JV or export The three global players have invested solo into the Indian market, building wholly owned manufacturing plants Major orders have only been received by only 4 players. They are responsible for nearly all of the worlds installed subway systems Big players like CAF, Nippon, Thales are also present in the market, looking to export from their foreign plants Source: AmTrak: The Hindu: Times Of India: Jeffries Research
    15. 15. Dedicated Freight Corridor DFCIL •Dedicated Freight Corporation of India Ltd incorporated in 2006. SPV under control of IR to undertake planning, financial resource and construction Implementation •L&T and Sojitz Corporation have signed EPC contract for 626km in West DFC. Supreme Court clears DFC on Sep 1, 2013. Purpose •Indian Railways to improve customer orientation and establish industrial corridors and logistic parks. Generate higher revenue. High capacity and high speed Phase 1 •Total length of 3300 km in West DFC and East DFC corridors. High Density Corridors carrying 52% of passenger and 58% of freight Western DFC 1500 km •Dadri to Mumbai, passing through Delhi, Haryana, Rajasthan, Gujarat and Maharashtra. Connects JNPT Port to Industrial hub. Eastern DFC 1800 km •Ludhiana, Punjab to Dankuni in West Bengal, passing through Haryana, Uttar Pradesh and Bihar. Connects entire Gangetic Plain to Eastern ports Funding •Japan International Co-operation Agency (JICA) technological and financial support. The main Agency financing Metro projects. Conditions •Lead partner to be Japanese along with consortium of Indian companies to execute the jobs. Stated preference for Japanese products Order Size •200 electric locomotives of 9000 HP each from Japanese vendor in Phase 1. Turnkey contract also possible. •Kawasaki manufactures such locomotives for Japan railway Policy •Railway Board Chairman assures that DFC will be implemented by 2017( West) and 2018 (east). Government identified DFC as ‘Top Priority’. As per our conversation with a high ranking Railway Board Official, the PMO has suggested multiple Indo-Japanese JV’s to implement DFC’s, now on a high priority. Source: Indian Railway: Economic Times: Nippon times
    16. 16. High Speed Railway HSRC Shatabdi •High Speed Rail Corporation of India set up in August 2012 •Building first HSRC between Mumbai to Ahmedabad •Reduce travel time from 8 hours to 2 hours Frauscher India, an Austrian Signaling firm has committed towards investing ₹75 cr over 4 years in a manufacturing plant in Mysore. They have agreed to partner with HSR to build an ecosystem as per our discussion with them •Fastest train in India •Peak capacity of 150 km/h •Average speed of 130 km/h Political •Indo-Japan agreement in 2013 to study feasibility of HSR in India •Preference for Shikansen trains to fight off TGV/Valero and the Chinese •Chinese vendors not preferred Shinkansen •Kawasaki is the major manufacturer of these bullet trains •2400 km network in Japan transporting over 350 million annually •Maximum speed of 320 km per hour with superior ride quality Implementation Economics •500 km line costing up to $10 billion •Technological reviews and costing to finish by 2014 •French SNCF already invested in surveys and initial studies •Suited for India’s large population and medium distances •Competition against LCC fliers as air fares rise continuously •$1 billion worth yen-based soft loans already sanctioned by Japan As per our conversation with a high ranking Railway Board Official, the PMO has suggested multiple Indo-Japanese JV’s to implement DFC’s, now on a high priority Source: Economic Times: NDTV.org: The Hindu
    17. 17. Markets: Exports Middle East • Riyadh Metro developed recently • Other oil rich nations invited initial bids for turnkey projects Central Asia • New oil and gas money • Infrastructure identified as priority investment Bangladesh • New subway system announced for Dhaka • DPR commissioned for Chittagong India • Huge infra sector investments announced • 19 metro systems on anvil of operations Africa • Japanese and Indian aid investments across Africa • The next wave of infrastructure development South Korea • Existing Business Relation in automotive with Ssangyong Taiwan • Huge infra sector investments announced • Only Metro in Taipei City Philippines • Huge infra sector investments announced • Only Metro in Manila Thailand • Huge infra sector investments announced • Only Metro in Bangkok Malaysia • Huge infra sector investments announced • Only Metro in KualaLampur Indonesia • Huge infra sector investments announced • Only Metro in Jakarta Australia • Received 95 trains from Bombardier India
    18. 18. Mahindra Core Competencies Leadership Financial and Management • A passionate leadership keen to explore new businesses Reputation • Adequate muscle and experience to take on big projects • One of the country’s most respected business houses Engineering • Frugal Engineering experience earlier Values Knowledge Technological Synergies • Professionalism, Customer First and Quality Focus • market understanding to anticipate market’s needs • Innovation and experimenta l work culture • Group companies producing complement ary goods.
    19. 19. Mahindra Group : Support Capabilities Automotive Mahindra Vehicles Manufacturing Limited Components Mahindra Forgings Limited •Forging Products • Manufacturing HCV and LCV expertise Consulting Services Mahindra Consulting Engineers ltd Mahindra Castings Ltd Business and Consulting Services •HCV Engine Manufacturing •Castings of LCV and HCV •Captive Staffing and Allied Businesses •Design Services SsangYong Auto Parts Manufacturing •HCV Auto Components Mahindra Satyam •Software Solutions and Services •Engineering Project Consulting Mahindra Navistar Engines Pvt Ltd Mahindra Graphic Research Design Information Technology Mahindra Gears and Transmissions Pvt ltd and MetalCastello S.p.A Mahindra Ugine Steel Company •High Quality Alloy Steels and Stampings Industrial Equipment Mahindra Conveyor Systems Pvt ltd •Bulk Handling Systems Mahindra Engineering Services Limited •Engineering Services Bristlecone Ltd •ERP Implementation Solutions The Tata Group, India’s biggest industrial conglomerate has a successful history of achieving synergies between its numerous group companies to create sustainable business ventures, often disrupting existing market dynamics. Mahindra BPO Services •Back-Office Services We assume Mahindra has similar synergies and will be successful in utilizing them to create quality at competitive prices.
    20. 20. Related Diversification High Fit of the New Business Performance Rolling Stock + Mahindra Automotive Undiversified expansion Related limited diversification Unrelated diversified Diversification Efficient operations due to very limited diversification Aircrafts Two Wheele rs Tractors Feel of the New Business Mahindra Automotive Buses Cars Trains The only missing link of the Automotive Ecosystem Trucks SUV’s High
    21. 21. Missing Link ? Design and Manufacture Technology A proven and known technological leader A partner with Engineering as Core value A partner not already in the local market A partner who is bullish about India A partner with favorable political situation A partner with world wide positive reputation
    22. 22. Evaluation of Partner International Operations Experienced with India Current JVs/ Partnership Technical Expertise • Players international exposure and ability to JV with Mahindra in a new market • Considering the complexities of the Indian Market, a prior experience with India shall add to the fitness of the player • In case a player already has a similar JV it would be reluctant to go for a JV with Mahindra • A firm known for its engineering capabilities Partnering Options 1) Nippon Sharyo (Japan) 2) AnsaldoBreda (Italy)/Talgo (Spain) 3) Bombardier (Germany) 4) Kawasaki (Japan) Long Term Synergy • Where primary aim is to partner with a player to capture the rolling stock markets in Rapid transport, a focus on high speed trains should be considered by Mahindra Environmental Factors • Country of the players and bullishness about India contribute towards assessing the suitability of the player 5) Siemens (Germany) 6) Alstom (France)
    23. 23. The Potential Partners •Japan-based manufacturer since 1936 •Consolidated subsidiary of Japan Railway •Notable projects in 8 countries, including Japanese Shinkansen •No previous experience with India •No other investments in India •Spanish manufacturer of high speed and inter city rail since 1942 •Primary sales in Spain and Portugal •No previous experience with India •No other investments in India •Has a signed supply contract in India •Berlin headquartered rolling stock division •One of the largest global rolling stock companies •Major supplier to DMRC and other Metro systems •Wholly owned Integrated plant in Gujarat • Proven international credentials •Japan-based one of the largest global manufacturer •Germany-Austria based manufacturer of Valero trains •Paris based manufacturer of TGV trains •Subway, high power locomotive and high speed trains •One of the largest global rolling stock companies •Largest global rolling stock companies •Turnkey solutions provider in New York Metro, the worlds largest •Complete range of electrical and mechanical components •Invested 2500 crore in hydraulic equipment factory •Major supplier to Gurgaon and other Metro systems • Considerable quality reputation in India •Wholly owned Integrated plant in Maharashtra •Complete range of electrical and mechanical components •Major supplier to Chennai and other Metro systems •Wholly owned Integrated plant in Tamil Nadu
    24. 24. The Comparison AnsaldoBreda / Bombardier Kawasaki Siemens Talgo Factor (weight) Nippon Sharyo Alstom International Exposure(10) Experience with India(5) 8 6 8 8 9 9 3 3 7 8 9 7 Current Jvs/ Partnership(8) 5 5 4 8 4 4 Technical Expertise (10) Long Term Synergy(8) 7 7 8 8 8 9 5 5 8 8 7 8 Environmental Factors(10) 9 5 7 9 7 7 Weighted Total 335 275 361 418 373 381 The marks awarded are as per our judgment
    25. 25. The Perfect Marriage Why Kawasaki Why Mahindra • Has prior experience of Indian markets in Automobile • The Japanese connection – Enjoys Goodwill • No existing JV in Rolling Stock in India • Open avenues for Mahindra to venture High Speed/Bullet trains • One of the biggest transport player in India • Expert in 'Frugal Engineering' which could provide competitive advantage • Good Market Knowledge and relationships ties • Opportunity of extensive synergies • Else • Kawasaki might enter with another player say Tata/Birla/Reliance • Delay might cause more crowded players and missing out on demand boom • Else • Mahindra might enter with another player say Nippon Sharyo/Alstom • Might miss out on the booming Indian market having major projects in pipeline
    26. 26. The Outcome Enter Mahindra Kawasaki Rolling Stock Limited • Vision: To become the preferred global Rolling Stock supplier in different transport system • Mission: To produce high quality metro rolling stock at competitive prices • A 50-50 Joint Venture between the partnering firms • Kawasaki becoming the first foreign player in the industry to come with an Indian partner • Kawasaki bringing in its technological prowess mixing it up with Mahindra’s 'Frugal Engineering' expertise to bring competitive Rolling Stock supply to the market • Hence becoming a supplier of high quality competitively priced rolling stocks to meet both national and international needs
    27. 27. Metro Market Scenario Planning Scenario 1 Scenario 2 Scenario 3 •7-8 player Oligopoly Market: Few major players decide to enter the rolling stock industry like Alstom, Bombardeir, Seimens, Mahindra JV, Mitsubishi, BMEL, HyundaiRotem, etc •5 player Consolidated Market: Mahindra pips other new players in entering the market to join the existing 3 player and a new player say Hyundai-Rotem •10-15 player crowded Market: Considering the Metro boom, multiple player enter the market including Chinese players which also bring in the price wars •Consolidated Market share of about 20-25% considering Kawasaki brings in competitive technical prowess to the JV •Unsure Market share as winning tenders becomes difficult •Divided Market Share of about 1520% •Eg : The Indian Consumer Goods Market •Eg : The Indian Tractor Market •Eg: The Indian Mobile Market
    28. 28. Demand Forecasting Delhi Metro Current Track Length: 189Km Current Trains running: 40(4 bogie), 97 (6 bogie), 25(8 bogie) equivalent to 236(4 bogie) trains  Total track length of new tracks: 532Km  Total Track length of initial phases of projects: 249Km  Total trains running on the tracks: (249/189) x 236 = 311 trains  % Consideration for new Project: 0.8 = 248 Trains  Completion Factor of planned Projects: 0.7= 173.6 trains  Hence Estimated demand in the year 2016(assuming Rolling Stock ordered 18-20 months in advanced) from new Projects: 174 trains Project Estimated Operation Date Total Track(km)* Track length of first Phase (km)* 1 Assumption: We assume that number of trains per kilometer running on an existing metro is a good metric to forecast number of metro trains required on a new track Surat 2018 100 19 2 Pune 2018 82 30 3 Patna 2017 54 50 4 Nagpur 2017 40 25 5 Ludhiana 2018 28 16 6 Lucknow 2018 36 36 7 Kanpur 2017 84 27 8 Indore 2019 33 10 9 Chandigarh 2018 37 16 10 Bhopal 2018 38.5 20 S. No * Projected Source: DMRC Website, Individual Metro Project Website
    29. 29. The Plant The plant has to be set up in Chakan to utilise the capabilities of the existing Mahindra companies in the vicinity Plant investment @₹ 150 crore and a capacity of 25-30 trains a year Subsequent investment of another ₹ 100crore and subsequently increase the capacity to 50-55 trains a year The plant to have the capacity and capability to produce high performance bogies for locomotives and metros Source: Google Maps
    30. 30. Financial Model : Assumptions Investment Cost: Capacity of Plant Operating Margin (10 %) • ₹ 150 crore in Phase 1 • ₹ 100 crore in Phase 2 • Plant setup at Chakan, Maharashtra • Bombardier India plant at Savli cost ₹. 200 crore to set up • Siemens India invested ₹. 200 crore in Aurangabad facility • 30 Metro trains / Year • Excess capacity installed, production to increase as per demand • In phase 2, develop capability to manufacture High Speed Rail and High Performance rail systems • We do not know Cost of Goods Sold of a Metro train • We assume operating margin as average of all listed Mahindra Group companies • OPM to be 6% in Year 1, then increasing to 8% in Year 2 and 10% in Year 3 • OPM to rise from Year 1 to Year 3 as we gain tacit knowledge and markets’ confidence WACC (8.5%) Tax Rate Sales • Existing Bank Rate is 8% • We assume Corporate debt, to create a 70:30 Debt-Equity company structure. • In view of Mahindra balance sheet, we assume debt rate as bank rate-100 basis points at 7 % • We assume equity returns at 12% • We take Corporate tax rate at 33% • No tax advantages as investment in prosperous Indian state • We assume a market share of 9-10% in 2016 • Sale price of each train targeted at 32 crore • Alstom sells for 35 crore in Chennai metro • Hyundai Rotem sells at 40 crore in Hyderabad • BEML sells at 32 crore for Jaipur Metro • Sales will grow at 20% annually for 3 years. • Sales will grow as we produce similar/superior product at competitive prices
    31. 31. Breakeven Analysis CAGR – 37.28% Excluding Time value of Money we can break even in 4 years Capacity VS Production 60 50 Growth: 20% 40 30 20 10 Wacc Selling Price 0 2016 2017 Capacity 2018 2019 120.00 100.00 CAGR: 37.28% 80.00 60.00 40.00 20.00 0.00 2016 2017 Growth Rate Production PAT ₹ crore 2018 2019 8.5 % 32 Cr Investment Capacity Production Operating Profit Margin Operating Margin Interest PBT PAT 20% 2016 150 30 25 2017 100 50 30 2018 2019 50 36 50 44 6% 8% 10% 12% 48.00 4.08 43.92 29.43 76.80 6.53 70.27 47.08 115.20 168.96 9.79 14.36 105.41 154.60 Total 70.62 103.58 250.71
    32. 32. Implementation Plan Friday, December 27, Tuesday, July 15, Saturday, January 31, 2015 2013 2014 Wednesday, August 19, 2015 March 06, 2016 September 22, 2016 April 10, 2017 October 27, 2017 Sunday, Thursday, Monday, Friday, Feasibility analysis Initiate talks: Kawasaki • XX Phase 1 Phase 2 Terms of the JV Technology share Identify Synergies:Group MCE consultancy with DMRC IT Infra synthesis with Mahindra Satyam Supply Chain Creation Plant Construction - Chakan Bidding tenders Synergy with Subsidiary Production for Metro Trains Commence commercial operations Expand Capacity Production for High Speed Trains Duration The duration mentioned are based on our judgement
    33. 33. Tying the ends together  Case: India has seen various industries booming at point of time and few players rode the wave on such occasions:       Telecom Boom: Dairy Revolution: Information Technology: Power: Road infrastructure: Bharti Airtel, Idea Amul Infosys and TCS Adani Group and Reliance GMR, GVK Rationale  We suggest to Mahindra to become the pioneer Indian player in the Public Transport boom envisioned in the coming time.  With an existing competency in transport and possible synergies provided by its subsidiaries, the Public Transport is the golden opportunity Don’t miss the train !
    34. 34. Late entrant in the market  CASE:  Plethora of rolling stock manufacturers for rapid transport exist.  Players have moved ahead and capitalized on the High Speed Rail as well  Bombardier, Alstom and Siemens have already setup plants in India and are capturing the Indian Market and also supplying to foreign demand  RATIONALE  Abundant late entrant success stories available like  Atari in video games worldwide  Samsung in mobile phones worldwide  LG in consumer electronics in India  Dell in Indian PC market  Mahindra would not be bringing in just another product in the existing category, but provide a similar/better at competitive prices using the synergies with Kawasaki  The Rolling Stock Industry is yet to experience the Indian 'Frugal Engineering' at which Mahindra is an expert.
    35. 35.  The essence of strategy is to know what to do and at what time…  Anonymous This Market Opportunity needs to be addressed right NOW
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